Allis-Chalmers Manufacturing Company v. White Consolidated Industries, Inc.

1324(a), he as was the mas- said Section plan over-all mind of the aided

ter abetted in its execution. jury to the trans- instructions as (5

portation counts the Indictment 6) adequately covered the elements

of those offenses. concludes no error re-

The court appears

quiring reversal in the record judgment of the

and the trial court

affirmed.

ALLIS-CHALMERS MANUFACTURING COMPANY, Appellant, INDUSTRIES,

WHITE CONSOLIDATED INC., Appellee.

No. 17713. Appeals

United States Third Circuit.

Argued March July 18, 1969.

Decided

Rehearing Sept. Denied Allis-Chalmers,2 and to that end White

proposes to make a tender offer to Allis- Chalmers stockholders order to in substantially its share crease of owner ship. Proceedings I. in District Court Alleging acquisition White’s part a substantial stock and its proposed acquisition of additional stock Clay- constitute a violation of 7 of the § Gillespie, Davis, S. Hazard Polk & Act, 18, appellant ton Allis- U.S.C.A. § Wardwell, (Morris, City New York Chalmers instituted action Nichols, Tunnell, Wilmington, Arsht & seeking injunction preliminary re- Del., brief), plaintiff-appel- on the for any acquiring strain from White addi- lant. exercising pres- stock tional and from George Meisel, Squire, I. & Sanders any ownership ent share of manner Dempsey, Cleveland, (Potter, Ohio An- accomplish pur- that would its takeover Corroon, Phillips, derson & Blaine T. pose. Wilmington, Del., Richard Donald- M. After filed its Allis-Chalmers verified son, Cleveland, Ohio, brief), for on the complaint, 5a, App. the district court defendant-appellee. parte temporary an issued ex restrain prohibiting order from “di White SEITZ, Before and ALDISERT soliciting, contacting rectly indirectly or STAHL, Judges. Circuit communicating by public or announce ment or otherwise with other share OF OPINION THE COURT holders of Manufactur Allis-Chalmers STAHL, Judge. Circuit ing Company, any person, or other for purpose acquiring thé additional stock appeal by This Manu Allis-Chalmers Manufacturing in Allis-Chalmers Com facturing Company, appellant, pursuant announcing pany or intention of ac 1292(a) (1), 28 U.S.C.A. quiring taking acquire steps or of ad denying order of the district court1 ditional stock in Allis-Chalmers Manu application prelimi Allis-Chalmers’ * * ”3 facturing Company. By nary against allegedly relief threatened agreement parties of the order was violations of the antitrust laws. until extended such time as district In December White Consolidated court rendered a final decision on the Inc., Industries, appellee, “a diversified injunction. application preliminary manufacturer, specializing in a wide variety machinery equipment, complaint response In of Allis- appliances, sup Chalmers, answer, household industrial a verified White filed plies,” F.Supp. 1265, purchased 28a, App. parties and both submitted outstanding of the stock of Allis- numerous affidavits and exhibits. 31.2% Chalmers from Gulf and Indus Western of the court decision district was based purpose underlying tries. presented avowed on a on the documents acquisition purchase White’s stock hearing January is the held on F.Supp. (D.Del.1969). Appendix (App.) 1. 294 53a. Allis-Chalmers. addition, President, White’s Edward 2. In a form filed the Securities Reddig, indicated to Allis-Chalmers’ of- S. Exchange subsequent to its Commission objective was to obtain ficers White’s acquisition stock complete ownership control of Allis- (Schedule 4, Purpose 13D, Item Trans Chalmers, 52a; id. at affidavit of David action), stated that “the ultimate Scott, Allis-Chalmers, President id. C. purpose underlying purchase by White at 72a. described herein * * * e., ”, business of issuer i. n. exclusively gaged to oral limited acquiring almost commerce from “di argument counsel.4 rectly indirectly, any the whole or affidavits, exhibits part the basis On of the stock of another by counsel, arguments legal advanced corporation engaged commerce, also in appel- concluded the district any where line of commerce in sec to demon- had failed lant Allis-Chalmers country, tion of the the effect of such ac probability of suc- a reasonable strate quisition, may substantially to lessen is- antitrust trial of the final on a cess monop competition, or to tend to create a preliminary in- denied hence sues and oly.” legislative 18. The U.S.C.A. § junctive relief.5 history of the amendment indicates forth, hereafter set reasons For the Congressional injunction clearly with “a should concern believe granted.6 been rising have in tide of economic concentration economy,” the American Brown Shoe Co. Clayton Act a. The 315, 294, States, 82 v. United Act, as amend- of the 7 Section (1962).7 corporation 1502, en- 8 L.Ed.2d 510 1950, S.Ct. a prohibits ed postponed to until further order of ed App. 323a-403a. 4. this court. supra. 1, 5. Note supported by is Studebaker Our action January opinion was issued initial Corp. Corp., Allied 256 F. v. Products 1969, January 24, 22, the dis- On 1969. Supp. (W.D.Mich.1966), 173, 192 where 46a, court, App. 45a, trict “ * * * said: That federal the court (1) motion for reconsideration denied power postpone to annual courts 1969, January 22, dismissal its * * *." meetings is dear See also application for a Corp. Susque America Vanadium injunction, Corp., F.Supp. 686, (D.Del. hanna 203 699 any stay on (2) continue refused to 1962). by to con- action further comprehensive leg ap- pending 7. of the For a discussion an a takeover summate history amendment, court, the 1950 islative peal and this to States, stay temporary Brown v. United 370 (3) had see Shoe Co. it vacated the granted pending 1502, 294, 311-323, 82 S.Ct. U.S. own court’s that accompanying that (See L.Ed.2d 510 The Court said text decision. Congress “hoped plain supra.) § that to make note applied only mergers 3, 1969, between ac February not to had after Allis On appel- competitors, but to vertical and appeal, tual also court denied this filed its may mergers conglomerate restraining temporary whose effect motion for lant’s any line of tend to lessen pending final decision. our order county.31 section of commerce case, posture of the Because of the 6. apparent key is [I]t stockholders’ annual to what in the erection of a barrier stone May 14, 1969, meeting we for scheduled Congress rising tide of saw was the 1969, post- May 5, an order issued provi concentration, was economic meeting. poning order stated: mergers authority arresting sion of for appeal appearing came the above It lessening a time when the trend to a at 28, 1969, argument on March on for following competition in a line of commerce for accelerated schedule Congress incipiency. in its was still appearing argument, briefing it and process of concentration saw the pre- of the issues the determination dynamic force; business as a American appeal an- affect the sented sought to Trade power it assure the Federal meeting of Allis- stockholders’ nual courts the Commission Company Manufacturing Chalmers at and be to brake this force its outset ap- May 14, 1969, and it for scheduled (Emp gathered fore momentum.32” it pearing for this is feasible it not added.) 317-318, 370 U.S. at hasis merits on the file its S.Ct., at appeal prior date the scheduled excerpts meeting, In in the above Application Preliminary b. present anyone Relief for threat to deter contem plating Basing business Clayton behavior in violation of its action on 7 of § * * *." alleged Act, its ac- the antitrust laws Perma substantially quisition White would Life Mufflers Inc. International Parts v. competition lessen lines each several Corp., 134, 139, 1981, 392 U.S. 88 S.Ct. Injunctive of commerce. relief was (1968). 20 L.Ed.2d 982 also Zenith See Act, sought Clayton 16 of the under § Corp. Research, Inc., Radio Hazeltine v. 26, empowers 15 a U.S.C.A. which 100, 1562, 395 U.S. 89 23 L.Ed. S.Ct. grant pri- relief in federal a (1969). 2d 129 action, vate against damage by Recognizing preliminary or threatened loss re * * * remedy,8 ap- lief is a of the antitrust laws serious and because violation * * * * * * Report substantiality], Congress House the final bill. [for on plainly merger indicated [and] had to be functionally That Act was in viewed in the context § 7 of its * * incipient monopolies particular industry tended to reach *. [The scope proceeded identify and trade restraints outside the then certain explicitly “aspects,” factors, of the Sherman Act was stated or economic which original Report “properly on Act. * * *. should Senate be taken into ac- 320-322, count.”] 370 U.S. at 82 S.Ct. The Court also said: at ** * adopted .Congress legislative neither nor For other discourses on in rejected specifically any particular tent, Grocery see tests v. United States Von’s measuring Co., markets, 270, 275, the relevant ei- 16 product (1966) ; L.Ed.2d ther as defined in terms of or 555 Hamilton Watch geographic competition, Co., terms locus of Co. v. Benrus Watch 206 F.2d anticompetitive (2d 1953) ; within which the effects n. 5 741 United States F.Supp. merger judged. Corp., of a were Nor v. Bethlehem Steel to be did adopt ; Thomas, (S.D.N.Y.1959) Conglom it a definition “sub- word stantially,” quantitative Merger Syndrome—A omparison whether erate : C Congressional Policy terms of sales or assets or market shares With Enforcement , designated qualitative Policy terms, or 36 Ford.L.Rev. 539-560 competition merger’s (1968). which a effects on [Footnote

were to be measured. omit- least, preliminary cases ted.] at re * * * may providing no defi- lief often a “final” [W]hile have effect as quantitative qualitative parties may plans nite tests abandon their rather

5H relief, particularly hearing; facts, no final plication aft- hearing, case, on a rec- er final complex when the is often based defend- private ton ord less reasonable N.Y.U.L.Rev. jury show sought full Ingersoll-Rand to establish showing success on final of a In a case in * * (Emphasis (3d Cir. Act, unless relief is adjudication required allegedly case the merits. lessening * party, we said comprehensive than that enjoin corporate of a reasonable chance of 1963). * added.) that a United violated which the that, Co., suffer would plaintiff hearing granted. In an ultimately prevail- States plaintiff United 7§ yield, irreparable F.2d probability action Government acquisitions probability must also the courts States stage Note, required show a which * Clay- in- *. ton Act when planation of a district court’s function ly any aspect this case. The ultimate merits taken as an main this limited liminary injunction the ultimate merits nothing not before me for determination. ture appear their deed, they ants have had a effects It should be Of similar ^[******] fully open for defense or defenses in is said in ** requested possess very [0]n different import could attempt record. noted, *. substantive this motion for a relief under the the ultimate merits of chance is to determine substance Judge be determined on determination to consummate F.2d different granted: course, Bryan’s issues at 523. full, is to final Clay- legal pre- tex- are In- ex- re imposed Rich warranted trial. Atlantic so United States v. The burden 1061, 1067, extraordinary of the re nature field sought. (S.D.N.Y.1969). am also But lief which fact that mindful of the being requested, if the Parties and c. Status relief which is moving party a reason establishes large a manufactur probability of a 7 violation able $821,- ing company sales of with annual “possibility decide the court 000,000 during plants 1967.9 With 18 adversely right permanent relief 30,000 employees, than Allis and more preclude it plaintiff does cap major manufacturer diverse is a * * *." granting temporary relief goods equipment and for numerous ital Drug Bergen Parke-Davies Co. v. major industries, a manufac and is also 1962). (In (3d 307 F.2d 727 agricultural turer of construction and pre Bergen the denial we reversed generation, machinery electrical and a liminary relief the district transmission, and distribution utilization action). private antitrust equipment. effect, Judge Biggs, To the same highly a man- is also diversified White Ingersoll-Rand, speaking this court in ufacturer, approxi- with total sales said: mately $825,000,000 1968. White’s * * * clear, years growth in has how- recent wish make tremendous We large ever, part has from series ae- been resulted in protracted against un- White to issue the outcome its intention than await reached, Note, agreement costly litigation. dis- 40 N.Y.U.L. See less consent accompanying in the text n. further 7 cussed Rev. 772 A2, required Reply showing infra, Appellant’s Brief note For discussion among preliminary injunction Allis, “presently ranks about 100th will issue before corporations, case, industrial nation’s 7 see id. at 774-777. §a ” Id. A7. complaint According which the 9. has indicated Trade Commission Federal 512 being quisitions,10 equipment. ment one most recent and construction addition, part of Blaw-Knox Com- of Blaw- 1968 major producer pany. of Knox’s net from the Blaw-Knox is sales are derived design machinery foundry products, mill of chemical construction

finishing processing plants. ap- lines for Blaw-Knox’s sales volume industries, proximates per year.11 $200,000,000 steel and non-ferrous metal handling castings, equip- steel material * * * Originally machines, sewing 10. a manufacturer and seller of since 1950 expanded through acquisitions 32 rank diversified approximately among largest corporations. 100th nation’s industrial Its major acquisitions were made between when its still annual sales were million, $54.7 when its annual sales million. Its 32 $825 reached ac- quisitions since 1950 are as follows: Year

Company Acquired Acquired Apex Manufacturing Company 1. The Electric 1956 Strong, Company 2. Carlisle & Hammond 1956 Boyer-Campbell Company 3. 1957 Manufacturing Corporation 4. McAlear 1960 Murray 5. W. Sales & 1960 Co. Fibreglass Ohio, 6. Inc. 1961 Regulator Company 7. Davis 1962 Wilgus Manufacturing Company 8. 1962 Jerguson Gage 9. & Valve Co. 1963 Manufacturing 10. Schade Valve Co. 1963 Humming Sewing 11. Machine Limited 1964 Reading-Pratt Cady 12. & Division Company, American Chain & Cable Inc. 1964 Fitting 13. Robinson Orifice Co. 1964 Company, 14. Sarco Inc. 1964 Sewing 15. Tessler Machine Co. Supply Company 16. Finishers 17. Leland-Gifford Co. Company 18. Marsh Valves Equipment Corporation Sewing Standard 20. Worcester Valve Co. Rivett, Inc. Plastics, 22. Roller Reinforced Inc. Williams, Incorporated 23. Scott & Works, 24. Whitin Machine Inc. 1966 25. Davidson Division Company Fairchild Camera and Instrument 1967 Hupp Corporation 1967 Company 27. The Lees-Bradner Company 28. Blaw-Knox Company 29. The Bullard Appliance 30. Franklin Division Corporation Studebaker Manufacturing Company 31. Hamilton 32. Kelvinator Division Corporation American Motors acquisitions, largely As a result of business is these White’s oriented machinery, non-electrical, manufacture and sale of both electrical and Id. at A5-A7. affidavit, 11. Blaw-Knox’s 1966 net sales exceeded Scott which consists of a letter report $250,000,000, net were while its 1967 sales and concerning White to its sent shareholders approximately $200,000,000: acquisition. Exhibit 6 of its Blaw-Knox alleges anee home market a where White is sub manufacturer, unlaw stantial by district court acquisition would White in some 20 found the anticompetitive effects evidence insufficient to es ful significant entry imminent commerce. While tablish or separate lines of might resulting char on market acquisition effect behavior best one, conglomerate by appliance Allis awareness manufactur a acterized potential ers that Allis entrant.12 are also economical was a that there maintains horizontal ly and adverse Shop Capability Machine (The proposed com effects. vertical the attributes (2) here has argued bination some a Allis-Chalmers also has called a Professor Turner acquisition of what would eliminate actual conglomerate,”- acquisition potential competition “mixed horizontal —-“the manufacturing company a different “large line of commerce denominated as product nevertheless related which is capability.” shop custom machine Allis acquiring products product possesses great machinery deal produced with large it can equipment, very boring firm because such as through facilities, sold much the same lathes, capable machines and of manufac- channels, or made turing range the same distribution a wide of industrial items. develop part research giant same Because Allis does not run its ma- Conglomerate Turner, efforts.” ment shops capacity, chine full it seeks Mergers 7 of advantage and Section unique equip- take ). (1965) Act, ,it selling Harv.L.Rev. “open ment time” on Further, Contending contends the lower shop Allis its machine facilities. court “open failed consider and make find the sale time” mean- is a ings respect many ingful commerce, of fact possesses with line of it alleged anticompetitive consequences giant total machine nation’s 15% shop capacity, possesses White would and that White have. similar of the na- facilities about 5% argues capacity, tional that a com- Allis Basis District Decision d. companies would bination the two opinion, In its court district dealt present horizontal eliminate specifically primarily three of giant open time ma- sale of arguments by Allis, advanced evi- shops. chine dently relating to issues which em- were the term treated The district phasized argument: the oral “large shop capability” custom machine Appliance Electric Home Market referring capacity manufac- (1) As to Allis’ contention that it range not products and did ture a wide likely appli entrant into the electrical capability per as a dis- consider such se interesting pro- entirely agree. App. 12. It to note that would 397a- posed complaint ap- the Federal Trade 398a. I do not take issue potential entry rejection requested pro- parent Commission lists the of this hearing cedure, Allis-Chalmers into the area of the manu- be that on the major injunction appellant’s permanent facture and sale of electrical home for a coupled impor- appliances, chips evaporate with White’s when the reluctance would position by acquisition any rate, tant in the field down. At it should be made are appliance my Kelvinator manufacturers, and several other there is a clear that conclusion that grounds support as one of the sufficient basis in the record to a possible Appel- probable the Commission’s action. success on the determination Reply Brief, important predicated any lant’s A8. merits is not problems appellant degree appellant’s potential One of the seemed to on claimed respect particular entry appliance have to this area the electrical home into developed, Perhaps issue, awas reluctance to disclose the details of field. if negotiations potential European hearing its with a with more certitude at a re- on appliances mand, manufacturer-licensor of such tend to buttress the anticom- except proceeding, petitive acquisition merger in an in camera effect of the appellee proposed by which the and the district court White. 514 Thus, conclusion was based The court’s the court tinct line of commerce. large part to find sufficient specific failure cate- willing into to examine was evidence, beyond Allis company assertion gories products each which rolling entry management, into “capability,” but produce could contemplated. industry In ad- mill court was information the absent dition, the absence the court noted unwilling the anti- evaluate unable or to confirm that evidence the record effects, any, in rele-

competitive if technological or financial Allis has markets.13 vant capacity or the enter the market abil- ity support an addition- of the market to Entry Market— Into Potential competitor. al Rolling Mills Metal my I think the record From review of (3) The third area with inquiry status a further into Allis’ opin- industry in its court concerned itself potential lower entrant into this construc- ion the manufacture and was warranted. See United States v. Wil Blaw-Knox, rolling Sporting Co., F.Supp. son metal mills. Goods 288 tion of (N.D.Ill.1968). 549 The uncontroverted acquisition, is one recent a disclose has Allis affidavits leading mills. Al- of such manufacturers components manufactured and sub-as entry into contends that its own lis rolling complete mills semblies of metal sufficiently line of commerce is for Blaw-Knox Knox but also Blaw probable restraint White’s to warrant has indicated to Allis its that the belief court, projected The district takeover. presently appropriate latter has the fa hand, found insufficient on the other capability cilities and to manufacture a potential Allis’ contentions that it was a complete App. 10 or 12-inch mill. field, further found entrant into this Also, affidavit, 146a. General enough to that Allis did not stand “close Manager Process, Equipment of Allis’ edge of the mill market metal Systems he Division states that competitive negotiating European exert influence on others a been with a firm license14 industry.” F.Supp. obtain a to enable Allis to at 1268. 294 analogy sig proposed complaint to the Sherman Act is makes no FTC “large shop nificant been cases under reference to custom machine involving “part” my view, shop capability.” statute a of com In “machine consisting See, g., though merce capability,” of services. e. a service rather than dealing product, the line of Fourth cases Circuit nevertheless be considered “selling purview with the allocation of time” in line of commerce within companies: warehouses to tobacco Rob Act and I believe this matter should Fuquay-Varina again by erts v. Tobacco Board of be reviewed the district court on Trade, Inc., (1964), rehearing. 332 F.2d 521 405 United States v. Philadel Cf. (1988) ; Bank, phia F.2d 283 Danville Tobacco As 83 National Bryant-Buckner Associates, (1963), sociation v. 10 L.Ed.2d 915 S.Ct. Inc., (1964), 333 F.2d F.2d 634 v. Manufacturers Hanover States United F.Supp. (S.D.N.Y. Co., Trust 1965), banking See also United v. Tidewater where were held States services F.Supp. (E. Marine Service to be a line of commerce within § 7 D.La.1968), chartering in which Act. transport sup discussing cases, “service men craft the bank the Su- plies industry,” preme oil offshore in United States v. Grinnell implicitly service, Corp., case, subject (1966), line considered a of commerce Sherman Act L.Ed.2d 778 Clayton Act, although involving monopoly burglar alarm field, was found not to be violative of § service said: differen- We see no reason to between “line” of in the tiate commerce Clayton Evidently European “part” 14. different this is a context of the Act and purposes than the one with which Al- the Sher- manufacturer of commerce for of negotiating sale of electrical lis is for the man Act *. 384 U.S. at appliances. S.Ct., home at 1705. preliminary casting proc- triet court indicated that continuous a manufacture producing relief would been warranted.16 The machinery steel have ess opinion evidently process court was 293a, in- App. 294a. slabs. irreparable injury by Allis would suffer utilized tra- those volved differs outweighed injunction designed if were denied rolling but mills ditional likely the harm White to result if product.15 produce end the same granted. relief Were conclusion accord to demonstrate I am the district court’s failed aware that Allis-Chalmers had probability irreparable of convincingly issue of reasonable discussion of the injury, margin, quoted trial, was some- district final success on gratuitous subsequent preliminary and, at a application for a what denied the hearing appellant’s injunction. on motion for recon- relief,

sideration of the denial of gone into court said that it had not Irreparable Harm e. fully question irreparable harm as might finding explained, have had there been a previously it order As prevail in Allis’ private favor on 7 issue.17 party to Never- § in an action theless, injunction the court's preliminary believe anti tentative for a balancing hardships showing resolution of the case, trust must be a in Allis’ irreparable respect, favor warranted In this there harm. adequate support finds fore, the record. important had note showing by there been a The affidavits Allis submitted show probability of on success reasonable the threat of a takeover has hearing issue, professional final had an the dis- adverse effect on § sonably expected Trade 15. Federal Commission to manifest them- complaint states: selves interim between denial of * * * presently supplies preliminary Allis im- relief and final determina- portant components rolling mill ma- tion of the merits and those anti-eom- chinery rolling petitive irreversible, to contractors of mills effects are the in- likely jury public which, by definition, and is one the most entrants to the weight. and sale into the follows is entitled to considerable manufacture machinery. Sporting White’s mill See United v. Wilson States acquire plan Co., supra F.Supp. Allis’ stock and its busi- Goods at 568- may potential compe- eliminate the ness tition offered Allis mill After careful review of the record in machinery (Emphasis case, market. is of the the Court Reply added; Appellant’s Brief, A10). that, showing by had there been a Allis- potential probability On the tests for Chalmers of reasonable potential entry market, Brodley, hearing into see success on final of the § 7 Oligopoly issue, Power the Sherman Under would Court have been com- Theory pelled injunc- grant Economic Acts — From Legal Policy, 19 Stan.L.Rev. 357-359 tion. Evaluation of public harm future to the parties course, is, and the speculative highly undertaking; how- opinion below, F.Supp. 16. In ever, the convinced that Judge Wright n. Chief said: offer, imminence of a White tender following The Court notes the conclu- disruptive unscrambling effects of irreparable injury sions on the issue of : combination, White-Allis-Chalmers party satisfactorily dem- Where a probable injury public to the probability onstrated reasonable of es- (assuming such a combination it to be tablishing 7 violation final trial illegal), together, when considered would issue, properly should the Court justified injunctive relief. injury public consider as well as The Court reiterates there has parties injury immediate in de- showing probable been no success preliminary injunction ciding whether a that, therefore, Allis-Chalmers and Corp. Vanadium should issue. See irreparable injury issue of is not Susquehanna Corp., supra, America fact before the Court. Indeed, prob- at 696. if App. anti-competitive able effects rea- 429a. 516 recruitment, truly highly prejudicial appel- employee be management public. lant as performance, also well as to and has

morale on Allis’ business effect adverse had by district As was stated withholding customers operations with Ingersoll-Rand Co., 218 United States v. uncertainty of its future. orders due F.Supp. 530, (W.D.Pa), which we 542 Furthermore, 162a, im- 74a, App. 173a. (3d 1963): affirmed Cir. in 320 F.2d involving negotiations portant * * Considering hardships European licensing agreement with a divestiture with their ramifica- actions producer Allis to enter to enable complications pain- and their tions and apparently appliance field home they touch, impacts upon ful whom all by possibility the ac- been stalled is hard understand that such App. 76a, quisition by White. 77a. reasonably device considered as can. be addition, serious to Allis harm remedy employed the ultimate to be * * might if White were to result nominees here *. of Allis’ Board of Di- become members Relying Ingersoll, inadequacy on gaining knowledge rectors, thus of Allis’ Judge by reiterated divestiture was Wor- secrets, plans, business trade future tendyke Chrysler United States information, or other which Corp., (D.N.J.1964). F.Supp. “irreversible” event would Smelting Refining also See American ultimate divestiture. See Co. v. Crane United, Inc., Co. v. Pennzoil Briggs Manufacturing Co., 280 F.2d (D.Del.1969). 157-158 (6th 1960). Cir. position I on the While take no matter Significant impact also is the financial time, there has divestiture been occasion, a White takeover would as expressed some doubt as whether such White has admitted that access to Allis’ remedy is an antitrust action available necessary cash resources to finance by private Note, party. 40 N.Y.U.L. White’s of the Allis stock. (1965). Note, Minn. Rev. App. cognizant Cf. 196a. While I am as If un L.Rev. 267 divestiture is problems well of the financial available or uncertain ultimate face as a result of a reversal of the lower remedy present action remain should the action, court’s I am of the may private suit, party be even quo the maintenance of the status affording preliminary more reason for necessary viability to assure the of Allis- stage. appellant relief at this independent, healthy as an Chalmers en- tity ultimately prevail should it on the merits. II. This Reversal Further, question White contended at the oral On the of whether there has argument appeal probability showing before this court been a of reasonable possible issue, action the Federal trial of the success on final Commission, later, disagree compelled Trade discussed takes I am with the away the element of “future harm the district court. public” in its cited the district court Ingersoll-Rand In United States v. irreparable of the issue of evaluation Judge (3d 1963), 320 F.2d 16, supra. injury. agree note See Biggs said: appellant, reply asserted brief its course, start, 5-6), (pp. opposite may We be true. proposition possibility fundamental issu- of action the Federal injunction interlocutory remedy ance of an Trade Commission makes the likely discretion of rests within the more sound divestiture a one in the event found, trial court and discretion Act violation of the appeal anticompetitive interfered with effects “irreversible” improvi- unless it has been exercised if result would dently *. meanwhile been consummated would court, Rolling a. Metal Mills —Blaw-Knox district the record before On it was hold that I am constrained Turning alleged to the of the merits improvident conclude that anticompetitive effects a combination showing probability of not a reasonable Allis-Chalmers, and the main onAct a violation appear areas of concern to involve deny hearing prelimi- and thus final subsidiary. White’s Blaw-Knox I have nary relief. already po issue of dealt with the entry tential of Allis into the metal roll conclu the lower court’s While ing (See point (3), mill market. Poten respect dealt to the issues with sions Entry Rolling tial Into Market — Metal already opinion been in its with Mills, heading, under the Basis Dis for mentioned, raised issues certain other Decision, supra.) trict Court affidavits, complaint and more and fully developed and oral the briefs Product Extension court, sufficiently argument in in this previously noted, As Blaw-Knox is one view, dicate, my probability that major substantially manufacturers metal acquisition may a White rolling mills. The record indicates that of rele in a number lessen the manufacture of such mills is a dis- (With pos commerce. vant lines of tinct line of commerce and that the in- shop cap exception of the sible machine dustry highly is a concentrated one. castings, Ac- large par ability and steel cording major to Allis the four manu- agreement for ties seem to be rolling machinery facturers mill geographic ac- purposes the relevant market, count for more than of the as 80% are nationwide. The “nation markets being largest sup- Blaw-Know the third “a the coun a whole” section of plier mills, of such with a market share try” to measure anti- within which approximating competitive or 20%.18 effects Kimberly- merger. v. United States The electrical and drives controls which (N.D. Corp., rolling represent Clark run mills Cal.1967).) part completed mill, of the cost of a com- prising approximately one-third of the discussing issues, I Before those fully-installed cost of a mill. Other emphasize points I find should equipment machinery in the mill ac- cogently persuasive nor were neither cost, count for another third of the total forcefully presented district court to the remaining going design, third for argument. Indeed, the district at oral buildings. Industry- construction extensively court’s dealt shipments equipment wide mill major arguments Allis’ counsel machinery, including com- electrical presented lengthy to it in oral hear ponents, $300,000,000 annually.19 exceed January 14, 1969. But I believe court, appellate major our role as mill do not manufacturers having type important in an case manufacture the electrical drive con- far-reaching consequences systems economic integral trol part which form an only parties but to the industry the immediate practice of the mill. The well, duty-bound public purchaser to con we are acquire the mill properly components sider raised separately through all issues control complaint having support. manufacturer, record the mill with the latter App. chinery country 146a; Exh. MM to affidavit of of the 11% 1967, being W. H. Davis. market one of four According proposed complaint companies supplying complete Commission, Appellant’s Reply Brief, the Federal Trade mills. A10. machinery top rolling mill manu- four busi- facturers accounted for 19. Exhibit MM to Affidavit of W. H. Da 60% top eight and the of all vis. See also ness shipments. Federal Trade 75% complaint, Appellant’s Reply White was stated to be Commission Brief, largest supplier rolling mill ma- third A10. agent. (1967), FTC, acting Corp. purchaser’s Foods General denied, 1967), (3d major suppliers 386 F.2d electrical control cert. Electric, Westing- 391 systems 20 L.Ed.2d are General Allis-Chalmers, (1968), United and those States v. Wilson house and Sporting Co., 543, approxi- companies 548 for Goods 288 three account (N.D.Ill.1968). “product equipment

mately A extension of the electrical 90% merger” “merger may rolling supplied is mills. terms enable for metal significant integration production, percentage figures, in the of Electric General marketing Westinghouse of distribution or for over activities account 80% merging sales, firms.” 386 a dis- F.2d at 944. with Allis-Chalmers tant third. Gamble, case, is Procter the Clorox & presently While the two leaders are perhaps principal Supreme de- primary suppliers of Blaw-Knox’s electric conglomerate acquisition cision in the rolling mills, past for drives its over the 583, area. 87 1224. S.Ct. years approxi- supplied five Allis has with a con- This court dealt “mixed” mately a half million dollars worth glomerate merger in Foods General annually. equipment such to Blaw-Knox Judge Staley. an App. 199a. Reciprocity major position In addition to its rolling industry, major purchasers mill rolling Blaw-Knox also The mills significant engineering utilizes companies. past its con- are steel In the few designing capability years purchased struction an Allis-Chalmers has building complete plants. average $30,000,000 industrial worth of steel annually companies from the ten steel probable anticompetitive ef principal which are Blaw-Knox’s custom fects of an Allis-Chalmers-Blaw-Knox rolling App. 294a, ers for its mills. 295a. (i. e., White) signifi are combination purchases Allis’ total annual of steel mill design cant. Blaw-Knox’s and construc products appear approximately $44,- capabilities position tion its as 000,000.20 coupled with When White’s r leading rolling mills, manufacture purchases products, annual steel mill coupled position when with Allis’ as the value,21 $42,000,000 in about a White largest supplier third of the electrical larger buy Allis would a far combination components mills, drive for such would amount of competitors steel than Blaw-Knox’s becoming result in Blaw-Knox rolling mill market. company capable designing, producing danger competition inherent installing complete rolling metal is not difficult market situation emergence company mill. The of a offer perceive. product complete such a would raise higher already acquisition An which creates barriers to entry reciprocal seg market conducive to others into the structure various dealing presents acquiring company rolling ments of the metal mill market. App. 111a-112a, competitors, advantage an poten with an over 290a-293a. The advantage very power tial nature entrenchment of the which market merged anticompetitive. FTC See v. Consolidat Allis-Chalmers-White indus complex Corp., trial ed 85 Foods U.S. S.Ct. as a “full-line manufactur er” And L.Ed.2d field of metal mill machinery possible by reciprocal trading example “product made is an ex acquisition consequences not ensue “from tension” need be anti- competitive bludgeoning Id. at coercion.” and violative held § Co., in FTC noted United States v. & 386 S.Ct. 1220. As we Procter Gamble (3d Ingersoll-Rand 320 F.2d 509 S.Ct. L.Ed.2d Proposed complaint FTC, Appellant’s Id. at A11. Reply Brief, A10. petitors mill 1963), of this the sale ma- “the existence mere chinery might industry.22 steel purchasing power make its con end un employment toward this scious Market Share power necessary; possession sufficient, sophisticated frequently forget We must not quick to the advan see are businessmen play Act comes into where the effect of good securing tages “may substantially * * * ” ‘Reciprocity’ possessor. competition, (emphasis lessen particularly destructive added; 18). U.S.C.A. As Su- buying substantial it transforms because preme said, Court has concern of ‘denying power weapon com into a Congress probabilities, was with not cer- favorably to petitors access situated less tainties. Brown Shoe Co. v. United ” 524, quoting from Id. the market.’ States, 294, 323, 1502, 82 S.Ct. Judge Rosen the district (1962). 8 510 L.Ed.2d berg. v. General also States See United imply I do mean 7§ 36, (S.D. Corp., F.Supp. Dynamics 57 258 prohibits per diversification But at se. principle of N.Y.1966), the rec in which no can be doubt that 7 date § conglomerate iprocity applied was designed rising to arrest tide of merger case. curb, in economic concentration purchasing power of a The tremendous lessening incipiency, competition of combine, coupled with Blaw- White-Allis probable by possession of mar made rolling position power corporate acquisi acquired enhanced in the Knox’s ket via 23 scope market, of tions 7. com- within § mill foreclose White’s (3d 1953), 163, System, reiterate, 169 Cir. FTC’s 206 F.2d section of the To approval reciproci- complaint dealing proposed States v. in United with cited with Co., A10-A11, ty, Reply Brief, Appellant’s E. Pont Nemours 353 I. du De & 872, 586, 592, that, L.Ed.2d 1 asserts (1) buys approxi- (1957), v. Luria Bros. & Co. 1057 1968). (3d 847, mately $44,000,000 products FTC, in steel 389 F.2d Pont, supra annually; See I. also E. du major Corp. (2) supplier Ameri- of White is a of and Vanadium S.Ct. F.Supp. Susquehanna Corp., equipment industry to the steel ca 686, v. rolling mills; (D.Del.1962). of area 695-697 (3) purchases discussing White makes annual of In 1950 Celler-Kefauver products Clayton Act, approximately steel mill $42,000,000; amendment 7 of charge Attorney Assistant General (4) Thus a Allis-Chal- United combine of Division of Antitrust buyer White, large Department as a has said mers and of Justice States products “nothing mill and a substantial has steel while the that against conglomerate Government producer rolling equipment, firms, such, mill as compel great indeed, recognize en- could the selection of an there is a we larged company mill we are deal to be said for them * * * big-com supplier disadvantage very of other about concerned producers. machinery pany mergers, galloping to mill and the trend reciprocity. (Address is This the essence of ward economic concentration.” relationship oligopolis On Anti between W. McLaren before the Richard reciprocity eco As tic market and and the Bar trust of the American Section Brodley, theory underlying it, 1969, Washington, sociation, nomic see March Oligopoly D.C.). Power Under Sherman Mr. also discussed McLaren Clayton Theory presented Acts — From Economic his 1950 amendment and views Legal Policy, applicability conglomerates 327- 19 Stan.L.Rev. on its Congressional testifying com before a CCH March 1969. See 5 mittee on 7, supra. 23. See note Reg.Rep. 50,233. ¶ Trade stated, Judge aptly As Maris “ * * * purpose Federal it is [§ of] It should noted also that the April nip monopoly in the Act to Trade Commission announced * * Corp. program,” 8, 1969, “merger Bud notification Transamerica mergers requiring prior of Federal Reserve notice v. Board Governors Applicable impact here is our statement in. the immediate Corp. FTC, upon General Foods F.2 competition PCA in the United (1967) potash 945-946 : appear States d market would not * * substantial, to be but such a narrow not the While aim approach is not consistent with the ob- merely policy preserve antitrust “competitive jectives of Section the Act. Con- per se, it as- balance” industry, centration in the as well as suredly policy the aim degree existing competition, preserve competition whatever exists must also be considered *. given industry, in a if even such com- petition oligopolistic be of an nature. In United States v. Atlantic Richfield (S.D.N.Y.1969), expressly I have not dealt large companies very which involved party’s the matter of each share of the power, assets and substantial economic market the lines under commerce say: the court had this to nevertheless consideration I do not believe question dispositive of market shares * * * [Mjarket are an im- shares present preliminary stage portant considering prob- factor in proceedings, particularly conglomer in a able effects a combination on effec- Turner, ate situation. Con tive market. relevant glomerate Mergers and of the Section 7 percentages Of course such not the are Clayton Act, 1313, 78 1315- Harv.L.Rev. sole criterion. (1965), 1316 the author stated: Among important * * * other factors are in- developed for The rules de- dustry * * * concentration, trends toward termining validity the of horizontal degree the of concentration mergers clearly and vertical * ** industry, history of conglomerate gen- acquisitions for do firms, merging acquisition of erally. types In the of hori- familiar * * * entry and barriers cases, merger zontal and vertical * * industry, *. Supreme place im- Court has come weight portant if not on the decisive merely These factors must be viewed share of the con- relevant markets guidelines assessing anticompeti- acquired acquiring trolled and likely tive effects are result sig- company. But whatever merger. They from a of course cannot nificance can attached to market substitute for extensive and de- more cases, quite clearly in these shares analysis industry of tailed at trial significance less with con- becomes probable structure and the economic glomerate mergers, and indeed setting effect of * * * completely vanish. particular industry and the rele- Likewise, in United States v. Standard geographic vant market. Brown Shoe (New F.Supp. Jersey), 253 Oil Co. States, n. at 322 Co. v. United said, (D.N.J.1966), dis 224 cussing 82 8 L.Ed.2d 510. On a S.Ct. generally: 7§ motion for relief such as * solely strictly me, economic anal- Measured now before detailed percentage, ysis of this nature seldom before the

in terms of mathematical * * * having involving firms, (1968) (“ acquisitions 1231 [T]his or Rev. golden rapidly emerging as- or combined decade is as the certain volume of assets * * ; subject ”) age conglomerates sets, to the Commis- of the which are Elman, Conglomerate jurisdiction. Mergers, U.S.L.W. Clorox and sion’s 37 ; 1969). (1967) (Apr. 22, 23 36 A.B.A. Antitrust Turner, L.J. 2596 expected, Conglomerate Mergers the literature and Sec As is to be Clayton Act, views Harv.L.Rev. extensive and the tion 7 field is See, divergent. experts (1965) ; Brodley, Oligopoly widely Power Clayton Davidow, Conglomerate Acts— g., Concentra- the Sherman and e. Under Theory Legal Policy, The From Economic Limita- tion and Section Seven: (1967). Anti-Merger Act, Col.L. 19 Stan.L.Rev. 285 tions oligopoly expected. or create oth- conditions court and cannot added.) (Emphasis must relevant market. above factors referred er heavily Brodley, Oligopoly on in relied deter- Power Under therefore be probability at trial. mining n success Acts—From Eco Sherman Policy, Theory Legal F.Supp. 1071-1072. omic (See also Stan.L.Rev. primarily My concern here Dynamics United States General probable anticompetitive made effects (S.D.N.Y. Corp., already significant the entrenchment 1966).) rolling mill power. metal market product markets some of other Equipment Construction b. oligop- appear case to be involved in this thus disclosed structure, the facts with either the basis olistic in On burden being its met number Allis has Allis one of small I far believe suc- probability showing account reasonable sellers who note, hearing. in ad- light I of such But market. on final share cess probable effects structures, proper possible think dition, market other g., are deserv- concerned, acquisition which e. with the asserted be less of a White previ- inquiry. purchases, As percentage of total steel small extensive of more leading manu- nationwide, indicated, is a ously which a White-Allis combine Allis range compari- construction for than would account a wide facturer of scrapers, tractors, purchas- including equipment, son the dollar volume steel machinery used graders vis-a-vis dollar other es combine re- By purchases virtue volume steel White’s construction. road Steel, Allis competitors sale in the manufacture of Standard cent leading Davidow, Conglom- manu- mills. nation’s See now one of asphalt plants.24 Blaw-Knox erate and Seven: Concentration Section facturers of pav- asphalt Anti-Merger Act, major of The Limitations of manufacturer is a highly concen- 1231, in that Col.L.Rev. leader and a ers indicates industry. evidence The trated discussing Thus, in rec- the doctrine of pavers asphalt plants asphalt and iprocity, one commentator stated: often are and complementary items are ** roadway con- conjunction Consolidated Foods indicates for in used involving mergers as- “product in those reci- extension” The struction. deserv- procity inquiry acquisition are a crucial will be wheth- pects of a position expected reciprocal buying light Allis’ ing scrutiny er the of in of appreciable leading of a broad have an effect on main- manufacturer as a equipment and its oligopoly range tenance of conditions in the of construction carry industry wide who or industries involved. It is of dealers network App. possible 137a. equipment. range that under certain conditions of such may effect, no such as where Castings c. similarly Steel other firms are diversified equally signifi- and can make de- possibly effective may be a There also supplier-customers. on their mands ac- aspect vertical cant issue, large [Footnote how- omitted.] cone manufactures quisition. Allis merg- ever, appears grind- crushers, whether the clear: and crushers, gyratory likely intensify, maintain, er components will be for ing One mills. “asphalt plants” poured asphalt 24. site, The function is de into is tion pavers in scribed 57 of the affidavit Thomas ¶ taken and trucks Dineen, App. highways. L. spreading 136a: on plants site, 18, brief, p. Appellant’s At actual construction states that pavers are, semiportable course, batching plant “asphalt and in con- is used junction is, the actual plant with one another. That is moved around asphalt semiportable is in mixed as- site.” construction phalt batching plant near construc- castings, legal large equipment steel memoranda conduct several hearings presently parties and is which counsel for the and White manufactures castings.25 presented argument, suppliers dispos- of such one of Allis’ oral before may of Allis White’s foreclose matter of Janu- ary competitors White’s manufacture and the denial the motion castings selling January from on and sale steel reconsideration disagreement Allis, My preclude competi- 1969.27 result Allis’ obtaining large castings reached, tors from which the district there- steel fore, way supply. in no from detracts the master- short number times performed castings small, dealing ful task the court manufacturers of steel expeditiously complex with this and there is new- evidence because ly developing transportation field law con- costs involved glomerate acquisitions mergers. shipping large castings areas meaningful competition among sell- fact, ers is less than nationwide. Proposed Complaint III. FTC alleges Allis of cost because and oth- pointed also, It should out purchases er it now cast- considerations court, fairness to the district that over ings thirty in excess tons but following a month suppliers, its decision three and while one of which is White.26 pending appeal the case was on to this emphasized It should be the trial court, the Federal Trade Commission de judge, following filing appellant’s clared complaint complaint intent file a on December and the against January appellee answer of the White for violation of 7 of the compelled review an over- agreement Act unless a consent whelming documentary mass materials is reached with the Commission.28 See affidavit, App. 131a-134a; 25. See Dineen proceeding sion is in this interested Reddig affidavit, Exhibit O. following its course court. Arsht, I The Court: Mr. haven’t heard App. 131a. thing T. from the F. C. and it doesn’t Judge Erankel has characterized in they whether make difference are pithy plight judge, fashion of a district they If interested or not. are interest- sweeping antitrust actions of this na they ed, something can come here and do ture, being required as to hear and con They about it. not here. And are since sider such “with all cases inconvenient forget they here, are about it. ” * * * speed Lunkenheimer v. Co. say May Mr. I Arsht: one or two ad- Corp., (S.D.N.Y. Condec regard in ditional sentences to that. 1967). policy We are advised that is the or argument practice 28. We were at oral advised Federal the Trade Commis- way affirmatively discussions were under between the sion not appearance by to initiate an appellee by Federal Trade Commission and or an intervention .it White, private litigation and we not been have informed as it in such as this but to the status of matter at the this time. if should Court indicate an in- investiga- story So that the on the FTC terest in a statement from the Federal including complete, position I tion will be am Trade Commission of its or a following colloquy report investigation— between the its the status of good counsel at the commencement of the Jan- The Court: What would that do uary argument 14, 1969, they investigation? below: if made oral haven’t know, your Allis-Chalmers]: Mr. Arsht Mr. [counsel Arsht: I don’t Honor. introductory up One other matter I I Court: don’t think it is to is, your inquire they me would like to mention as Honor to them. If want case, get any- knows from record in in to touch with me and have thing say it, they Federal Trade Commission is in the to about I think can investigatory proceeding, they midst of a either or come to court can write proceeding having by copies to do the defend- a letter and advise counsel ownership they ant’s of this block of stock the letter. If think that this is so plaintiff. serious, they doing of the in- We have been have their method of something They go formed Federal Trade that the Commis- it. about can either prises may A2, be able to market Reply A5. While achieve Appellant’s Brief weight power arrangements, from as give to a com- subtle excessive we cannot reciprocity opportunities the new Trade Commis- plaint the Federal merging file, I created of White intention its indicated sion has combination of the Allis. A of White proper note to take it is believe largest proposed Allis will constitute fourth exploration of the Commission’s involving because, acquisition or manu- by White, particularly takeover facturing companies in since appellant, Federal asserted as significantly January and will “reason to must have Trade Commission manu- increase concentration in the violation of believe” that there is economy. facturing This issuing complaint. sector Act before combination, furthermore, combines 21(b).29 15 U.S.C.A. § many operate two firms which across to some previously adverted I oligopoly industries and which have in Federal of the items twenty power of at in a total least complaint. cite Trade Commission ** The result- industries. complaint, following statement oligopoly power accumulation designed presumably to meet stat- may markets result numerous utory requirement, “reason to believe” unhealthy the mutual entrenchment of conforming my view on own market and the enhance- situations pre- probability appellant will power ment of the new combination’s merits: vail pursue anticompetitive practices in connecting link be- There is a vital by selectively ap- of its markets growing aggregate concentra- tween plying power against oligopoly less power conferred tion and the market powerful firms. White’s individual mar- concentration in sub- therefore Allis’s stock conglomer- largest Many kets. stantially competition or tend lessen leading occupy corporations posi- ate monopoly violation create industries, particu- tions numerous Clayton Act, amended larly the most concentrated ones. (15 18), plan ac- U.S.C. § pow- positions These confer economic quire constitutes the business Allis advantage potential er and economic big- beyond method of an unfair with sheer associated Vast, ness alone. multimarket enter- Federal violation of Section 5 of the Attorney, Smith, to the United States the At- Ward White Vice President torney General, Court, opposition Secretary, and come Al- submitted go they injunction can to the Circuit lis’ motion to this court Appeals injunctive supra. pending appeal, and ask for relief. note 5 they hadly it, If feel about is too Robbins, bad. Inc. McKesson Cf. Well, Co., 743, F.Supp. Mr. Arsht: I have stated what & 235 Charles Pfizer practice, .MacIntyre, I (E.D.Pa.1964), have been informed their Anti 747 namely, Injunctions: if the Court invites them A Private trust Flexible position 22, 30-32, Remedy, to state their or if the Court Duke 1966 L.J. weight parties given proceedings. authorizes counsel for the to to ex- to FTC key par- tend the Court’s invitation for their It noted should be the factors they ticipation, respond according- will which FTC has the considered ly conglomerate but will not themselves initiate the cases in which it found participation mergers illegal intervention or to be are elimination “the potential competition, gaining case. they competitive advantages The I Court: am afraid couldn’t threaten to help very stage raising decisive, this Court much at this the barriers * * proceedings. entry App. anticompetitive and the creation of reciprocity opportunities 325a-326a. *." Appellee aware, course, Reilly, Mergers Argument Conglomerate —White—was — An acquisi- investigation Action, 522, of the FTC’s of its 61 534 Nw.U.L.Rev. tion of Allis’ stock. See affidavit 524 (15 partment’s merger policy Act chiefly U.S.C. Trade Commission focuses * * * Brief, 45). Reply upon Appellant’s dealing market In structure. conglomerate mergers,

A17-A18. the Justice De

partment regards mergers involving po Department IY. Guidelines Justice mergers creating tential entrants and significant danger buying reciprocal presenting its case concern having sufficiently as anti- identifiable ing anticompetitive probable effects competitive subject effects be the takeover, of a White Allis-Chalmers has relatively specific guides. structural sought upon support relied Guidelines are also concerned with con Merger Department’s the Justice 1968 glomerate mergers involving acquisitions (set Guidelines out in an addendum leading relatively of a firm in a concen appellant’s argued brief), and has concentrating rapidly trated or market clearly a White-Allis combination is vio acquisition may where the serve to en portions guidelines lative of the power trench or increase the market dealing mergers involving potential entry that firm or barriers to raise entrants, mergers creating danger Guidelines, firm’s market. issued mergers reciprocal buying and en 30, 1968, May reported are at 1 CCH recognize power. trench market 4430; Reg.Rep. they Trade dis were ¶ primary purpose of the Guidelines Sporting in the Wilson cussed Goods Co. being applied is to indicate the standards case, 14, at 554 n. and in Department of Justice in deter Co., United States v. Atlantic Richfield mining challenge corporate whether F.Supp. 1061, (S.D.N.Y. 1072-1073 acquisitions mergers 7, under § 1969); Judge referred Chief (subject reevaluation the stand Wright Smelting in American and Refin present Depart ards head of the Inc., United, F. Co. v. Pennzoil Division, ment’s Antitrust Trade 5 CCH Supp. 149, 154, (D.Del.1969); Reg.Rep. ¶ 50,233, 55,465), at upon testimony commented before purport standards do not abe Congressional present committee concise statement of the status Department’s head of the Anti Justice which the law courts are bound CCH, supra Division, trust note to follow. But because Justice De 55,465. partment obviously prin one of the decision, cipal government In the Wilson a well-reasoned agencies charged with legal compendium of most recent duty enforcing laws, the antitrust principles applicable to the kind of anti- position I think its is entitled to some here, problems the court trust we have consideration, particularly when elements said: support Guidelines find in the de veloping (See, g., case law. e. FTC v. Supreme rec As supra; Procter & Co., Gamble United ognized Clorox, particu it does not Co., States v. Continental Can U.S. mergers larly analysis aid to discuss 441, 1738, 84 S.Ct. 12 L.Ed.2d 953 terms of labels their conventional (1964); Co., United States v. Penn-Olin horizontal, conglomerate vertical U.S. 84 S.Ct. 12 L.Ed.2d (386 87 S.Ct. 18 L. (1964); United States El Paso v. 303). Ed.2d is the What Natural Gas merger upon effect of the (1964); 12 L.Ed.2d 12 General in market structure the relevant Corp. FTC, supra; Foods United States dustries, whether Sporting Co., supra.) v. Wilson Goods competition rele in the tend lessen light purpose Indeed, governing In of the clear 7 to the vant market. § preserve promote meaningful involving conglom compe- litigation and in facts tition, par- merger usually and because the structure of a different erate are ticular market effect in situa those horizontal vertical competition market, analysis on tion, required in that the De- em- and their phasis upon appellant effects the end of market for an in- different road as * * dependent entity. economic *. precious raised in the realization * ^[*] * attemped probabilities, * ^[*] little haveWe ^[*] in ease proceed pondered ' long and ^[*] law to we are and ^[*] hard and guide caution dealing issues ^[*] us. is to: laws because the sition of Allis White ability of a violation of the antitrust (a) eliminate In metal summary potential mill poses proposed industry competition threatens acqui prob and markets; ad- Turner’s other Professor relevant We have heeded antimerger monition that “whatever (b) potential independent diminish gen- adopted, they should standards are other in diversified mar- horizontal erally for be more severe kets; and conglomerate vertical) (and than for (c) power enhance a White- * * * mergers.” engage recipro- Allis in combination 567. dealing.30 cal in- Basically, is stake what Allis, appeal or death is the life stant Preliminary Injunction V. eager company, independent a viable effectuating pre- the decision that White, against such, pitted continue liminary relief should be in this afforded fast-moving acquirer of aggressive, case, necessary be will this court businesses, particularly many diverse and the district to determine the may years. motives past few White’s injunction preliminary outlines of a promote designed highest carry following objectives: out the enter- free concept American of the one (1) preservation quo of the status firm view prise system, but am pending a decision on the merits very likely is takeover permanent injunction,31 (2) fairness in viola- anticompetitive litigants. protection effects adequate to have' deny To Act. tion of 7 of hearing Pending final and determina very mean well tion, shall, could therefore, relief the district court32 case, course, stand proportions higher must each While These are than feet, ob upward not be own we should on its those continue the * * * years. (Sta- in our econ trends to the current livious trend of recent impact possible omy 3.) p. of this Report, and to the tistical Henderson, toward further on the movement case The Henderson Cf. by merger. Unit Oligopoly, concentration economic Race Duke L.J. 637. Co., Brewing 384 U.S. Pabst ed v. States Inger v. As said United States we 16 L.Ed.2d 86 S.Ct. (3d Co., 509, 525 soll-Rand 320 F.2d Cir. (1966); v. Continental States United 1963): 441, 464, Can ** * order does The Sta 12 L.Ed.2d rights determine the ultimate Report Trends on Current tistical Merger contesting parties merely but maintains Activity, 1968, the Bu issued quo hearing final can status until Trade of the Federal Economies reau of and final determinations made had March, 1969, Judge (concurring). holding hearing SEITZ, it deems as Circuit after such injunction preliminary necessary, enter by I in the result reached While concur following terms includes the which Judge STAHL, appropriate to I find it conditions: my for for re- set forth basis vote the separate opinion. versal this hold (1) permit Allis-Chalmers injunction preliminary meeting should for the elec- think a its stockholders’ ground directors; issue in on the this case tion probability there is a reasonable (2) prohibit Consolidated White hearing court after final the district voting of Allis-Chal- from its shares might create find that the would taking any action calcu- or mers stock market structure conducive unlawful give representation on the lated rolling dealing reciprocal mills Allis-Chalmers; board of directors of Ingersoll-Rand area. States v. United my (3) prohibit Co., (1963). con- Consolidated I base White 320 F.2d 509 taking any steps following the calculated recital af- clusion the holdings Dineen, Allis- Allis- increase stock of Thomas L. fidavit ; Manager: Chalmers Chalmers General purchase steel “Allis-Chalmers’ (4) determine, pursuant F.R.Civ. leading cus- from the ten Blaw-Knox 65(c), security furnished P. years during past four tomers as a condition averaged $30,000,000 year. None injunction. granting preliminary principal four the other three in- is authorized to district court ** suppliers mills of metal corporate condi- other terms and anywhere quantity purchases near this injunction preliminary order tions producers. from these steel steel long appropriate so as it considers Furthermore, other three none of the pre- they those not inconsistent with are suppliers principal of metal of the four addition, court. In this scribed anywhere purchases near mills modify alter court district industry steel much steel from the as enumerated and conditions of the terms Allis-Chalmers.” as a as does whole approval of parties, if the above chal- Industries Consolidated agree. court, so district general, lenges un- “the as affidavit requested to The district court also supported opinion of an Allis Chalmers speedily possible proceed ” ** Manager at- While General hearing on the merits. of this final case specificity tacking lack of factual affidavit, Con- denying nowhere does White district court The order of the challenge ac- solidated its brief injunction reversed preliminary bewill curacy there- statements contained to the dis- remanded the case will be in. I think the affidavit was sufficient- proceedings con- for further trict court pur- ly explicit opinion. constitute sistent with in Janu- the relief below denial of ary, 586, 607-608, reversing district a dismissal 1 L.Ed.2d 1057 complaint 7§ for violation of a Government, appealed containing brought injunctions di- 33. For Supreme rectly Muskegon nature, under see relief Expediting Act, Ring said: the Court In v. Gulf & Western Piston Co. framing Courts, Inc., (6th dustries, District 328 F.2d decrees, equitable Briggs 1964); “with are clothed v. Manu Co. Cir. Crane judg- (6th large Co., facturing their to model discretion 280 F.2d par- exigencies Corp. 1960); fit ments to America Vanadium Corp., Susquehanna *. United States case.” ticular (D.Del.1962). & I. Pont DeNemours v. E. du concluding possess very that Allis- stance and poses texture the basis legal buyer of different substantial in more effects.” a Chalmers competitors most of all than or the steel accordingly I concur in the of reversal Blaw-Knox. of denying the order the court district injunctive join that Allis-Chalmers also contends relief White Consolidated Judge comparison pre- be made between STAHL’S direction should that a a by injunction liminary by yearly purchases issued steel the dis- buyers mills trict principal court in the form set forth in his from opinion. Blaw-Knox, a White Consolidated subsidiary, total steel amount ALDISERT, Judge (dissent- buyers a by such com- Circuit and that sold these ing). parison the 30 million dollars that shows purchases Allis-Chal- year of steel respectfully I must dissent from ac- (% amount mers is majority. tion taken however, my view, per cent). It is one appellate, trial, Ours is an not a probability that reasonable that there appellate court. And an court no au has hearing may after final the district court thority grant prelimi or to refuse a comparison is proper be- find that nary injunction. “It is to the discretion power purchasing of Al- the steel tween appellate of the trial court and not to competitors of the lis-Chalmers and court, has law intrusted field mills of Blaw-Knox in the * ** power grant or dissolve show that Allis-Chal- would injunction, only question and the for an buyer of steel is a substantial mers appellate clearly proof court Does the is: comparison to them. establish an abuse of that discretion prelim Under these circumstances the trial court unless inary injunction issued because should be clearly established, abuse is or an obvious the record contained I am satisfied application error has occurred in the showing requisite “probability law, important or a mis serious showing lessening competition and a take been made the consideration on probability of success of a reasonable judgment proof, trial Inger hearing.” final United States presumptively court must be taken cor Co., supra, at 525. soll-Rand (3 Williams, rect.” Stokes v. 226 F. 148 my reci- Because of conclusion Cir.1915), cert. denied 241 U.S. unnecessary pass procity issue I find it S.Ct. 60 L.Ed. 1234. grounds developed upon the other express compelled I am this delinea- Judge opinion, I nor do ex- STAHL’S appellate tion of court trial functions press as to whether that, approach I their because fear cognizance of the court to take is entitled problem my distinguished brothers com- Federal Commission Trade prerogatives of a broad assumed plaint, until after not issued was confining trial instead of them- court the district decision. court scope limited selves to the review vest- finally now con- note that we are ap- appellate ed in For an structure. propriety prelim- cerned pellate or- trial court’s reverse a relief, Judge Biggs inary and, noted injunction refusing re- der Co., Ingersoll-Rand in United States v. inappropri- quires a determination supra, at 523: applied the facts or ate law was finding hearing, clear error committed facts, when “the after final be- circumstance facts. Neither chance to those have had a defendants upon examination to me comes visible defense defenses consummate their record.1 full, may appear sub- trial of different 1967): (3 an abuse Springfield “There is v. Trans also Crusher See the action when discretion F.2d 125 continental Insurance findings independent of question of turn this case: fact.” In- law will One showing they having stead, findings Allis- are charac- there was

whether probability of ulti- teristics both law and fact—the Chalmers of a reasonable hearing. judge resting preliminary The trial mate on on conclusions success final findings such, fact plaintiff not met its bur- of fact. As and had law found that den; reverse, inextricably majority and are Had would interwoven. the equity say not met. side of the court been chosen the burden was by Congress process private to anti-trust pure questions con- are law Where litigation, findings by found basic appel- cerned, scope of an of review enough majority to to be so But this is court unlimited. late is the decision of the trial court overturn only an question law “has where the questions jury. for a would have been findings independent” existence finding equity requires to That the fact Yellow Cab fact. United v. States by judge, jury, not a does be made 177, L.Ed. 150 338 U.S. 70 S.Ct. not factual charac- dilute exclusive question of the ultimate Where findings. of these teristics fact, depends findings upon law severely circum- scope of review becomes This threshold consideration assumes ; appellate not have court does scribed an findings proportions critical because the authority pick choose to blanche carte judge by adopt- of fact the trial must be had it been it have found facts would reviewing ed unless set court contrary, tribunal; fact-finding quite the “clearly aside under the erroneous” rule. findings of the accept of fact it must 52(a). Fed.R.C.P. error in judge there was clear trial unless States In the anti-trust case of United finding process. the fact Co.,supra, 338 v. Yellow Cab govern our principles must These basic S.Ct., Supreme dis- Court the action of the record examination very “It and said: cussed this issue court below. ought say unnecessary Rule to to be reversing majority’s action applies appeals by to the Government ordering issuance court trial litigants. by other as well as to those injunction on preliminary is bottomed it, permits exception There is no which finding acquisition Allis-Chal- that the case, to to in an antitrust even come in all will mers White Consolidated virtually amounts to a Court for what power of a White- probability enhance find- de trial novo on the record illegal re- engage in combination Allis ciprocal While, design. ings intent, motive and addition, my dealing. brother In duty course, correct it our would be combina- finds that a White-Allis Stahl error, findings fact, the clear even probably: tion will any has failed establish Government competition potential (a) might grievance eliminate greater here than industry and mill in the metal the evidence case where markets, or way other relevant support either a conclusion would it to has decided the trial independent but where (b) potential diminish weigh heavily for defendants. more mar- other diversified permissible two choice between kets. Such weight not of the evidence views of the are based of these None conclusions ‘clearly pure existence erroneous’.” questions of “an law with injunction contrary clearly judge exercise of a trial reaching power, very justified never far evi reason Manufacturing clearly except indulged ; in a ease Asbestos be demanding it; New York dence” decision of a court and the Air-Cell Ambler Asbestos v. . Co refusing instance, (3 in- Company, such an Covering F. 890 Cir. first very strong not, except junction, Murray quoted 1900), Restaurant Hill reasons, Locust, Twenty court.” reversed 98 F.2d Thirteen One v. granting 1938): (3 “The review, tion of we ex- National Associa are restricted to an States United Boards, present- amination those matters tion of Real Estate L.Ed. 1007 495-496, ed trial court. Our assessment Douglas “It (1950), stated: must be limited to the four corners Mr. Justice give might enough court. record which was before the lower that we is not construction, suggests, appellate resolve As its name review facts another differently, jurisdiction preroga- more ambiguities find a confers neither nor reopen the District or to tive a case on the merits east actions sinister innocent, [ci apparently consider dehors the record. deemed matters given those not We are omitted] tations postulate Reassertion of be- this basic to set choices, mandate is not our because necessary comes a because clearly findings erron fact ‘unless of aside legal portion of the facts and conclusions eous’.” by appellant advanced the are derived yet why allegations pro- I am reason from the in a is another contained There emphasize posed role an our to Federal com- constrained Trade Commission exercising our func- appellate plaint3 published 'the court: after could have viewed [has] trial court “That the “the Commission might differently, person or that we reason to believe that vio- [a] facts is the perhaps so, lating any pro- had if we been have done or has violated of the thereof, 13, 14, 18, not does alone of sections initial trier visions 19 of the reverse. Under Rule [Title 15].” § us to U.S.C.A. entitle interpretation filing complaint (a) in the United of such a mere case, any Gypsum little, sig- [United States has if Co. more substantive States Gypsum Co., complaint filing States nificance than the aof United 746], by private L.Ed. there a citizen in a civil law suit. stronger Indeed, filing complaint for a basis over- the the is exist of must merely step throwing finding a mere of fact than initial in the the commence- judgment. any against personal Such ment of action the FTC difference evidentiary alleged weight and such convictional an violator law. of the anti-trust ap- provision certainty the 16 CFR 3.11. is no must be There § escape any discovery pellate to for not feel able until after the com- does plaint filed, require- has trial court failed is and complaint is the view no the survey upon or to of accord ment the be make a sound based to cogent investigation alleged proper all the effect to of a full-scale illegal operation of the the course, giving regard, facts, the Part III of the FTC due appraisal Practice, governing of witness credi- Rules of nature the trial court’s bility proceedings. adjudicatory factor involved.” where that F.2d of the Securities The tenor FTC Rules of Prac- v. Linwood Nee 434, 1949). Judge (8 also See tice bulk of the investi- indicate Cir. gative adjudicatory observation in United function is car- Hand’s Learned America, Aluminum Co. of ried on in much the manner as States v. same private (2 1945): “It is idle case law suit. Section F.2d answer, meaning provides filing try 3.12 an to define erroneous’; ‘clearly phrase can all that motion for a more definite statement appellate admissions, charges, profitably that an and the adminis- said is equivalent court, though judgment to re- hesitate less trative of a default it will judge pre- finding than that file an answer. A failure verse hearing provided by tribunal 3.21 administrative conference is § an simplifying purpose jury, reverse most for the clari- will nevertheless per- considering fying issues, reluctantly when well amendments pleadings, expediting discovery, issu- suaded.” guar- ing subpoenas, etc. Section 3.41 strongest emphasize 3. I must public hearing; provides 3.42 antees a § preliminary posture of the extreme terms presiding hearing; for a official at that prop- proceedings. if it Even FTC prescribes appeal- 3.54 the method of § judicial notice to take er for this court ing from the initial hear- decision (much “pro- complaint less FTC examiner the Commission. public posed complaint”) made after the court, proceedings little It after full should be noted even in the district Commission, given weight A review it. decision or no should yet Only signify “complaint” than is not considered final. after does no more concepts decision lower court. This com- independent tional judicial re- plaint ex-parte disclosed document view. stage FTC as say This is not to that a district court possible governmental anti-trust action determining the issue of whether against acquisition of Allis-Chal- White’s probability reasonable of success has been mers. shown, should, totally ignore ostrich-like, accept quaint pending refuse to notion proceeding, of an FTC even if that the issuance of this “reason to be it has not become “final” within the meaning le 26(a).5 lieve” statement the FTC has of 15 U.S.C.A. Even gitimate place My present appeal. then, however, the district court should Stahl, nevertheless, pro accept brother gospel, while not either conclusa- fessing weight tory to afford “excessive prosecuting articulations complaint,” believe, freely, agency and I branch of or facts which have improperly, incorporated the facts and not been tested in the crucible of an ad- complaint versary proceeding.6 conclusions of this very opinion. into the foundations of his My quarrel, however, is not limited per example, For the foot over 30 cent of upon inordinate reliance not matters supporting capabilities field urge of Allis’ this case on He who would based components. of prove mill electrical perforce more than doctrine must possibility competition, or of naked disagree with these conclusions. I possible a market entrant into that a capable developing into actual of Competition I. Elimination of Potential competitor. It seem that to fore- would many disagreement points In the merger proposed com- stall a because appellant appellee in between and compe- potential bination would eliminate proceedings below, one matter there was sense, it neces- in tition the anti-trust dispute: it about there was no which first, sary so concen- a market to show agreed not make out that Allis could was pro- potential competition that trated between case actual oligo- on the few checks vides one of Instead, merging companies. it had (1) polistic pricing then: compe- proceed theory “potential on a acquired firm must be a newly emerging theory tition,” market; (2) one factor by the embraced times has been in recent firms, objective capa- in terms of legitimate in anti- concern courts as a appear likely com- to be a bilities must trust considerations.7 petitor some time of the other at suggested distinguished (3) future; Potential, ac- some as as commentators, potential must tual, competition itself entrant must manifest among pos- scrutiny appear preeminent precise within to come be forms entrants, spirit likely there are or that enforce the would sible those who position.11 Thus, very firms in a similar where two few others Act. Co., Davidow, “Conglomerate Concen v. Pen-Olin Chem. 9. United 7. States See 1710, 12 L.Ed. The Limita S.Ct. Seven: U.S. and Section tration Anti-Merger Act,” (1964). 68 Colum. 2d 775 tions (1968). 1231, 1241-49 L.Rev. Co., 386 Gamble 10. v. Procter FTC L.Ed.2d 303 See, g., Nat- El Paso e. States v. United (1967). S.Ct. ural Gas (1964). 12 L.Ed.2d Davidow, at 1244. 68 Colum.L.Rev. suggested Donald This standard principles enjoined. It is with these in mind accept must be I cannot this may appropriately nor, hypothesis; observed, that we previously examine as theory entry potential previous of Allis- has court decision or com- market, potential suggested Chalmers into a new mentator it. product potential reciproc- extension regretfully I must also observe that ity consequences. support theory, this novel been necessary self-serving to embrace This decla- has been done the discussion opinion length. appellant’s rations of- hereinafter set forth And having so, ficers evidence of factual done there is no area data basic myself agreement critical where I areas which should have demand- find my analytical proof I ed clear instead of sub- brothers. the theories ad- find jective impressions. Consequently, potential entry, product even vanced exten- sion, accept theory unique reciprocity prec- were I to to be devoid of law, support by any I anti-trust would edental or endorsement still con- recognized ground Indeed, strained to dissent on the commentator. I view approach the trial record was deficient in factual to be uncharted excur- support theory, heeding always for the into a Ameri- sion sensitive area of the weight given embracing community, can economic doctrine prov- truly expressions concept is the radical of the doctrine of law; potential competition ince of the of fact. trier anti-trust long theory that so which seems to hold Reciprocity II. possibility a mere en- exists market, try possibility in a or a mere Although agree majority’s with the product extension, possibility or a mere governing law statement anti-com reciprocity, then the petitive reciprocity,12 I effects of find the Turner, F. Department’s head of the contemplated. former Justice entry is Aside from the See Antitrust Division. now manu fact that Allis-Chalmers Mergers Turner, Conglomerate Sec- papermaking factures and constructs Clayton Act, Harv.D.Rev. machinery, 11-12, nothing tion 7 of the 1313, Tr. there is It is to be noted in the record to confirm Allis- atypical technologica is in that the instant case lcapacity Chalmers has acquir- alleged potential entrant is not the to enter evi this market nor is there ease, company, as in the usual but the capacity dence to confirm financial acquired presents company. This a more enter, ability sup of the market proof problem: port difficult burden of competitor, an additional or Allis- prove future intention to motivation a serious Chalmers’ consideration of en thereby merger via try.” enter and block the at 1268. Be- the anti-trust laws becomes obvious. this, greater im- of of even Foods, cause it is 12. In v. Consolidated FTC portance alleged potential entrant 592, 594, that the L.Ed.2d 95 objective capa- judged Supreme of its (1965), be terms reci- Court defined suggested by procity bilities as Mr. Davidow. “Aas threatened withdrawal of thing products al- It lege is one for Allis-Chalmers to if orders being bought, of an affiliate cease any given intention to enter of conditioning its a as well as a presently purchases receipt number of market areas oc- of future on the of subsidiaries, cupied by products of takeover, White or one orders of that affiliate * * prevent is in order to quite but it The Court affirmed the Com- objective present evidence another to mission’s decision that was violated § 7 intention, Consolidated, giant of this and to demonstrate the when a food whole- respect, capability saler, acquired In Gentry, compa- do so. Chief a smaller Judge Wright ny dehydrated Allis- garlic was not content with which sold onion and self-serving of inten- suppliers. Chalmers’ statement to certain of Consolidated’s area, rolling terms, tion to the metal mill enter no uncertain the Court condemned proof upon objective capa- practice obtaining competitive but insisted of of a ad- bility vantage through reciprocal to do so: buying prac- “However, only before the evidence tices : “We hold at the outset that potential ‘reciprocity’ possible by of com- Court- Allis-Chalmers made such an petition acquisition congeries this field is an assertion is of one of Management anticompetitive practices that at which the 603-605, Foods, supra, at facts Consolidated present sufficient of record devoid S.Ct., injunction : support 1227-1228 a acquisition. the White-Allis merger may properly “Before be a solely facts, majority outlawed basis under 7 on the § From the barest of reciprocal buying potentials, the law conjured rec- overtones vivid closely requires eco- indus- textured iprocity more mill-steel being analysis. capable Act does only nomic statistic tries. The certainty require gleaned Allis- not that is there be that from the record $30,- anticompetitve approximately But purchases effect. Chalmers my annually. or the not 000,000 does courts To mean steel rely slipshod in- figure, on Commission can not brother Stahl adds confusingly presented pur- below, formation annual steel record ambiguous implications. Blaw-Knox; conclu- in its and then chase of proof sup- require com- does not proffered, law factual sion is without petition certainly be lessened port, combination that “A White-Allis merger. larger buy of steel But the record should amount would a far convincing requisite competitors clear and than of Blaw-Knox’s probability present.” is mill market.”13 which, true, I em- if this were Even any- point on this is The trial record phasize, cannot be determined thing convincing; it suf- but clear and record, fail to see state of the an exam- from factual anemia and fers anti-competitive how conclusion symptomatic ination is discloses acqui- Nearly every reciprocity follows. only suspicion possible rec- a bare has, extent, elements sition some Supreme iprocity. As the especially true reciprocity. This is stated, “probabil- concerned with we are where, here, involved the industries ities, ex- not The test certainties.” component the basic are consumers actly probabilities reciprocity, that: steel. go possibilities. far do not so “We say any acquisition, e., no matter reciprocity, i. But the vice of small, prob- if buying how violates is a ability to transform substantial ability buying. reciprocal against competitors Some situ- power weapon into a only to situated, ations amount de minimis. favorably deter can less ** * here, But in of the market mined the context company portrayed that commands a substantial Otherwise, all that volved. Foods, Consolidated reciprocity.” share a market.” "potential Cf. is the S.Ct., supra at 1225. Foods, footnote Consolidated acquired, company Gen to be where the

try, along Entry competitor controlled with one III. Potential Into the garlic dehydrated per Rolling cent Mill Market onion market. evidence, Based its review the district court determined: necessity information for detailed The “ * * * concurring opin- emphasized in asserts AUis-Chalmers entry in FTC and con- ion of Mr. Stewart its into the manufacture Justice practice inappropriate The laws are aimed. I consider consider antitrust it to record, and alien factor’ not in ‘an irrelevant this item because it is in the results ** among intruding figure, into choice with considered another creating products, appellee’s brief, competing least at set forth also not equal pur- priority business at on the the record: the total steel ‘a annual ” S.Ct., prices.’ chases the United States amounts light 13 billion Viewed in dollars. 1221-1222. purchases Allis-Chal- $30 million per complaint, mers of one FTC amounts cent The % purchases figure total; record, states that Blaw-Knox Blaw-Knox would be Although per per year. $42,000,000 of one steel cent. % rolling

struction of affidavit, metal mills—an the source cited in the Exhibit QQ, area in which supportive Blaw-Knox is active— demonstrates sufficiently probable to warrant re- itself data contradicts ex- However, pressed straint of White's takeover. in the affidavit. Far from cor- only roborating general appel- evidence before claim in potential competition “possible Allis-Chalmers in lant’s affidavit of manufacture complete this field is an assertion for Allis-Chal- them of a or 12 inch management mill,” entry merely mers is metal such this exhibit contemplated. Aside the fact discloses that Allis-Chalmers sold two heavy-duty that Allis-Chalmers now tool container manufactures block assem- paper-making helicopter and ery, blies for use at Alcoa on constructs machin- blades 11-12, nothing as a Tr. there is sub-contract with Blaw-Knox and negotiations record to confirm that with Blaw-Knox and not a technological ingot capacity $50,000 has the contract for a order for an to enter assembly this market. transfer car Nor is Ford Motor there evidence enter, Corporation.14 capacity confirm financial ability support of the market to only upon other factor relied competitor, an additional or Allis-Chal- buttress the that “further in- conclusion entry. mers’ serious consideration of quiry” required, into this is a area Finally, the record does not indicate vague self-serving declaration one Allis-Chalmers, by the nature of appellants’ officers that Allis-Chal- present business, stands close secretly negotiating mers has been enough edge metal roll- European firm unidentified to obtain competitive market to exert a in- a license to an unidentified manufacture industry.” fluence on others in that casting process machin- and unidentified My concludes,however, brother STAHL ery producing steel This nebu- slabs. inquiry that “further into Allis’ status hardly lous statement classified can potential as a industry” entrant into this compelling probable evidence is warranted. form of this further entry into the of Allis-Chalmers inquiry is a discussion of what is de- Furthermore, analysis mill market. scribed as an “uncontroverted affidavit ignores critical determinations as components Allis [that] manufactured questionable Allis’ financial and techni- complete and sub-assemblies for metal market, ability a market cal to enter this rolling mills.” An examination of this point at another which conceded affidavit, however, only “some reveals possess “already significant concerning components barriers information entry sub-assemblies.” And examination of others.” page legend, machinery, description, 14. Reference is made to 146a of no no gen- identifying This Allis’ record. is an affidavit and no data whatsoever! machinery: manager paper QQ An Exhibit reveals examination of eral “In meager Apple- information: the custom machine end of the working rela- “We have an excellent business, ton we have manufactured com- tionship particularly Knox with Blaw ponents complete and sub-assemblies of Chicago Company of East is the rolling mills. This work has been done Machinery Foundry Mill Division of Examples for Blaw Knox. of such work Industries.” White Consolidated for Blaw Knox are shown in Exhibits integral part is an “Industrial sale JJ, II, KK and LL.” Paper Machinery De- the business of the supportive An examination of these ex- products partment. manufactured for fascinating experience. hibits is a Where especially desirable since Blaw Knox are expect statistics, tabulations, one would they optimum utilization of our fa- afford specialized concerning “complete and data equipment in the areas of cilities rolling metal mills done for Machinery Foundry, Fabricating, and As- Knox,” particular exhibits, Blaw these sembly.” together NN, PP, are noth- A as- discussion of the block and car ing photographs pieces more than semblies mentioned above then follows. record, examining sketchy power produce shift market anti- After notably competitive usually part self-contradictory effects. The law facts, disagree ordinary persuasive not concerned transfers I devoid completely judge clearly power. only of market It is when that the trial finding there was in- transfer in a market structure so that occurs his erred pose Allis- concentrated a serious threat to establish sufficient evidence rolling creating enhancing entry present mo- potential or a into Chalmers’ position point. nopolistic oligopolistic or market mill This is a crucial market. overturning circumspect; Only by it court’s that and it be- the lower becomes finding probability fact not intend comes so because that that Allis did competition substantially seriously really les- intend could —or could capabilities finan- sened.16 with its picture this market can cial enter —to important Product extension becomes justify a White one conclusion in the context of anti-trust considerations substantially lessen com-

takeover could petition whereby only when it becomes a means rolling mills market in the metal might merger enhance mar- by eliminating potential a Allis as future power point ket where it becomes competitor.15 pre- It is “entrenched.” not difficult to probable anti-competitive dict the effect Product Extension IV. by larger a of a takeover firm of small- materials, my Stripped explanatory product er firm a market whose analysis “product ex- brother Stahl’s already oligopolistic. or concentrated nothing tension” “entrenchment” could exist- Such increase the pos- mere than a conclusion that a more in the market of concentration prob- sibility product extension acquired by strengthening po- firm generate anti-competitive ably effects smaller, acquired firm.17 sition of the It 7 of Act. outlawed § Thus, typical case entrenchment necessary put problem in becomes arises in an of a dominant proper perspective. In the context relatively industry small firm in considerations, product exten- anti-trust larger po- The market a much firm. And it is not malum se. sion is not firm become sition of the smaller significance in which has factor through pricing, predatory “entrenched” when, importance It assumes itself. “deep pocket practices” of the so-called acquired conduct of reason through promotional party, parent,18 various acquiring occurs or (2 1945). America, lower 148 F.2d 416 Cir. 15. Because conclude objec- product finding based on extension is did not The law that Allis court’s tively Judge mill that business conduct mar- Hand’s thesis intend enter the erroneous, entrenching monop- clearly having I do not the effect of was not ket oly necessary laws. the reasons for is violative of the anti-trust to detail feel neither additional belief Gamble, See, g., e. v. Procter FTC & requirements violation for a other two 386 U.S. 87 S.Ct. 18 L.Ed.2d potential com- on elimination of based Foods, (1967); FTC v. Consolidated say petition : Suffice it to were satisfied. 14 L.Ed.2d 85 S.Ct. proof no trial here there was ; FTC, (1965) v. General Foods in a was a factor Blaw-Knox (3 1967), den. 391 386 F.2d 936 Cir. cert. potential so concentrated market 1805, 20 L.Ed.2d 657 provided of the few checks one Reg. (1968) ; Prods., Inc., Trade Ekco oligopolistic pricing; that Allis was 1963), aff’d, Rep. 16,956 (FTC Ekco ¶ likely important or most one of the most (7 FTC, F.2d Prods. Co. potential entrants metal F.T.C., 1965); Reynolds Metal Co. v. very market; few mills there were U.S.App.D.C. 2, 309 F.2d 223 positions brink in similar others entry. potential F.T.C., Reynolds supra, v. Metal Co. 17, p. Judge essence Learned Hand footnote at 229. The 16. See the theory presumption is a the in v. Aluminum Co. of this United States 536

advantages not smaller tion of three to the decisions: v. Procter available FTC Co., acquired competitors in market of & Gamble 386 the the U.S. advantage company,19 (1967); or because of the 18 General L.Ed.2d 303 gained Corp. (3 through FTC, “product Foods extension”— 386 F.2d 936 v. e., 1967), ability i. the combined com Cir. cert. den. 391 88 U.S. panies complete equip (1968), “to offer line of S.Ct. 20 L.Ed.2d and Sporting ment its consumers and United to further States v. Wilson Goods position (N.D.Ill.1968). and dominance in enhance its the market *.”20 application product- Judicial concept In the case at bar we not extension do of anti- field typical legislation crystallized. case a smaller dominant com- trust is far from being larger pany acquired by legis- relevancy outside While anti-trust company. variously seriously record indicates lation this area cannot be questioned, already Blaw-Knox controls between court has said mills, per cent of the metal in Foods that not General “we do read Allis-Chalmers, acquired merg- proscribing, per se, market. Clorox as all company, mergers’.” ‘product has none of this market. ers labeled extension It in the metal mill busi- Clorox, do not consider the facts Although supply ness. it does electrical Sporting General Foods or Wilson com- equipment market, to this it is not even parable at to the case In all these bar. prominent supplier. Suppliers cases, involved, corporations both the equipment, electrical re- with their acquiring acquired, firm and the were spective market, of the shares are: Gen- respective dominant in their industries. Electric, 45%; ; Westinghouse, eral 40% Clorox, example, acquiring For Allis-Chalmers, 6%; Electric, Reliance firm, Gamble, giant Procter & was 5%; Cuttler-Hammer, 3%; and Clark industry, accounting for over Smith), (A. Controller O. 1%. detergent per packaged cent mar- Although largest there is an ket advertiser assertion that nation’s past years sup- products. addition, over the five the firm to be Allis has plied Clorox, “leading approximately acquired, a half-million dollars was the manu- bleach, liquid equipment worth facturer of household with Blaw-Knox annually, referring App. for au- national sales.” 199a 48.8% thority, S.Ct., that same at 1226. source describes these language: sales in this “Allis- Similarly, Foods, this court General very supplies Chalmers small fraction prospect confronted was Gen- compo- of such [electrical drive devices] Foods, largest producers eral one nents.” packaged foods States United leading advertiser, the third national Nonetheless, prof- the conclusion is merging S., copartner of O. S. product fered that the area of exten- recognized industry duopoly, sion, probable anticompetitive “the ef- many occupying monopoly position in “a fects of an Allis-Chalmers-Blaw-Knox areas.” (i. e., White) signifi- combination are cant.” This conclusion based Sport- substan- trilogy, In the last of the Wilson tially interpretation applica- on the ing Goods, the ac- involved parent” through “ricli has the financial where- parent, The fear here is that prices approximating withal to sell advertising low-unit cost bulk could cause below, acquired cost or and thus to “undercut firm to become more an even competition.” ravage participant already affluent less dominant con- Again, argument obviously much centrated market. compa- acquiring more forcefulness if the example probably 20. The best our own ny parent” fulfills the “rich characteriza- Ingersoll-Rand, case United v. States tion. (3 1963). 320 F.2d theory suggested 19. This in FTC supra, Gamble, Procter & footnote 10. “leading is no manufacturer evidence that the market quisition of the position gymnasium equipment firm combined be- and seller by by predatory pricing come Corporation, Wilson entrenched country,” Nissen promotional advantages Company, which was not Sporting available Goods competitors acquired producer mar- to other prominent nation’s company. goods. sporting keter only attempt giants represented is one There to inflate to the In contrast presented cases, present appeal in- the miniscule of facts at trial in these Ingersoll-Rwnd argu into a full blown midgets. controls Blaw-Knox If volves rolling per ment: because has per cent Allis cent of 11 to 29 between market, this, market, by the in- the electrical control no means when it is mill figure. rolling dustry’s added to Blaw-Knox’s Allis-Chal- share dominant market, produce anti-competi mill if we would And even of it. mers has none prejudice effects of the mar- tive to the share of other Allis’ to consider are rolling rolling producers. mill equipment There was no ket for electrical specific cent, presented mills, per a feeble evidence the trial is its share per compared below that Allis-Blaw-Knox percentage when advantages possessed would afford per commanded cent share cent and by Westinghouse. producers. mill Other Electric General facts, citing meager Nevertheless, than them name with their these respective probable market, shares majority the rec conclude are studiously “anti-competitive effects description ord avoids a significant.” production capabilities.21 their and sales proof There is no the transfer facts, Upon skeleton this emaciated power through product market exten just anti-competitive effects the cloak of advantages magni sion will be of such takeover is no There not fit. does prod- larger tude that Blaw-Knox one whose of a smaller become “ent firm oligopolistic; already market is in a uct renched.” expression already given 21. There was court has this issue its scrutiny.” naked state- findings Allis’ officers —a one of “deserved made It supportive appellant, possibly data —that no ment with adverse to fact appellant press Blaw Knox point. “should Allis-Chalmers because did not this combined, resulting point firm would references to Factual on the only supplier conspicuous by furnish which could record are trial their complete-unit responsibility prod- roll- for metal The answer absence. to the fear of asphalt paving drive and control mills and electrical uct extension batch- attempt systems.” ing equipment prof- been An 112a. is the same as that self-serving equate declara- made fered in the mills discussion above. proved appellant’s with the and effect of tion force own evidence indicates disagree. Saying Blaw-Knox, it does not fact. “in the universe of as- phalt plants, pavers equip- make it so. and related ment, about [ranks] sixth with to7 8% product ex- observations on the These [of share]. the market With Standard argument applicable are tension also Steel, newly acquired company] [a Allis- product ex- contentions that there are Chalmers will rank product category.” fifth with 9% consequences the construction tension equipment I37a. castings field. and steel My scrutiny.” con- brother Stahl’s discussion of I see no reason for “further meager. equipment We struction is most Facts are It facts. that the sug- being product are not sure what standard cited extension eases all refer gested where, here, elsewhere, percentage to dominant of a con- shares “ aspects product acquired (or ‘the extension’ centrated stated market of the com- deserving bined) company. of a are Blaw-Knox’s share 8% posi- scrutiny light asphalt paving of Allis’ market and Al- leading broad tion as a manufacturer of a lis-Chalmers’ share of the batcher market equipment range begin approximate control, and its of construction do not especially carry proof of dealers who a wide network in the absence of of con- range equipment.” The trial of such centration in this field. lation; Significance attempt Market V. The Share nor should court to legislate long Concentration Data such a doctrine into it. So legislative proscription as the of anti- my Both been careful brothers have beyond trust turns activities on factors prelimi- opinions the in their nary to stress “possibilities” anti-competi- the mere proceeding, if of this as nature effects, diligent tive the be courts must that somehow this factor ab- intimate not to the substitute Brandeisian bias demonstrating appellant solves the analysis. for sound findings “clearly were of fact company The characterization aof or that the district court erroneous” conglomerate” “large legal should not im- construing applicable erred in pose presumption anti-competitive under anti-trust laws. standards guilt. Section 7 of the Act no- Conceding quantum same provides. company’s where so It is the proof required prelimi- not was at activities —not form its' and size—which stage nary injunction would be at Congress regulate. sought merits, suggest I trial on appellant judicial regu- And enforcement this obliged at upon lation should be had factual facts, least some figures relevant evidence of activity “may determination that the be describing statistics the af- substantially competition, to lessen or to fected markets and the shares of these monopoly.” tend to create a 15 U.S.C.A. companies by the markets commanded jus- find involved. I it most difficult to Moreover, this factual determination tify any reversal trial court synthesis should result as the of an ad- Ingersoll-Rcmd argument of an basis versary proceeding. It should not be presence such without the essential any way by parte affected in the ex factual data. FTC, actions context respect, impossible In this I find private stranger is a anti-trust suits prefatory pro- to reconcile a statement litigation. reject any inference fessing “expressly deal with of proposed that the issuance plaint FTC com- party’s matter each share of the mar- prima illegal- facie evidence ket in lines of commerce” ity, justifying preliminary injunctive re- conclusion that a market would combined case, presumably lief in this others. “account for a share” of that aspect majority’s But other one incongruous market. This result is in action me causes no little concern. Not large due to a of fact measure blend only has there been an exercise of trial philosophy appel- which characterize prerogatives at this Lacking adequate lant’s case. support factual stage litigation, some of the lan- anti-competitive its thesis of guage expressed by my brother Stahl is oligopoly, attempted to sweeping conclusatory so upon theory that I fear bottom its case econom- objective ics, little asserting remains for an hypothesis: determina- this because tion large of the basic issues the trial still corporate White Consolidated is a substituting conglomerate, philosophy size, had. more, without fact, ex-parte produce anti-competitive declarations for evi- effects in af- dence, analysis dangerously comes fected markets. molding close'to a cast for the final re- nothing hypothesis This than more sult, effectively circumscribing scope a restatement of a “Brandeisian bias in yet of a case on the tried merits— institutions,” favor of human sized despite concerning protestations pre- nostalgic attempt bigness equate liminary adjudication. Congress nature badness.23 But has not writ theory legis- ten amply into its anti-trust This demonstrated the fol- Davidow,

23. See 28 Colum.L.Rev.

lowing in the ma- contained statement

jority opinion:

“Basically, is at stake what appeal life death of is the instant independent company

Allis, ea- a viable such, against ger pitted to continue fast-moving aggressive, White, ac- businesses, many quirer of diverse past years.”

particularly in few validity

First, question I trial,

conclusion, without a reached on- cannot survive as an

going acquired by if White. business Moreover, assumption reject the under- I judicial

lying this statement the task

branch has entrusted with been economy, preserving policing

“viability” corporate structure. justified cannot role within Such leg- existing

the framework anti-trust It is where the “life

islation. corporate entity

death” of a has anti- judicial

competitive inter- effects that proper.

vention Allis-

The district court concluded that probabil- failed to establish a Chalmers

ity anti-competitive effects. On the evidence, and the do

basis of law I clearly that conclusion erroneous. find judgment affirm the would court for forth

lower the reasons set judge. of the learned trial

Accordingly, I dissent. America,

UNITED STATES of Appellee, EDELMAN,

Louis Defendant-Appellant.

No. Docket 33309. Appeals

United States Court of

Second Circuit.

Argued June July

Decided notes and 32 of such emphasized: Shoe, meeting from Brown Court that the It is ORDERED apply That was intended all § 7 Manu- of Allis-Chalmers stockholders facturing conglom- mergers horizontal, originally vertical or Company scheduled — specifically hereby May erate —was reiterated direct- 1969 be and developing criteria deter when and under the same conditions mining anticompetitive principles injunctive effects of relief mergers acquisitions, Supreme against conduct threatened that will abundantly damage granted Court has made clear that cause loss or ** “probabilities, equity the focus upon is on cer courts of * * * Mergers prob tainties. against proper execution of dam- bond anticompetitive ages injunction able effect improvidently were from an proscribed by granted showing Act.” Id. at 82 S. and a that the dan- Ct., added.) And, (Emphasis ger irreparable damage loss or recently, immediate, more in FTC v. Procter & *. Gamble S.Ct. Thus, noted, as the district court “in (1967), Supreme 18 L.Ed.2d 303 junctive particularly relief is suited again designed noted 7 is that § preventive function of 7 and Con anticompetitive practices to thwart gress expressly extended the avail incipiency, policy their ability injunctive remedy pri “requirement would be frustrated ** parties vate *.” 294 anticompetitive power that the manifest Supreme at 1265. The Court has de anticompetitive itself in action before § ” purposes clared “that anti play. can be called into Id. insuring trust laws are best served S.Ct., at 1229. private that the action will be an ever-

Notes

notes Commission * * litigation *. this intricate merger activity previous “All levels developments eclipsed by in 1968.” 32. As American Fed stated Carroll were Musicians, report eration 295 F.2d states further: “* public policy (2d 1961), standpoint detailed From the injunction properly unique framing aspect current the most par conglomerate Judge.” This left District movement mergers ticularly appropriate ac- in view of the In 1968 these here character. complex relationships already existing percent number counted parties possibility percent of all of the assets between the * * large acquisitions. since the situation have shifted recorded

notes refer to the Indeed, found in the trial one record. complaint matters in contained the FTC my major of concerns stems from the not to the I record below.4 found cavalier treatment afforded find- those believe that reliance on this extra ings by of fact made the trial Not court. un neous material is unwarranted and findings clearly were these erro- Congressional wise. There is no direc neous, my they but in view were com- it; commanding almost tive there are pletely justified on the of basis the evi- judicial ex two centuries of American perience militating against presented. dence it. For an appellate go beyond the of court record district court was confronted with gauging accept anti-competitive court the trial instead accusa of effects tory agency acquisition information of an in three areas: (1) government market, appliance electric executive branch of the home (2) ex-parte proceeding (3) shop capability an nothing machine rolling metal .short of an abdication tradi- mill market. appropriate evidence, consideration redress courts or com- should pletely provided satisfy imposed right by upon waiver of that the burden plaintiff connection with § U.S.C.A. does the Commission’s or- a motion provisional (emphasis sup- der final. relief.” become plied) 9, 10, 12, 18, 19, 4. See footnotes thirty- representing ten of the Nothing in the schema of the anti-trust three footnotes. also See the extensive statute and the FTO Rules of Practice quotations opin- references text of suggest complaint issuance of a ion. publication or the of intent to issue one See, g., Robbins, e. McKesson & Inc. v. does in fact reflect the Commission’s Pfizer alleged Charles & views on the merits viola (E.D.Pa.1964), emphasized stage it proceedings, where was tion. At bearings” fulfilling “extensive on the same the Commission’s task of its im partial adjudicatory issue before the court had been com function remains pleted adjudication accomplished. Although prosecu section evidentiary hearing tory adjudicatory after FTC a full con functions are not adversary ducted statute, in an fashion. See also bifurcated the allocation of MacIntyre, Injunctions: “Anti-trust A agen to different duties units within the Remedy,” cy effectively separates Flexible Private 1966 Duke the two. In ad 22, 32, dition, comply L.J. wherein the writer asserts the FTC must with the “ * * * quasi- findings requirements 5(c) of a of the Adminis § judicial charged agency Act, administrative trative Procedure 5 U.S.C.A. enforcing laws, (c), conducting adjudicatory proceed with the anti-trust made lengthy thorough ings. contest after after appliances, substantially of home market In the first area the same or similar colleagues my appar- products parts that neither of in different note the coun try, disagrees might present ently ques court’s district their comp finding lessening estab- of insufficient evidence tion of “substantial 8 market, also, etition; entry lish Allis’ into or where two or more firms ” they merge the district apparently, joint concede that or form a for the venture very impressed entering purpose presently to be had little data a market argument. shop capability the machine dominated others and it can be shown agreement but for the each would therefore, review, critical area separately, have entered the market new emerges metal the field of independ or one would have entered majority part It here that mills. ently at the while the other “remained of the low- company the conclusions edge market, continually threaten er court. enter;”9 where because suggests majority concert, long history repeated entries into anti-competitive dan- there is a distinct market, particular reasonably like dealing ger reciprocal of unlawful ly specific to enter a that mark area My brother mill-steel industries. et.10 anti-competitive equally finds an Stahl entry potential of Allis- effect on the It becomes obvious therefore that rolling mill meaning into the metal “potential” Chalmers literal of the word product exten- potential market and applied not to be to the doctrine potential ramifications White’s sion law. anti-trust

Case Details

Case Name: Allis-Chalmers Manufacturing Company v. White Consolidated Industries, Inc.

Court Name: Court of Appeals for the Third Circuit

Date Published: Sep 9, 1969

Citation: 414 F.2d 506

Docket Number: 17713_1

Court Abbreviation: 3rd Cir.