*1 v. STATES. CO., UNITED INC., SHOE BROWN Argued June 1962. December 1961. Decided No. *2 With appellant. the cause argued H. Arthur Dean McRoberts, N. Henry H. Robert were him on the briefs Mahoney. Dennis C. III and Ess for the United argued the cause Cox General Solicitor Attorney Assistant brief were him on the With States. A. Solo- Doolittle, Richard Loevinger, J. William General Coyle. J. mon, Marcus and James Philip opinion delivered Warren Mr. Justice Chief Court. I. 1955 when November
This suit was initiated Dis- action States filed civil United Government *3 alleging District of Missouri Court for the Eastern trict Kinney R. contemplated merger a between the G. that Company, Shoe Company, (Kinney), Inc. and the Brown Kinney an Brown (Brown), through exchange of Inc. C. Clayton stock, § would violate of U. Act, part: Act, pertinent amended, provides § 18. The ac- shall engaged “No commerce corporation any or directly indirectly, part the whole quire, or capital or of of stock other share ... another any engaged commerce, also in where in corporation of any country, section line commerce acquisition may substantially be effect such monopoly.” to tend to create a competition, lessen or sought complaint injunctive § relief under Clayton Act, 25,§ S. C. to restrain consummation 15 U. of the merger.
A a by preliminary injunc- motion the Government for pendente companies lite and were denied, tion was permitted merge provided, however, that their busi- separately kept and operated nesses be that their assets merger identifiable. The separately was then effected 1,May contended the Government Court, In the District seller largest third merger of Brown —the the effect of the leading States, a by volume in the of shoes dollar United shoes, women’s, and children’s men’s, manufacturer or con- owned, 1,230 operated and a retailer with over largest Kinney eighth trolled retail outlets1 —and —the en- volume, among primarily those company, by dollar large shoes, gaged selling shoes, itself a manufacturer “may be sub- and a retailer with over 350 retail outlets — stantially or to tend to create competition to lessen monopoly” by eliminating potential competi- actual or production tion in the for the national wholesale shoes and in shoe market the sale of shoes at retail in the Nation, from by foreclosing competition rep- “a market by Kinney’s resented retail outlets whose annual sales $42,000,000,” exceed enhancing competi- Brown’s tive advantage producers, over other distributors and sellers of shoes. The argued Government “line that the commerce” affected this merger “footwear,” or alternatively, that the are “men’s,” “women’s,” “line[s]” and “children’s” shoes, separately considered, “section of country,” within anticompeti- which the tive effect of is to be judged, is the Nation as or whole, alternatively, each separate city city and its
1Of these over 1,230 outlets under Brown’s control at the time of filing the complaint, of the operated Brown owned and over while over independently 570 were operating owned stores under the Brown Program” “Franchise and independently over 190 were owned operating outlets under the operating “Wohl Plan.” A store under Program agrees Franchise carry competing not to lines of shoes of other manufacturers in return for certain Brown; aid from a store under the similarly agrees Wohl Plan purchases to concentrate its lines through which Brown sells Wohl in return for credit and merchandising aid. See note addition, In Brown shoes infra. through were sold operating numerous entirely retailers independently of Brown. sell parties in which area surrounding
immediate at retail. shoes merger that the contended Brown Court,
In District if the endanger competition not shown would be coun- of the the “section [s] and commerce” of “line[s] not urged Brown determined. try” properly were intended customers age and sex of only were of com- line determining relevant in considered be quality material, grade in that differences merce, but resulted of shoes and customer use workmanship, price, agree- of commerce. While lines establishing different manufac- regard to that, with ing the Government with assessing market geographic turing, the relevant as a country is the merger upon competition of the effect regard retailing, the that with whole, Brown contended vary reality economic from central market must metropol- large to a “standard city district of business con- Brown further community. area” for smaller itan manufacturing and at the that, at the level tended both healthy level, industry enjoyed competi- retail the shoe not, vigor competition of this would tion that the any event, proposed diminished because Kinney less than and retailed less manufactured 0.5% than of the Nation's shoes. 2% rejected the broadest District Court contentions parties. of both The District Court found that “there is group one classifications which and recog- is understood concept adopted general defining “The metropolitan a standard integrated large that of an area economic area with a volume [is] daily city 50,000 travel communication between a central parts outlying inhabitants or more and the . . area. . Each (except England) area of one New consists or more entire counties. metropolitan England, In New areas have been defined on a town Census, county basis rather than a basis.” II U. Bureau of 1954, p. United States Census Business: *5 industry public and the classifi- nized the entire —the sepa- cation into ‘women's’ and ‘children’s’ shoes 'men's/ hand, other rately independently.” On the “[t]o classify a unjust; shoes as whole could be unfair and classify impractical, them further would be unwarranted and unrealistic.”
Realizing competition of for “the areas effective retailing purposes cannot pre- be fixed with mathematical cision,” the District Court found that “when determined by economic reality, retailing, country’ ‘section of the is a of city 10,000 or more population and its immediate and contiguous surrounding area, regardless name des- and in ignation, which a Kinney store and Brown (operated, franchise, or plan) [3] store are located.”
The District Court rejected the Government’s conten- tion that combining manufacturing facilities Brown and Kinney would substantially competi- lessen production tion men’s, women’s, or children’s shoes for the national wholesale However, market. District Court did likely find that the foreclosure other from manufacturers represented by market Kinney’s retail outlets substantially competition lessen in the manufacturers’ distribution “men’s,” “women’s,” and “children’s” shoes, considered separately, throughout Nation. The District Court also found that the merger may substantially lessen competition in retailing alone “men’s,” “women’s,” and “children’s” shoes, considered separately, city every 10,000 population more its immediate surrounding area in which both a Kinney and a Brown store are located.
Brown’s contentions here only differ slightly from those made before the District Court. In fully order to under- stand and appraise these assertions, it is necessary to set supra. See note *6 findings concern- the District Court’s detail
out some of Brown place and the industry shoe ing of the the nature industry. within that Kinney Industry. The shoe although domestic Court found that
The District among large of manu- a number was scattered production occupied companies of facturers, large small number manu- largest while Thus, commanding position. shoes, the of the Nation’s produced about facturers 35% (includ- Brown top -International, Endicott-Johnson, 4— approxi- ing Kinney) produced General Shoe—alone produc- or mately of the Nation’s shoes 65% 23% top tion of of nonrubber shoes was production
In domestic pairs million of which 103.6 million were pairs, 509.2 about shoes, pairs 271 million women’s shoes, men’s about were pairs million shoes.4 The and about 134.6 were children’s men’s, women’s, and children’s District Court found normally produced separate are factories. shoes buys public through 70,000 these shoes about retail outlets, only 22,000 which, or however, derive 50% gross receipts more of their from the and are sale shoes classified as “shoe stores” Census Bureau.5 These Census, Production, by Industry, S. Bureau of Kind U. Facts M31A-06, Footwear: 1956 and Table Series Production introduced as Defendant’s Exhibit MM. The term “nonrubber shoes, shoes, play leather shoes” includes sandals and but excludes canvas-upper, shoes, slippers. rubber-soled athletic shoes and Ibid. figures are These based the 1954 Census For that of Business. enumeration, the Census Bureau classification “shoe stores” included separately operated departments general stores, leased shoe as dis tinguished departments general operated only from shoe stores general Census, as sections of the latter’s business. U. S. Bureau Single Multiunits, Trade, BC58-RS3, p. Retail Units and I. As infra, described, operated departments Brown numerous leased shoe general stores which would be included in the Census Bureau’s of “shoe stores.” total
22,000 generally (1) found shoe stores were sell men’s only, (2) shoes women’s shoes chil- only, (3) women’s and shoes, (4) men’s, women’s, dren’s and children’s shoes. among The District found a Court “definite trend” shoe manufacturers retail acquire example, outlets. For International Shoe had Company no retail outlets in 1945, but acquired 130; 1956 had Company General Shoe *7 had only 80 retail outlets 1945 had 526 by 1956; but Corporation Shoe of America, in the same period, increased its retail from holdings 301 842; to Melville Shoe Company from 947; 536 to and Endicott-Johnson from Brown, 488 to 540. itself, no with retail outlets of prior its own to 1951, acquired had such by 845 outlets 1956. Moreover, between 1950 and independ- 1956 nine ent shoe store chains, operating 1,114 retail stores, shoe were found have become large subsidiaries of these firms and to have independent operations. ceased their
And once the acquired manufacturers outlets, retail District Court found there was a “definite trend” for the parent-manufacturers to supply an increasing per- ever centage of the retail needs, outlets’ thereby foreclosing other manufacturers from effectively competing for retail accounts. Manufacturer-dominated stores were found to up” be “drying the available outlets inde- pendent producers.
Another “definite trend” found exist in the shoe industry awas decrease in the plants number of manu- facturing shoes. And appears there to have been a con- comitant decrease the number of firms manufacturing shoes. In 1,077 there independent were manufac- shoes, turers of but 1954 their number had decreased about to 970.6 10% Census, S.U. Bureau of the Manufacturers, Census of MC 58(2)-31A-6. By 1958, independent the number of manufacturers
had decreased another to 872. Ibid. 10%
Broioji Shoe. a par- been to have only not found was
Brown Shoe industry in these factor, moving also ticipant, but times several experimented had Brown Although trends. had dis- 1945 it outlets, by retail its own operating with began again Brown However, all. of them posed largest Nation’s by acquiring the retail outlets seek Company Shoe Wohl departments, shoe of leased operator departments depart- shoe operated which (Wohl), Between States. throughout United stores ment acquisitions: of smaller Brown made number and 1955 stores), (three retail Company Shoe Wetherby-Kayser Reilly Company Shoe (two stores), Company Barnes & Store Richardson Shoe (two departments), shoe leased (not con- Company of Dallas (one and Wohl Shoe store), Dallas). departments in Wohl) (leased shoe nected major acquisition: Regal Brown made another In which, time, operated one manu- Corporation at the Shoe *8 and retail men’s shoes facturing plant producing outlets. lead corporations these found to acquisition of was companies. acquired sales Brown to the
to increased in of Wohl although prior acquisition Thus to Brown’s Brown of its total bought only Wohl from 12.8% purchases pur- it its shoes, subsequently increased Wetherby- to in 1952 and to in chases 21.4% 32.6% Kayser’s from Brown increased from purchases 10.4% acquisition Regal, before to over after. which had 50% previously no shoes to and only sold Wohl shoes worth $89,000 Brown, 1956 sold $265,000 shoes worth $744,000 to Brown. Wohl During period of time, same Brown acquired also companies the stock or assets of seven engaged solely in manufacturing. result, in 1955, shoe As Brown was the largest fourth shoe manufacturer- in country, produc- ing about pairs 25.6 million shoes about of the 4% Nation’s total footwear production.
Kinney.
Kinney principally engaged operating the largest family-style chain in shoe store the United States. At the trial, time of Kinney was found be operating over 400 such stores in more than 270 cities. These stores were found to make about of all national retail sales shoe 1.2% by dollar volume. Moreover, Kinney 1955 the stores sold approximately 8 million pairs of nonrubber shoes or about of the pairage national sales of such shoes. 1.6% Of these sales, approximately 1.1 pairs million were of men’s shoes or about of the pairage national sales of 1% shoes; men’s approximately 4.2 pairs million were women’s shoes or about of the national pairage sales 1.5% of women’s shoes; and 2.7 approximately pairs million were children’s shoes or about pair- national 2% age sales children’s shoes.7
In addition to this activity, Kinney extensive retail owned and operated plants four which manufactured men’s, women’s, children’s shoes and whose combined output was of the national shoe production in 1955, 0.5% making Kinney the twelfth largest shoe manufacturer the'United States.
Kinney stores were found to obtain about of their 20% shoes from Kinney’s own manufacturing plants. At the time of the merger, Kinney bought no ; shoes from Brown
7Kinney’s pairage men’s, women's, sales of and children’s shoes were *9 extracted from response exhibits submitted to the Government in to interrogatories. its See GX R. 48-53. These statistics are vir tually identical appellant’s brief, to those cited in with but one exception. operations, appellant In its internal classifiescertain shoes “growing girls’” as figures while shoes the cited follow the Census Bureau’s treatment of such shoes as “women’s” shoes. for reasons8 Brown’s conceded in line with
however, largest become had, by 1957, Brown Kinney, acquiring of all Kinney’s shoes, supplying supplier outside 7.9% needs. Kinney’s considered merger was that setting
It The District Clayton Act. 7 of § and held to violate all completely of itself ordered Brown to divest Court held or other interests it stock, capital, share assets degree Kinney greatest possible operate to the Kinney, to divestiture, complete pending concern independent as an having any interest acquiring or to refrain thereafter from file the court and to Kinney’s assets, business or the divesti a into effect days plan carrying within 90 would District also stated it Court ture decreed. parties the cause to enable over jurisdiction retain to necessary might further as for such relief apply submission Prior to its judgment. apply enforce and a appeal notice of plan, a Brown filed divestiture state then a jurisdictional It filed the District Court. below Court, seeking judgment in this review ment as entered. II.
Jurisdiction. basis statement cites as the Appellant’s jurisdictional 2 of appeal Expediting § over this jurisdiction of our testimony Gamble, President of Brown As stated in the Clark R. Company: Shoe getting feeling, in addition to a distribution into “It was our covering, feeling prices were it was that field of which we not also the standing shopping Kinney centers in these free moved into the they they higher neighborhood stores, going a and were into income necessity adding upt-grading and additional probably find would they doing very operation had been lines to their successful hoped give opportunity be able to sell them in us we it would an very operation category. that, successful it was Besides earnings.” good investment stabilize our give diversified would us T. 1323.
305 of February 1903, 823, amended, Act 32 15 11, Stat. U. S. C. 29. In a civil antitrust action in § which the complainant United States is the Act for provides that a direct appeal to Court from judgment “the final 9 (Emphasis district court.” supplied.) The Gov- does appellant’s ernment not contest claim of jurisdiction; on the it contrary, moved to have judgment below summarily affirmed, conceding present jurisdiction our review the merits of judgment. ruling We deferred on the Government’s for summary motion affirmance and probable noted jurisdiction the appeal. over 363 U. S. 825.10
It suggested was from the during argu- bench the oral that, ment judgment since the of the District Court does not specific plan include a for the dissolution of the Brown-Kinney merger, but reserves such a ruling pending the filing suggested plans implementing divestiture, the judgment below not “final” as contemplated by the Expediting Act. In response to that both suggestion, parties filed contending have briefs that we do have juris- diction dispose case on the merits in present its posture. However, the mere parties consent to the Court’s consideration and decision of the cannot, case itself, confer jurisdiction on the Court. See American Fire Casualty Finn, & Co. 6, 17-18; v. 341 People’s U. Calhoun, Bank v. U. S. 260-261; Capron v. Noorden, Van Cranch 127. Therefore, review of the sources of the Court’s jurisdiction is a threshold
9Congress the-right thus limited appeal of review in such to an cases from disposed a decree which matters, precluded all and it possibility appeal of an either to this Appeals Court to a Court of interlocutory from an decree. Coopera United States v. California Canneries, tive 279 U. S. probable jurisdiction After joint noted, had been motion of the parties postpone argument appeal oral present to the Term granted. of the Court was U. S. 825. every case disposition
inquiry appropriate Court, Supreme of the Rules Revised us. comes before Public Department Kesler v. (1) (b); 23 (1) (b), 15 Miller, 364; 252 S.U. v. 153; S. Collins Safety, 369 U. More, 159. 3 Cranch States v. United shall have judgment a final requirement The right a lower court before in a case entered been history practice, in federal has an ancient appeal attaches occa 1789.11 With Judiciary Act of appearing first has remained requirement modifications, sional in the federal appeals of the structure cornerstone essentially practical adopted has Court courts.12 The are, and those which judgments identifying those tests g., See, e. Cobble- "final.” not, to be considered which are States, Market Street 323, 326; dick 309 U. S. v. United 552; 548, Republic 324 S. Comm’n, U. R. v. Railroad Co. Oklahoma, 69; v. 62, 334 S. Cohen v. U. Natural Gas Co. 546; 541, Corp., Industrial Loan 337 U. S. Beneficial 129; cf. Fed States, 121, 124, S. 369 v. United U. DiBella Regulator well Minneapolis-Honey Comm’n eral Trade v. 212; Brew 206, S. United v. Co., 344 U. States Schaefer to the approach A ing Co., 227, pragmatic S. 232. 356 U. to the has essential finality been considered question deter inexpensive “just, speedy, achievement 13the of federal every action”: touchstones mination of procedure. Act has Expediting cases in which the been
In most the issue jurisdiction, cited as the basis this Court’s parties has not been raised or discussed “finality” particular but occasions have or the Court. On few 11 present form, 1 Stat. in its 28 1291. Section U. S. C. § 12 1292; (b); Proe., 54 28 28 S. C. Fed. Rules Civ. U. S. C. Cf. U. § States, parte United 420; United States v. United 1651; Ex 226 U. § Court, Theatres, Inc., v. West- 258; States District Beacon 334 U. S. over, S. 500. 359 U. 13 Proc., Fed. Rules Civ. 1.
orders suits to which that Act applicable been con- light they insufficiently sidered of claims that were “final” preclude appeal so as to Compare Court.- States, Schine Chain Theatres v. United S.U. States,
with Schine Chain Theatres United v. S.U. question generally has passed been over adjudications without comment in on the merits. While we by previous are not bound of jurisdiction exercises cases in which power our to act was questioned not but silentio, sub United States v. Tucker Truck passed was Lines, ex United States rel. Arant v. 33, 38; U. S. Lane, 166, 170, U. S. neither disregard should we implications of an exercise of judicial authority assumed *12 Mo proper years.14 be for over 40 Cf. Stainback v. 14See, g., Reading Co., e. 229, (D. United States v. 226 F. 286 C. Pa.), Judgments E. D. 1 Decrees & in Civil Federal Antitrust Cases (hereinafter J.”) 575, pertinent cited “D. & 576-577, affirmed in part, 26; 253 Co., U. S. United States Supp. 513, v. National Lead 63 F. (D. Y.), 2846, 534-535 C. S. D. N. 2851, affirmed, 4 D. & J. 332 S.U. 319; Bearing Co., United States v. Supp. Timken Roller 284, F. 83 (D. Ohio) 318 C. portions N. D. reprinted the decree at [relevant 593, 1], 341 S. modified, 593; U. 602 n. S. 341 U. States v. United Machinery Cory., United Shoe Supp. 295, 352-353, (D. 110 F. 354 C. Mass.), affirmed, D. 521; Maryland 347 U. S. United States v. & Virginia Milk Assn., 799, Producers Supp. (D. 167 F. C.), C. D. affirmed, 362 U. approved S. 458. The practice Court has also jurisdiction of District retaining Courts in such cases for future modifications of decrees, practice their a which has also not been finality considered inconsistent original with the of the decrees. See States, Associated Press v. United 1, 22-23; 326 U. S. Lorain Journal States, Co. v. 143, United 342 U. S. 157. But cf. United v. States Theatres, Supp. 229, (D. Schine Chain 63 F. 241-242 Y.), C. W. D. N. 1815, 2 D. modified, 110; &. J. S.U. United States v. Paramount Pictures, Supp. 53, 72, (D. 70 F. Y.), C. S. D. N. 2 D. J.& 1682, modified, 131, 334 U. S. revised in accordance with this Court’s mandate, Supp. 881, 898-901, 85 F. 1690, 2 D. & J. affirmed sub nom. Loeiu’s, Inc., States, v. United 339 U. S. in which review did entry specific provisions await the and detailed disposition for the defendants’ assets. Radio Station 379-380; S. Lok Po, Ke U.
Hock 125-126. Johnson, 326 U. WOW v. case this District Court of the think the decree
We finality hold that for us to indicia of sufficient had note, at time. We appealable properly judgment com- of the entire disposed District Court first, for relief Every prayer by the Government. plaint filed Kinney’s Brown divestiture Full passed upon. was was Appellant expressly required. was and assets stock fur- having any acquiring from or permanently enjoined of the other stock assets business, ther interest provision judg- of the single defendant the suit. The is the one finality may questioned by which its ment future propose in the immediate requiring appellant of divestiture. into the court’s order plan carrying effect of, affirm, and we the merits However, when reach below, remaining for the District judgment the sole task plan divestiture, its of a for full acceptance Court will be rul- supervision plan accepted. so Further administering decree, its ings the District Court have facilitated the fact that the defendants below lite, separate pendente to maintain books required been sufficiently independent to, of, are subordinate by this to make the case in its presented appeal issues present posture proper Appellant for review now.15 one *13 here does not attack the full ordered divestiture District it is such; appellant’s Court as contention that Forgay Conrad, 201; Cf. v. 6 How. Carondelet v. Canal Co. Louisiana, 362; Johnson, v. U. S. Radio Station 326 U. WOW 120; Corp., Cohen Industrial Loan 541. v. 337 U. S. The Beneficial approve details of the divestiture which the District will Court cannot litigation case, affect the outcome of the basic in this as the details of might an eminent domain settlement moot the claims of the condemnee type Republic Oklahoma, in that of suit. See Natural Gas v. Co. Coats-Fordney Grays Logging Co., 62; Harbor Co. U. S. v. 243 U. S. case, alleged proved by under the facts of the no of divestiture Government, order could have been proper. propriety The of divestiture was considered disputed nothing” an “all or below and here on ripe now, basis. It is for review and will, thereafter, be Repetitive judicial foreclosed. consideration of the same question in a single suit will not occur here. Cf. Radio Johnson, Station WOW v. supra, at Catlin v. United 127; States, 324 229, 233-234; U. S. Cobbledick v. United States, at supra, 325, 330.
A second consideration supporting our view is the char- acter of the decree still to be in this entered suit. It will be an order full divestiture. an Such order requires careful, and often extended, negotiation and formulation. This process does not take in a place vacuum, but, rather, in a changing place, buyers market in which and bankers must accomplish be found to order sale. forced The unsettling of uncertainty influence as to the affirm- ance of initial, underlying decision compelling divesti- only ture would make still more difficult task of assur- ing expeditious enforcement of the antitrust laws. The delay in withholding review any issues until the case details of a divestiture approved had been by the District Court and reviewed here could well mean a change in sufficiently market conditions pronounced to render impractical or otherwise very unenforceable the plan disposition of asset for which litigation was held. public interest, as well as that of the parties, would procedure. lose such
Lastly, holding decree of the District Court in the instant case less than “final” and, not thus, appealable, require departure would from settled course of the practice. Court's has consistently It reviewed antitrust contemplating decrees either future divestiture or other comparable prior remedial action formulation and
310 No of the relief ordered.
entry
details
precise
has reviewed
has
in which the Court
instance
been found
we
the one
following decree such
a case
divestiture
party subject
in which the
to consider here,
are asked
Court
back to this
brought
case
has later
that decree
finally
the divestiture
in the details of
claims of error
were unanimous
years ago, we
only
And
two
approved.16
affirming
judgment
and in
accepting jurisdiction,
only
in the
here,
one entered
similar to the
District Court
brought
Act
before
Clayton
7 of the
§
case under amended
litigation.
to the instant
comparable
juncture
us
aat
Assn. v. United
Virginia Milk Producers
Maryland &
See
ap
A fear
States,
piecemeal
472-473.17
458,
362
S.U.
can
existing procedure
adherence
of our
peals because
body
history. Thus,
the substantial
support
no
find
16
varying
course, occasionally
facets
has,
reviewed
Court
However,
separate appeals.
such cases
single antitrust cases on
Thus,
group
distinguishable
bar.
one
from the situation at
are
sought appellate review
first
cases in which the Government
includes
complaints,
the Court considered
of its
whereafter
from dismissals
g.,E.
States v. Terminal R. Assn.
United
entered on remand.
orders
v. E. I.
States
194;
Louis, United
383;
St.
236 U. S.
U. S.
Co.,
de
586;
S.
Another
du Pont
Nemours &
S.
366 U.
U.
appealed from what
group
the Government
includes cases which
inadequate decrees,
Court later con
in which the
it considered to
g.,
E.
States
United
further
relief ordered on remand.
sidered the
Reading Co.,
sub nom. Continental
253 U. S.
26,
later considered
v.
States,
Para
156;
United States v.
v. United
Insurance Co.
259 U. S.
Inc.,
Loew’s,
Pictures,
nom.
considered sub
mount
334 U. S.
later
States,
appeals
of a
And
in which the details
v. United
HH l-H Legislative History.
This case is one of the first to come in which before us complaint allegations upon Government’s is based the appellant § has violated 7 of Clayton Act, as that section was amended in 1950.18 The amendments adopted in 1950 culminated extensive efforts over a num- of years, ber on the of parts both the Trade Federal Com- mission and some Congress, members of to secure revision of a section of the antitrust laws by many considered observers be in existing ineffective its form. then Six- teen bills to amend during § 7 period 1943 to 1949
18Material in
italics was
amendments;
added
material in
corporation engaged
brackets was deleted. “No
in commerce shall
acquire, directly
any
or indirectly,
part
the whole or
of the stock or
capital
subject
other share
and
corporation
jurisdiction
no
to the
of
acquire
Federal Trade
any part
Commission shall
the whole or
corporation
the assets of
engaged
another
commerce,
also
where
of
in
any
any
line
country,
commerce
section
the effect
acquisition may
substantially
such
competition
to lessen
[to]
corporation
acquired
corpora
[between
whose stock is so
and the
making
acquisition,
tion
any
or to restrain such commerce in
community],
section
or to tend
monopoly
any
to create a
line
[of
paragraphs
Other
of 7 were also amended in
commerce].”
details
§
only
not relevant to this
Court,
case. The
other cases to reach this
complaints
in which the Government’s
based,
part,
were
on
Maryland
amended
Virginia
were
&
Milk Producers Assn. v.
§
States,
United
362 U. S.
Corp.
Jerrold Electronics
v. United
States,
However,
analysis
alone were amendments proposed hearings public and full of this light In the separate sessions.19 held three and the measure, to the legislative attention extensive by Congress finally selected general language broad, appropriate think it its we will, expression determining inAct amended *16 history the the review was consistent court below of the judgment the whether v. United States legislature. of See intent the the 591-592; Co., 586, 353 S. de Nemours & U. E. I. du Pont 341 S. Corp., Distillers U. Schwegmann v. Calvert Bros. Co., Morton Salt Federal Trade Comm’n v. 384, 390-395; Refining Co. v. Products 37, 43-46, 49; S. Corn 334 U. Comm’n, 726, 324 734-737. Trade U. S. Federal Clayton Act 1914, original pro- of7 the § As enacted stock by of the acquisition corporation the one hibited acquisition such would corporation of another when of between lessening competition in a result substantial or tend to acquiring acquired companies, the and the 19 (1921); 2549, Cong., 7371, 2277, 1st H. S. 75th 67th Sess. R. S. (1937); 3345, Cong., 2d 10176, 1st R. S. 75th Sess. Cong., Sess. H. (1943); (1938); 577, Cong., 1st H. R. 1517, R. 78th Sess. H. S. (1945); 2357, 4810, 615, Cong., 4519, H. R. 79th 1st Sess. H. R. S. 104, (1946); 515, 3736, Cong., 2d R. H. R. S. 5535, H. R. 79th Sess. H. Cong., (1948) ; (1947); 7024, Cong., 1st H. R. 80th 2d Sess. 80th Sess. 988, 2006, 2734, 56, Cong., 1st 1240, H. R. H. R. S. 81st H. R. H. R. (1949). Sess. 2357, Cong., 1st hearings on H. R. 79th Sess.
Public were held 515, Cong., (1945); 104, (1947); 1st R. Cong., 80th Sess. H. 80th (1949-1950). (1947), Cong., 81st 1st 1st Sess. and H. R. Sess. Notes, history amendments, legislative For of see reviews of the (1952); (1951); Bok, L. 7 L. 46 Ill. Rev. 444 Section 52 Col. Rev. 766 Merging Economics, Clayton of Law and 74 Harv. Act and (1960); Robinson, A of L. Handler Decade Rev. 233-238 Act, Antimerger 61 Col. L. Administration the Celler-Kefauver Martin, Mergers Clayton (1961); Act Rev. 652-674 (1959). 221-310
313
any
line of commerce. The Act
create a monopoly
explicit
terms,
by
its
as construed
not,
did
bar
Court,
acquisition
corporation
one
preclude
assets of another.20 Nor did it appear to
any
of stock in
acquisition
corporation other than a
competitor.21 Although
direct
proponents
the 1950
amendments
the Act suggested
terminology
employed
provisions
these
was the result of accident
or an
acquisition
unawareness
assets could
competition
inimical
as stock acquisition, a
legislative
review
history
original
Clayton
Act
support
fails to
such views.22 The possibility of asset
acquisition
discussed,23
was
but was not considered impor-
Hegeman
See Arrow-Hart &
Electric Co. v. Federal Trade
Comm’n,
587;
Federal Trade Comm’n v. Western Meat Co..
291 U. S.
tant to the secret companies and at holding of development or all through purchase competitors acquisition stock.24 parts competitors’ of such Trade long not before Federal was, however, It Act as first recognized deficiencies Commission suggested frequently Reports Annual enacted. Its to first, “plug lines: along two amendments, principally coverage from acquisitions asset loophole” exempting require companies propos- Act, second, and under notification prior ing merger give Commission Report Temporary The Final plans.25 their changes also i Economic Committee ecommended National Hearings on focusing proposals.26 on these were held two changes or incorporating either both these some bills 1950, none but, prior adopted amendments Congress plenary reached the floor of for consideration. Although was eventually the bill that to become amended embracing was within § 7 confined to the Act’s terms the participation of control or in the control” of two or more other corporations carrying competitive business of the kind same acquisitions The amendment character. was not directed at asset any specifically was, event, overwhelmingly defeated. Cong. 14315, Rec. 14473-14476. Cong. 9073-9074, 9271, 14226, 14316, 14420, 14254, See 51 Rec. (remarks Representatives 14465-14466 Webb and Carlin Sen Reed, Poindexter); Rep. 627, ators Cummins and H. R. No. 63d Cong., 17; 698, Rep. Cong., 2d No. Sess. 63d 2d Sess. 13. Rep. F. 1928, 19; 1929, 6, 59; See T. C. Ann. for id. for at id. 1930, 50-51; 1935, 16, 48; 48; for at 1936, id. for at id. for at id. for 1937, 15; 1938, 11, 19, 29; 1939, 16; at id. for 14, at id. for at id. for 12-13; 1941, 19-20; at id. at 9; id. for at id. for *18 9; 1944, 8; 1945, 8-9; at id. for at id. for 1946, 12; at id. for at id. 1947, 12; 1948, at 11,16. id. for at The has Commission continued unsuccessfully urge adoption prior provision. notification 1958, 7; id. for at 1960, See id. for at 12. 26Temporary Committee, Report National Economic Final and Recommendations, 35, S. Cong., (1941). Doc. No. 77th 1st Sess. 38-40 stock, as in of assets as well the course of the acquisition hearings Eightieth Eighty-first in both the and conducted Congresses, far-reaching pur- of more examination the A poses provisions and of 7 was undertaken. review of § legislative history provides of these no amendments unmistakably precise clear indication of the standards Congress wished the Federal Trade Commission in apply judging legality particular the courts to mergers. of a However, expressions sufficient consistent in point view be found hearings, committee reports of both the House and in Senate and floor debate charged to provide enforcing those with a Act frame of which any usable reference within to evaluate given merger.
The dominant pervading congressional theme consid- eration of the 1950 amendments was a of what fear was considered to be a rising tide economic concentration economy. regard the American Apprehension was publication bolstered in 1948 of the Federal Trade Commission’s on study corporate mergers. Sta- tistics from this and other current studies were cited danger evidence of the to the American economy un- corporate expansions through checked mergers.27 Other in support considerations cited of the bill were the desir- C., F. T. Corporate Acquisi The Present Mergers Trend tions, reprinted Hearings 300-317; 515, C., R.H. at F. T.
Merger Summary passim; Report, Movement: A Cong. Rec. 16457; 11500-11507; Cong. 16433, Rep. Rec. No. Cong., 81st 2d Report Sess. 3. The House on the amendments summarized its view of the situation: [during
“That the years current movement 1940-1947] significant had economy clearly has effect on the revealed companies fact the asset value disappeared which have through mergers amounts to 5.2 dollars, billion no less 5.5 than percent manufacturing sig- of the total corporations assets of all —a segment economy nificant up to be swallowed in such a short period Rep. of time.” H. R. No. Cong., 81st 1st Sess.
ability retaining "local control” industry over and protection small Throughout businesses.28 recorded discussion found examples Congress’ only fear not of accelerated concentration of economic power on economic grounds, but also of the threat to other values a toward thought concentration was to pose. trend
What were some of the factors, judgment to a relevant validity given to the of a specifically merger, discussed by Congress in redrafting 7?§
First, there is no doubt Congress “plug did wish to loophole” and to include coverage within the of the Act the acquisition of assets no less acquisition than the of stock.29
28 See, g., Cong. e. 11486, 11489, Rec. 11494-11495, 11498; 96 Cong. Rec. 16444, 16448, 16450, 16452, 16503(remarks by cospon Representative sors of the amendments, Kefauver, Celler and Senator by Representatives and Bryson, Keating and Patman and Senators Murray Aiken). and America, Cf. United States v. Aluminum Co. of (C. 148 F. Cir., per 2d A. J.): 2d Hand, “Through Learned history out the of these statutes it has constantly been [antitrust] assumed that purposes one of their perpetuate was to preserve, for its own spite possible sake cost, organization an industry in small units effectively which can compete with each other.” 29Virtually every Congress member of spoke support who amendments, aspect indicated that this legislation of the was its salient Representative characteristic. Kefauver, one of the Act’s sponsors, testified, complicated. “The bill is not proposes simply It plug loophole Clayton sections 7 and 11 of the Act.” Hear ings on H. R. at 4. Report The Senate finally the measure adopted “Purpose” summarized the of the amendment with this single paragraph: purpose “The proposed legislation prevent corporations acquiring from corporation by another acquisition means of the of its assets, present whereunder prohibited law it is acquir- [sic] from ing the corporation. stock of said acquisition Since the of stock is significant chiefly likely because it is to result in control of the under- lying assets, prohibit purchase failure to direct of the same assets has been paradoxical inconsistent and as to the over-all existing effect of Rep. law.” S. Cong., No. 81st 2d Sess. 2. “acquiring-acquired” the deletion of the Second, language original text,30 hoped it to make plain *20 § 7 applied only mergers not to between actual competi- tors, but also to vertical and conglomerate mergers whose may effect tend to lessen competition any line of any country.31 commerce section of the it is Third, apparent that a keystone the erection of a barrier to what Congress rising saw was the tide of economic concentration, was its provision authority for arresting mergers at a time when the to lessening trend competition in a line of commerce was incip- still in its iency. Congress saw the process of concentration in dynamic American as a business it force; sought to assure the Federal Trade Commission and the courts power the
30The “acquiring-acquired” deletion of the test was the direct result an amendment offered the Federal Trade Commission. In presenting proposed the change, Kelley Commission Counsel made the following points: this implied Court’s decisions had that the on effect competition parties merger between the the only to was not the test illegality merger; aof applied stock the Court had Sherman Act Clayton tests to Act judged cases and thus the effect of a industry whole; as incorporation tests, Sherman Act accompanying reason,” inadequate “rule of reaching was some mergers public interest; which Commission felt were not in the proposed ground and the new amendment a middle between what appeared overljr mergers to be an restrictive test insofar as between competitors concerned, appeared were what and to Commission overly an mergers lenient test insofar as all other con were Congressman supported cerned. Kefauver this amendment and the proposal incorporated Commission’s was then into the bill which was eventually adopted by Congress. Hearings 515, See on H. R. at 23, Hearings 117-119, 238-240, 259; before a Subcommittee of the Judiciary Senate Committee on Cong., H. R. 81st 1st Sess. (hereinafter Hearings 2734) cited as S. on H. R. 147. apply That 7 was mergers horizontal, intended to to all ver § — conglomerate specifically tical or Report reiterated the House —was Rep. on the final bill. Cong., H. R. No. 81st Sess. 11. And 1st 21, supra. see note it gathered before at its outset this force
to brake momentum.32 Congress third, to the closely related
Fourth, sought it problem inappropriate rejected, standards for cases of the §to 7 remedy, application adopted by legality of business combinations judging the arising the Sherman dealing with under courts in cases early to some cases applied been and which have Act, 7.33 arising original § under Clayton incipient That reach 7 of the Act was intended to § scope monopolies and Sherman trade restraints outside original explicitly Report on the Act. Act was stated in the Senate E. I. Rep. Cong., United States v. No. 63d 2d Sess. See *21 Co., 586, du Pont 589. This theme was de Nemours & 353 S.U. adopted congressional reiterated in consideration of the amendments Reports expression 1950, and found final House and Senate the 1191, Rep. Cong., on the measure. H. R. 81st 1st Sess. 8 No. (“Acquisitions effect, of cumulative and control stock or assets have a may single acquisition but of the market . . not in a . be achieved permit acquisitions. result The is intended to the of a series of bill process when the effect of an intervention in such a cumulative significant competi acquisition vigor the of be a reduction in tion.”) (“The ; Rep. Cong., intent 1775, S. 81st 2d Sess. 4-5 No. incipiency cope monopolistic in their here ... is to with tendencies they justify and well before have attained such effects as would proceeding.”). C., Merger F. Sherman Act And T. The Move see Summary Report ment: A 6-7. 33 Judiciary Report the on R. of House Committee H. adoption stringent of tests more than those recommended Rep. 596, Cong., 7. A Sherman Act. H. R. No. 80th 1st Sess. minority thought legislation Id., vigorous new no was needed. at Report Between the of 11-18. issuance this Committee’s subsequent 2734, of H. R. this Court had decided consideration Co., 495, United States v. Steel S. some Columbia 334 U. which existing might inadequate understood to law indicate substantially prevent mergers competition that had in a lessened country, which, nevertheless, but section had not risen monopoly prohibited by of of level those restraints trade the Sher Cong. (remarks Kefauver); Act. man See Rec. Senator Fifth, at it sought the same time that to create an effec- mergers having tive tool for all preventing demonstrable anticompetitive effects, Congress recognized the stimu- might competition lation to flow from particular mergers. When concern as to the Act’s was breadth expressed, supporters the amendments indicated that it would impede, example, not a merger between two small companies to compete enable the combination to with effectively larger corporations more dominating the market, relevant nor a a corporation between is financially healthy which and a failing which one no longer can be a vital competitive factor in market.34 Rep. 1191, H. Cong., R. No. 81st 1st Sess. 10-11. Numerous other by Congressmen by representatives statements and Senators and Commission, Department the Federal Trade Justice and Adyisors Congress President’s Council Economic were made to the suggesting illegality imposed by that a standard of stricter than that See, g., Sherman Act was Hearings needed. e. H. R. on H. R. 2734, 29, 13, 41, 117; Hearings at 22, 23, 66, H. R. on at Judiciary 319. The Report supported House Committee’s 1949 unanimously concept although five the nine members who had dis- years serving Rep. sented two earlier in H. R. No. were still Rep. Cong., Committee. H. R. No. 81st 1st Sess. 7-8. The Report explicit: Senate was “The wish it committee to make clear that is bill not intended to revert to the Sherman Act test. The intent cope monopolistic here incipiency ... tendencies in their *22 they justify well before have attained such effects as would proceeding. Sherman Act . . . various additions and dele- [The] strengthening weakening tions —some and others the bill—are con- not flicting purpose They merely in steps and effect. are different toward objective, namely, framing which, the though same that of a bill dropping portions Clayton of the so-called Act test that have no significance appear primarily economic reference would to to [the original “acquiring-acquired” the Act], standard of the reaches far beyond Rep. the 1775, Cong., Sherman Act.” S. No. 81st 2d 4r-5. S.ess. 34 company mergers, Hearings 2734, As to small see H. R. H. on R. 117; 51; 41, Hearings 6, at 2734, Cong. 11486, S. on H. R. at 95 Rec. 11506; Cong. 16436; 11488, Rep. 1191, Cong., H. Rec. R. No. 81st original “community” the of the word
The deletion market geographic of relevant description Act’s the indicate that Congress’ to of desire illustration another given of a the adverse effects its was with concern signifi- only economically an merger competition on whole, country.35 Taken as cant “section” with congressional concern legislative history illuminates competitors, competition, its not protection such only extent mergers restrain to the desire to may competition. combinations tend to lessen Congress adopted rejected specifi- nor Sixth, neither mar- cally any measuring tests for the relevant particular kets, or product in terms of in terms either defined which anti- competition, locus of within geographic 6-8; Rep. 1775, mergers Cong., lst Sess. S. 81st 2d 4. No. Sess. As to failing companies, Hearings 2734, 115, see H. R. 134- S. at 135, Cong. 16444; supra, 198; 16435, Rep. 1191, Rec. H. R. No. 6; Rep. 1775, supra, at 7. S. No. at supra, amendment, 30, The Federal Trade see note Commission’s phrase any section, community, included the trade “where ... area, probability acquisition there is of such reasonable that the effect substantially Congressman competition.” be to lessen Kefauver urged “community” ground might deletion of word on the it suggest, example, filling that a between two small stations city proscribed. Hearings 515, in a of a section was on H. R. at 260. Cong. And prohibition see also 96 Rec. 16453. The fear of literal mergers through “community” all but de minimis word use of the Report was also cited Senate as the basis for its retention solely Rep. 1775, Cong., the word “section.” S. No. 81st 2d Sess. was redundant, reference “trade area” deleted as when it country became clear that "section” of the to which the Act was apply, geographic country, referred not a definite area of the but geographic competition rather the area of effective in the relevant line Hearings 2734, 38-52, 66-84, commerce. See S. on H. at R. 101— 102, 144, 132, 133, 145; Rep. 1191, Cong., 8; H. R. No. 81st 1st Sess. Rep. Cong., No. 81st 2d Report Sess. 5-6. The Senate cited with approval employed by definition of market the Court States, Standard Co. Oil v. United S.U. 299 n. 5. of California
321 merger a Nor competitive effects of were to be judged. adopt “substantially,” did a definition of word it in or quantitative terms of sales or market whether assets designated by a qualitative terms, shares or which merger’s competition effects on to were be measured.36
Seventh, providing quantitative while no definite or qualitative tests which enforcement could agencies a gauge given merger to effects determine whether may “substantially” it competition lessen or tend toward monopoly, Congress plainly indicated had merger that to functionally particular its viewed, context of Report The House R. stated that two tests of H. illegality proposed were included in the Act: whether substantially competition or monopoly. lessened tended to create a perceived It through findings, stated that such effects could be part example, competitive activity that a whole material of the enterprise, an had competition, which been a substantial factor in had eliminated; acquiring corporation been that relative size of point advantage competitors had its increased such over “decisive”; to be competing threatened that an “undue” number of enterprises eliminated; or buyers had been rele sellers relationships depriving vant had their market established rivals of Rep. opportunity compete. 1191, Cong., a fair H. R. No. 81st standards, general language, 1st Sess. 8. Each of these couched in exclusively reflects a conscious avoidance of tests even mathematical States, though case Co. of Standard Oil v. United of California substantiality” 293, “quantitative to have U. S. said created a Clayton arising Act, test for under decided suits 3 of was while § Congress considering appli was H. 2734. R. Some discussion cability Hearings ensued, g., see, test to cases e. S. on H. R. § 169-172; 21; 31-32, Rep. 1775, Cong., at No. 81st 2d Sess. Cong. aspect but this of the Standard decision was Oil Rec. impugned supporters. specifically neither nor the bill’s endorsed Judiciary Report, However, the House two Committee’s issued months decided, after been Standard Oil had remarked that the tests illegality under the new Act were intended be “similar to those applied interpreting language which the courts have the same Clayton Rep. used in Act.” H. R. No. other sections Cong., 81st 1st Sess.
322 was to
industry.37
the consolidation
is,
That
whether
than
fragmented rather
industry
in an
that was
place
take
toward domi-
had seen a recent trend
concentrated,
that
fairly consistent
by few
had remained
leaders or
nation
among
participat-
market shares
distribution of
its
easy
to mar-
experienced
access
ing companies,
had
that
buyers
suppliers by
easy access to
by suppliers
kets
had wit-
business,
of
that
or had witnessed foreclosure
ready entry
competition or the erection
of new
nessed
vary-
entrants,
aspects,
all were
prospective
of
to
barriers
consideration,
merger
with the
under
ing in importance
be taken into account.38
properly
which would
37
supporters
number of the
of the amendments voiced their con
A
passage
locking
would
to
the barn door
cern that
of the bill
amount
urged approval
stolen,
been
but
of
most of the horses had
after
prevent
still in the
to
the theft of those
barn. Which was
measure
yet
subject
particular
to
say that, if
industries had not
been
adoption
perceived
concentration,
congressionally
trend toward
way
urged
preventing
as a
the trend from
the amendments was
g., Cong.
reaching
yet
See,
95
Rec.
those industries as
unaffected.
e.
(remarks
Representatives Keating, Yates,
11498
(remarks
O’Mahoney,
Patman);
Cong. Rec. 16444
of Senators
Murray).
38Subsequent
adoption
amendments,
to the
of the 1950
both the
have,
light
Federal Trade Commission and the courts
Con
expressed
recognized
importance
gress’
intent,
the relevance and
places any given merger under consideration
economic data that
industry
inevitably unique
every
case.
within an
framework almost
reflecting the shares of the market controlled
the indus
Statistics
try
course,
primary
parties
are,
to the
leaders and
only
par
power;
of market
but
a further examination of the
index
history
pro
structure,
probable
market —its
future —can
ticular
setting
judging
probable anticompetitive
appropriate
for
vide the
Pillsbury
merger. See, g.,
Mills, Inc.,
555;
e.
50 F. T. C.
effect of the
Corp.,
(D.
Supp.
v. Bethlehem Steel
168 F.
United States
C.
Y.);
Corp.,
Supp.
States v. Jerrold Electronics
187 F.
S. D. N.
United
aff’d,
Atty.
(D.
Pa.),
E. D.
It we return to the case *25 before us.
IV. Aspects Merger. of Vertical the arrangements companies Economic standing between in a supplier-customer relationship are as characterized primary “vertical.” The of vice a vertical arrangement tying other a supplier customer to a is that, debate, hearings In the of both course the Committee and floor occasionally “possible,” was the attention focused on issue whether “probable” anticompetitive proposed merger or “certain” a effects of proven Language would have to be establish to a violation of the Act. quoted prior was in from decisions of Court antitrust cases in interpretations “may” each sug which of these of the was word gested appropriate. Hearings 2734, 74; H. R. on H. R. at S. Hearings 2734, 32, 160-168; Cong. on 33, 16453, H. R. at Rec. Report question explicit 16502. The final Senate on was on the point: [“may use bill, enacted,
“The of these words means if be”] apply possibility only not would to the mere but to the reasonable probability prescribed ‘may of the effect .... The words [sic] Clayton be’ have been in section 7 of Act since 1914. The concept probability conveyed by of reasonable is a these words neces- sary any element statute which seeks to arrest restraints of trade they incipiency develop full-fledged their before into restraints requirement certainty violative the Sherman Act. A actuality injury any competition incompatible to is effort to supplement by reaching incipient Act Sherman restraints.” S. Rep. 1775, Cong., Cong. No. 81st 2d Sess. 6. See also Rec. 14464 (remarks Reed). of Senator seg- from a party of either
by foreclosing competitors arrange- them, to open the market otherwise ment of Oil “clog competition,” as a Standard act ment States, Co. v. United 337 U. of California fair com- opportunity . . . rivals of a to “deprive[s] 40 which Cong., 1st Sess. 8. pete.” Rep. H. R. No. 81st very nature, arrangement by vertical its Every extended competitors supplier to of the time, for at least a denies or all of the trade opportunity compete part to How- arrangement. the vertical customer-party does render unlawful all such ever, Clayton Act not only effect vertical but forbids those whose arrangements, substantially to lessen or to tend “may competition, be any monopoly” any “in line of commerce sec- create country.” Thus, noted, previously as we have tion market a nec- the relevant “[determination essary finding of a violation of the predicate Clayton monopoly Act because must the threatened substantially one which will competition lessen competition.’ area ‘within the of effective Substan- tiality only can be determined of the market terms *26 41 affected.” competition” “area The of effective must be determined by product (the to a commerce”) reference market “line of geographic (the and a country”). market “section of the 40 addition, merger may disrupt injure competi In a vertical independent when supplier tion those customers of the who are in competition merging customer, stop with the are forced either to handling supplier's lines, thereby goodwill they jeopardizing the developed, lines, thereby supplier’s forcing have or to retain the them competition supplier. into with their own v. See United States Corp., Y.). Supp. 576, (D. Bethlehem Steel F. 613 168 C. S. D. N. 215, Sullivan, independent See also GX R. a letter from Sam an retailer, Gamble, shoe to Clark President Brown Shoe Co. 41 Co., E. I. du Pont de 353 United States v. Nemours & S.U.
325 The Product Market.
The outer a product boundaries of market are deter- mined the reasonable interchangeability or the use cross-elasticity of demand between the product itself and substitutes for it.42 However, market, within broad well-defined may submarkets which, exist themselves, product constitute markets purposes. antitrust United States E. I. du v. Co., Pont de & Nemours S. 586, U. 593-595. The boundaries of a such submarket may be determined examining practical such indicia industry public recognition of the submarket aas separate economic peculiar entity, product’s char- uses, unique production acteristics and facilities, distinct customers, distinct prices, sensitivity price to changes, and specialized vendors.43 Because Clayton § 7 of the Act prohibits any merger which may substantially lessen com- petition “in any line of commerce” (emphasis supplied), it is necessary to examine merger of a effects each such' economically significant if submarket determine there is a reasonable probability that merger will substantially competition. lessen If such probability is proscribed.44 found exist, cross-elasticity production facilities be also an imoor- defining product tant factor market within which a vertical merger is viewed. Cf. United States v. Columbia Steel Co.. 495, 510-511; 334 U. United States v. Corp., Bethlehem Steel (D. Supp. Y.). F. C. S. D. However,'the N. District Court findings concerning feasibility made but limited interchanging equipment in the manufacture of nonrubber footwear. At the same time, supports the record plants the court’s conclusion that individual generally produced only product shoes in one of the lines the court found relevant. generally Bock, Mergers Markets, Analy See An Economic *27 (1960). sis of Case Law 25-35 44United States v. E. I. du Co., 586, Pont de Nemours & 353 U. S. 592, 595; Spalding A. G. Comm’n, & Bros. v. Federal Trade 301 F. (C. Cir.); Crystal Sugar 2d A. 603 3d American Co. v. Cuban- case, we present to the considerations these
Applying the District Court’s supports that the record conclude men’s, are of commerce lines finding the relevant that lines are product shoes. These and women’s, children’s in is manufactured public; each line recognized to itself peculiar has characteristics each separate plants; others; noncompetitive with generally it rendering a class toward distinct directed is, course, and each customers. that the District Court’s contends however,
Appellant, sufficiently recognize “price/quality” fail to definitions argues Brown that ''age/sex” distinctions shoes. which it manu- medium-priced shoes predominantly from the pre- market different occupy product factures a Kinney But dominantly low-priced shoes which sells. argument equivalent to agreement with that would be holding medium-priced compete shoes do not that properly low-priced shoes. We think the District Court be found the facts to be otherwise. It would unrealistic accept example, Brown’s contention men’s that, selling $8.99 shoes in a market product below are different selling $9.00. from those above This not say, however, “price/quality” dif- they ferences, exist, unimportant analyzing where are merger; they may determining importance be likely merger. effect of a But boundaries of the rele- vant market must drawn with sufficient breadth to products include competing merging of each of the companies recognize competition fact, where, competition exists. Thus agree we with the District Court in this case of product further division “price/quality” lines based on differences would be “unrealistic.” Sugar Co., (C.
American F. 2d Cir.); 2dA. United Corp., v. Steel Supp. 576, States Bethlehem F. (D. C. D.S. Y.). supra. N. See also note *28 product Brown’s contention that the District Court’s recognized market definitions should have further “age/sex” a problem. distinctions raises different Brown’s sharpest criticism is find- directed at the District Court’s ing single that a children’s shoes constituted line com- argues, merce. Brown “a example, boy- for that little a girl’s does not wear little patent pump” black leather and baby boy’s male cannot wear growing “[a] ” argues shoes.” Thus Brown that “infants’ and babies’ shoes, and “youths’ “misses’ children’s” and shoes and ” boys’ shoes should each separate have been considered arguendo, line commerce. Assuming, boys’ that little shoes, example, do peculiar have sufficient character- istics to constitute one of the markets to be used in analyzing the effects of this we merger, do not think that in this case the District Court was required employ “age/sex” finer distinctions than recognized by those its of “men’s,” classifications “women’s,” and “children’s” shoes. Further division does not aid in analyzing us merger. effects of this Brown manufactures about percentage same of the Nation’s children’s shoes (5.8%) as it does of youths’ Nation’s boys’ and shoes (6.5%), of the Nation’s misses’ and children’s shoes and of (6.0%) the Nation’s infants’ and (4.9 babies’ %). shoes ly, Similai Kinney sells about same percentage the Nation’s children’s shoes (2%) as youths’ it does of the Nation’s boys’ shoes (3.1%), the Nation’s misses’ and chil- dren’s shoes and of (1.9%), the Nation’s infants’ and babies’ shoes (1.5%). Appellant point can to no advan- tage it enjoy would were finer divisions than those chosen by the District Court employed. Brown manufactures significant, comparable quantities of virtually every type of nonrubber men’s, women’s, and children’s shoes, and Kinney quantities sells such of virtually every type of men’s, women’s, and children’s shoes. Thus, whether separately considered or together, picture 'of this District therefore, agree with the We, merger is the same. case to sub- setting of this in the Court’s conclusion “age/sex” on the basis further the shoe market divide “impractical” “unwarranted.” would distinctions *29 Market. Geographic The that and the District Court agree parties with the
We concerned, aspect the vertical of this insofar as The Nation. is the entire geographic market the relevant weight and consumer value, bulk, of relationships product to their shoes distribute demand enable manufacturers Kinney, fact, in do. as Brown and basis, on a nationwide to merger are be anticompetitive effects of the The range within this of distribution. measured Merger. Probable Effect of by a of affected competition the area effective Once arrangement defined, analysis vertical has an must been arrangement be made to if of the determine the effect “may substantially be tend to competition, to lessen monopoly” create this market. vigor of competition
Since the diminution of which arrangement stem from a primarily vertical results open from a of a foreclosure share of the market otherwise to competitors, important determining an consideration arrangement “may whether of a effect vertical be substantially to lessen or to tend to create competition, a monopoly” is the size of the fore- share the market closed. However, this factor will seldom be determina- If tive. the share of the market large foreclosed is so approaches it monopoly proportions, Clayton will, Act course, violated; have been arrange- but the will also ment have run afoul the Sherman And Act.45 legislative history §of clearly 7 indicates Rep. 45 15U. S. C. 1 and 2. See Cong., No. 81st 2d §§ 4-5. Sess. legality particular measuring any
tests for economic arrangement Clayton stringent under the Act are to be less than in applying those used the Sherman Act.46 On the foreclosure of a de minimis hand, other of the share will "substantially market not tend to lessen competition.” Between these extremes, cases such as the one before us, which the is neither of nor monopoly foreclosure de minimis proportions, percentage the market itself, arrangement foreclosed the vertical cannot In cases, necessary decisive. such it becomes under- take an examination of various economic and historical factors in order to determine whether arrangement under review is the type Congress sought proscribe.47
A important most such factor to very examine is the nature and purpose arrangement.48 Congress not only indicated that “the of illegality *30 tests § [under 7] are intended to be similar to those which the courts have applied in interpreting the language same as used other 49 Clayton sections the Act,” but also chose for § 7 language virtually identical to that 3§of Clayton Act, 15 14,§ U. S. C. which had been interpreted by this require Court to an examination of the interdependence of the market share by, foreclosed and pur- economic pose of, arrangement. the vertical Thus, for example, if a particular vertical arrangement, considered 3, under § appears be to a limited term exclusive-dealing contract, 46 33, supra. See note 38, supra, 55, infra, See note and note and the accompanying text. 48Although “unnecessary it is speculate the Government to to what is in the ‘back of the minds’ promote of those who a merger,” Rep. 1191, H. Cong., R. No. Slst 1st 8, Sess. evidence indi cating the purpose of the merging parties, where available, is an aid in predicting probable parties future conduct of the and thus the probable merger. effects of the & States, Co. v. United Swift 375, 396; Maryland U. S. v. Virginia United States & Milk Producers Assn., (D. Supp. 799, 167 F. C.), aff’d, C. D. 362 U. S. Rep. 1191, See H. Cong., R. No. 81st 1st Sess. 8. generally significantly foreclosure must market tying is a contract before arrangement if than
greater
Act.
will
violated
arrangement
be held
have
Co., 365
v. Nashville Coal
Compare Tampa Electric Co.
United
v.
Oil Co.
and Standard
U.
of California
States,
v.
States,
Salt Co. United
supra,
International
readily discernible.
The reason for this is
small involved, purpose share of the market is if the agreement is to insure supply to the customer a sufficient a commodity vital to the customer’s trade or to insure supplier output market for his and if no there is industry. trend toward concentration Tampa Co., v. Electric Co. Nashville supra. Coal Similar con- pertinent siderations are judgment to a under 7 of the § Act. importance Congress
The which attached to economic is purpose further demonstrated by the Senate and House Reports on H. R. which evince an intention to preserve “failing company” doctrine International Comm’n, Shoe Co. v. Federal Trade 291.52 280 U. S. Sim- ilarly, Congress merger foresaw that of two large companies large aor and a small company might violate Clayton Act companies while the small two might not, although the share of the market foreclosed be identical, if the purpose of the small companies enable them in combination to with compete larger corporations dominating the market.53 present merger companies involved neither small failing companies. nor In 1955, the merger, date of this Brown was the fourth largest manufacturer in the shoe industry with of approximately sales pairs million shoes and assets of over $72,000,000 Kinney while had sales of about 8 pairs million of shoes and assets of about was,Brown $18,000,000. only Not one of leading men’s, manufacturers of women’s, and shoes, children’s but Kinney, over 350 retail outlets, oper owned and ated largest independent chain of family shoe stores in the Nation. Thus, in this no industry, merger between Rep. H. R. Cong., No. 6; 81st Rep. 1st Sess. No. Cong., 81st 2d Sess. 7. 34, supra. Compare See note Harley-Davidson Co., 50 F. T. C. Comm, 1047, 1066, Atty. and U. S. Study Gen. Nat. the Antitrust Laws, Report (1955).
332 involve could retailer independent an and
a manufacturer it is Moreover, foreclosure. market larger potential a and from of Brown past behavior both from apparent use Brown would President,54 that testimony of Brown’s Kinney Brown shoes into Kinney to force ownership of its arrangement operation vertical Thus, stores. involving tying a clause.55 analogous to one quite be would trend to is the factor consider important Another of true, It is industry.56 in the toward concentration only a if prohibits given statute course, substantially lessen merger may the effect a 7 very wording requires § But competition.57 merger.58 probable of the effect prognosis future integration, The existence of trend toward vertical found, which District Court well substantiated Moreover, tendency the record. the court found acquiring impor- manufacturers increasingly become tant sources supply for their acquired outlets. necessary corollary of these trends is the foreclosure independent from open manufacturers markets otherwise to them. And because trends not product these are of accident but are rather the policies result of deliberate leading Brown and other shoe account manufacturers, must be taken of these predict facts order to prob- 54 supra. 8, See note
55Moreover, ownership integration permanent is a more and integration. irreversible tie Stern, than is contract Kessler See and Competition, Contract, and Integration, 1, Vertical 69 Yale L. J. 78 (1959). 56 Pillsbury generally Mills, See Inc., 572-573; 555, 50 F. T. C. United States v. Bethlehem Corp., 576, Steel Supp. 168 F. 606 (D. Y.); S. D. Stigler, Mergers C. N. and Preventive Antitrust Policy, 104 U. of Pa. L. Rev. (1955); Atty. S.U. Gen. Nat. Comm, Study Laws, Report (1955). Antitrust 57See Handler Robinson, A Decade of Administration of Antimerger Act, Celler-Kefauver (1961). 61 Col. L. Rev. supra, accompanying See note text. *33 consequences merger. against able of this future is It background continuing present concentration that the merger must be viewed. argues, however, industry
Brown that is at shoe present composed large number manufacturers and retailers, industry dynamically and is competi- remaining vigor tive. But if merger cannot immunize a the trend in industry is toward oligopoly. See Mills, Pillsbury Inc., 555, 50 F. T. prob- C. 573. It is the able effect of upon future as well as present Clayton which the Act commands and the courts the Commission to examine.59
Moreover, we only have remarked not above, must probable we consider the upon effects of the merger particular economics markets affected but also we probable must consider its upon effects way economic sought preserved life by Congress.60 be Congress was of preventing desirous the formation of further with oligopolies their attendant adverse upon effects local industry control of upon small business. Where an industry composed was independent numerous units, Congress appeared anxious to preserve this structure. Report, Senate quoting approval from the Fed- eral Trade report Commission’s 1948 on the merger move- ment, states explicitly that amended 7 is§ inter addressed, alia, problem: to the following
“Under the Act, acquisition Sherman an unlaw- ful if it creates a monopoly or an attempt constitutes to monopolize. Imminent monopoly may appear large when one acquires concern another, but it is unlikely to perceived in a small acquisition by a large enterprise. As a large grows concern through a series of such small acquisitions, its accretions of 59 United States v. E. duI. Pont Co., de Nemours & 353 U. S. 589, 597. 28, supra, See note accompanying text. it make diffi- as to individually so minute
power are . . . them. against Act test the Sherman to use cult extending enterprises are large several “Where acquisitions, small by successive power their con tobe purchases of their effect cumulative competition of intense industry from one an vert or four three which many enterprises to one among Rep. supply.” the entire large produce concerns H. R. And see 2d 5.61 Cong., 81st Sess. No. 1st Cong., No. 81st Sess. Rep. *34 facts, and the record findings, Court’s District
The I of this convince many opinion, set forth Part of them just being subjected industry is us the shoe which, if mergers of a series vertical such cumulative “substantially to lessen unchecked, likely will be left competition.” ver- the trend toward this conclusion because
We reach when combined integration industry, tical in the shoe forcing upon own its policy Brown’s avowed its shoes a sub- subsidiaries, may competition foreclose from retail -women’s, men’s, stantial of the markets share countervailing shoes, producing any without children’s economic, competitive, advantages. or social
V. Aspects Merger. The Horizontal the arrangement companies perform- An economic between of com- ing similar functions the or sale production goods or parable services is as “horizontal.” characterized competition arrangement an effect on of such depends, course, upon scope. Thus, its character and validity its face of the will depend the antitrust laws upon such factors as: the relative size and number of the Stigler, Mergers Policy, See also and Preventive Antitrust 176,180 (1955). U. of Pa. L. Rev.
parties arrangement; to the whether it shares of allocates the it among parties; prices market whether at fixes parties which the will their or it product; sell whether competitors.62 arrange absorbs insulates Where ment merger companies effects horizontal between occupying the same product geographic market, competition previously may whatever in that have existed parties market between is eliminated. 7 of Clayton Section to its Act, prior amendment, focused upon aspect of horizontal combinations proscribing acquisitions might lessening which result in a competition between acquiring acquired and the companies.63 The 1950 plain amendments made Con gress’ intent that the validity of such combinations was gauged on be a broader scale: their effect on competition generally in an economically significant market.
Thus, again, proper definition of the market “necessary predicate” to an examination competi- tion that affected aspects horizontal merger. The acquisition Kinney by Brown resulted in a horizontal combination at manufacturing both the and retailing levels of their businesses. Although *35 District Court found that the merger of Brown’s and Kinney’s manufacturing economically facilities was too insignificant to come within prohibitions of Clay- Act, ton the Government appealed has not from this por- tion of the lower court’s decision. Therefore, we have no express occasion to our views with respect to finding. that On other hand, appellant does contest the District finding Court’s of the companies’ retail outlets may tend substantially to lessen competition. 62See, e. g., United Co., States v. Trenton Potteries 392; 273 U. S.
Sugar Institute, Inc., States, United v. 553; United States v. 297 U. S. Pictures, Paramount 131; Bearing Timken Roller 334 U. S. v. Co. States, United 341 U. 593. S. 63 supra. See note
336 Product Market.
The shoe stores retail States are sold the United Shoes These outlets stores. departments general in shoe (3) women’s (2) shoes, women’s (1) shoes, sell: men’s or children’s men’s, women’s shoes, (4) or children’s Kinney sold Brown and merger, both Prior to the shoes. through the with one another competition their shoes industry. of the of outlets characteristic kinds enumerated the District opinion we hold that In Part IV of and children’s correctly men’s, women’s, defined Court in which to as the relevant lines commerce shoes merger. For rea- aspects of the analyze the vertical hold the same lines com- sons stated we also there considering the horizontal appropriate are merce merger. aspects Market. Geographic appropriate determining
The criteria to be used essentially similar to those used geographic market are product Rep. to determine the market. See S. relevant 5-6; 2d States v. Cong., No. 81st Sess. United Co., E. I. du Pont de Nemours & U. as a
Moreover,
just
product
§
submarket
have
significance
commerce,” may
so
proper
"line
geographic
appropriate
submarket be considered the
“sec
country.”
Erie
tion
Sand & Gravel Co. v. Federal
Comm’n,
Trade
337
cally significant. Thus, although
geographic
market
may
in some instances
under
encompass
Nation,
the entire
single
other circumstances it
be
small as a
metro
Corp.,
area. United States
Pictures
v. Columbia
politan
United
fact that firms merging directly two have competed the horizontal in but a geographic level fraction of the markets in which operated, not, itself, either has does place merger their outside scope § of 7. That section speaks of . . .' “any section of and if anti- country,” competitive merger probable effects of in “any” are significant market, merger least to that extent— —at proscribed.65
The parties do not dispute findings of the District Court the Nation as a whole is geo- the relevant graphic measuring market the anticompetitive effects merger vertically viewed or of the horizontal merger of Kinney’s Brown’s and manufacturing facilities. As to retail level, however, they disagree.
The District Court found that the effects of this aspect
merger
of must be analyzed
every city
popu-
awith
lation exceeding 10,000 and its
contiguous
immediate
surrounding territory in which both
Kinney
Brown and
sold
through
shoes at retail
they
stores
either owned or
By
controlled.66
this definition of
geographic
mar-
retailers,
To illustrate:
If two
operating
one
primarily in the
eastern
Nation,
half of the
operating
and the
largely
other
in the
competed
West,
cities,
in but two mid-Western
the fact that the latter
represented
outlets
company’s
but a small share of each
business
would not immunize the
competi
in those
markets which
might
adversely
tion
be
hand,
would,
affected. On the other
that fact
course,
properly
determining
equitable
considered in
relief
to be decreed.
Corp.,
Cf. United States v. Jerrold Electronics
(D.
Supp.
F.
Pa.), aff’d,
E.C. D.
ket, less are outlets through such Kinney sold shoes or Brown if the Dis- recognizes The appellant represented. market is relevant characterization Court’s trict and Brown in which both of markets the number proper, that the numerous so sufficiently is Kinney outlets have testing properly judged is validity of the entire However, it is appellant’s markets. in those its effects in shoe competition areas of effective that the contention District Court. defined improperly retailing were cases, defined should, in some It claims that such areas large districts only the central business to include so as “standard encompass the others, in so as to cities, and communities which smaller metropolitan areas” within distinguish any failing to argues It test are found. competitive improper. situations is between these fully supports record believe, however, that We shoe in the out- findings that stores the District Court’s effectively with stores central compete skirts cities Although such Plan” and “Wohl Plan” stores were located. chise directly by Brown, did not sell stores were not owned controlled inventory through products exclusively and did not Brown finance Brown, adequate we believe there was evidence before the District support finding were To its that such stores “Brown stores.” Court provided mer- such stores Brown substantial assistance in the form of management chandising advertising aids, reports and on market and purchase research, group loans, life and fire insurance and centralized rubber footwear from manufacturers on Brown’s credit. For these exclusively services, required Brown the retailer to deal almost price products Fur- Brown’s scale at which Brown shoes sold. agree- ther, power Brown reserved the to terminate such franchise days’ required, ments on 30 notice. Since the retailer was under this develop good plan, to invest his own and his will to a sub- resources products, stantial extent in the sale Brown the flow of which Brown readily terminate, Brown was able to exercise sufficient control could departments these stores and to warrant their characterization as over measuring purpose the share and effect outlets for the “Brown” competition level. Standard Oil Co. of Brown’s at retail Cf. States, v. 337 U. S. United California areas, undoubtedly downtown that while there some commercial intercourse between smaller communi- area,” single metropolitan ties within a “standard most important competition intense retail sales will particular be confined to stores within the communi- *38 ties in such an area and their immediate environs.67
We agree properly therefore that Court District defined the relevant in which geographic markets to analyze merger this as those cities with a population exceeding 10,000 and their in which environs both Brown and Kinney retailed through shoes their own outlets. Such large markets are to enough include the downtown shops and in shopping contiguous suburban centers areas to the city, competitive which are the important factors, yet enough are small beyond exclude stores immediate environs of city, which are of little competitive significance.
The Probable the Merger. Effect of
Having product delineated the and geographic markets within which the effects of merger this are to measured, be turn to an we examination of the District finding Court’s that as a merger result in competition retailing of men’s, women’s and children’s shoes be lessened in substantially those cities in which both Brown and Kinney stores are note, appel- located. initially, We lant challenges finding a this on number of grounds other
than those discussed on grounds independent above and question the critical competition whether may, fact, be Thus, lessened. objects Brown that the District Court did competitive not examine the picture in each line of country commerce and each section of the it had defined appropriate. as says It the Court erred in failing to findings enter with respect to each city relevant assessing 67The findings District Court limited its having popu to cities 10,000 persons, Kinney lation of least operated only at since in such areas. sale on the retail effect anticompetitive men's shoes Bluffs, in Council men's shoes example,
of, and children’s City in Texas City, women’s shoes in Texas representative sam- assuming Even shoes in St. Paul. objects also Brown used, be properly ple could in shoe analysis competition detailed District Court’s city single city Louis—a to a was limited retailing —St. says The appellant operate. did not Kinney which sufficiently representative not be analysis could which could image of the shoe trade a standard establish which more 100 cities in to each of the than applied shoes, some Kinney particularly Brown and sold Louis, others were much smaller than St. those cities were climates and others were larger, were different some per incomes. having capita areas different median adequate support we believe the record is However, it is findings of the District Court. While true that *39 concentrated its attention on the structure of the court competition city in which it sat as to which was it heard readily available, detailed evidence most also from less in which the witnesses no than other cities parties merger operated. The court was careful point out that it was on the of all the basis evidence that it reached its concerning conclusions the boundaries markets merger’s relevant and the on com- effects petition recognize within them. We that variations of size, climate and by wealth enumerated Brown exist in the agree relevant markets. we However, with the court respect below that the markets with to which evi- dence was provide received a sampling fair of all the impact areas in which of this is to be measured. has not appellant shown how the it has variables mentioned could affect the structure of competition any particular within market so as to a require change in the conclusions drawn the District Court. Each competitor given within a market is equally affected factors, though these even the city in which he busi- does may ness in size, differ from St. Louis or wealth. climate Thus, we believe the District its properly Court reached conclusions on the basis the evidence available to it. There is to protract already complex no reason antitrust litigation by analyses detailed peripheral economic if facts, may the basic issues of the case be determined through study of a fair sample.68
In the us, case before only not was fair used sample to demonstrate the soundness of the District con- Court’s clusions, but evidence of fully record substantiates those findings as to each An analysis relevant market. undisputed statistics of sales in the cities in shoes which both Kinney retail, Brown and sell at sepa- shoes rated into appropriate commerce, provides lines of persuasive factual upon foundation the required which prognosis merger’s may Although effects be built. Brown objects to some details the Government’s com- putations used in drafting these exhibits, appellant can- deny not general correctness the more picture they reveal.69 We appended have the exhibits to this opinion. 68See Standard States, Oil Co. v. United 337 U. of California 293, 313; Atty. Study U. S. Laws, Nat. Comm. Gen. the Antitrust Report (1965): support “While sufficient data to a conclusion is required, give sufficient agencies, data to the enforcement the courts certainty competitive and business consequences nullify as to would words Clayton ‘Where the effect be’ in the and convert Act ” them ‘Where into the effect is.’ And the Committee of the Judicial Conference of the United States Procedure in Antitrust and Other emphasized limiting Protracted Cases has also the need mass *40 possibly type relevant evidence in cases of this in order to avoid confusion possibility and its concomitant increased error. 13 F. R. D. objects, Brown example, for to the fact that these exhibits are drafted concerning on the basis of the cities which census information available, was rather than the basis of and their the cities by environs —as the relevant markets were defined the District Court. However, the record that the statistics of shows shoe sales in cities by large and conform to statistics of shoe sales in counties in which D, principal metropolitan those cities Appendix are the area. See separate in 32 during 1955 example, for They show, Kansas, Topeka, from location in size and cities, ranging the com- Mexico, Hobbs, and New Batavia, York, New to slightly drawn as to injra. Thus, no in a we find error conclusion Brown in alone. of sales cities larger the available record market from volume, as sales, pairage rather than dollar objects the use of also to shares, of the measuring defining size, Brown’s and the basis for primarily Kinney sold shoes However, and since Brown market. light of the conceded ranges, and in the price and medium low by pairage provide agree spread prices, we that sales measured in shoe Brown-Kinney market picture shares a more accurate of shoe sales Detailed statistics than do sales measured in dollars. however, volume, Brown only and in terms of dollar were available by those has converted objects which the Government to the method reflecting pairage. The Govern- figures sales in terms of into those exceptions, was, based on national with some ment’s conversion averages prices the ratio of of shoe and national median income District Court men, population. in the women and children to the effect accepted expert testimony offered the Government price in the population age, sex and income variations that shoe most, statis- produced, in the at error converted relevant cities 6% increasing (by likely tics, to favor Brown and that this error was as against were to be meas- sales which Brown’s shares universe of ured) in District Court’s it. find no error as it was to disfavor We propriety to evidence as acceptance of the Government’s employed. Lastly, objects that accounting experts Brown methods its concerning pairage improperly derived its own sales were statistics they by its to the retail out- wholesale distributors since included sales category plans as con- lets on its franchise in the same sales ultimate possible Again, recognizing a sumers its owned retail stores. while combining margin of error in sales at two levels distribu- statistics they adequate upon gauge provide tion, we believe an basis which to Particularly through sales outlets it controlled. as the fran- Brown required inventory, their own does it seem chise stores were finance purchases most of their from Brown’s dis- reasonable to conclude that eventually summary, although appellant In tributors were resold. statistics, may point compilation to technical flaws in the of these we recognize type precision important of this cases detail is less picture presented. accuracy believe the than the broad We presented by adequate picture Government this case making required by 7: the determination whether this § competition substantially in the relevant tend lessen markets. *41 Kinney of shoes bined share Brown and sales of women’s (by volume) In 31 exceeded cities—some unit 20%.70 as in of measuring same those used the effect of merger the women’s line—the combined share children’s shoes their 20%; sales exceeded 6 cities Dodge City, Kansas, share exceeded In their com- 40%. bined of share the market women’s shoes was over their share of the children’s in that 57%; shoe market city was In the 7 cities which Brown’s and 49%. Kinney’s combined shares of market for women’s greatest shoes were from of (ranging 57%) each 33% the parties alone, prior captured to the had sub- merger, portions stantial (ranging those markets from 13% 34%); existing intensified this concentration. In 118 separate cities the combined shares of the market of Brown and Kinney in the sale of one the relevant lines of commerce cities, exceeded In 47 their share 5%. exceeded in all three lines. 5%
The market which companies share may control merging is one the most important factors to be con- sidered when determining probable effects the com- bination on effective competition in the relevant market.71 industry In an as fragmented as retailing, shoe the con- trol of substantial city shares in a trade have important effects on competition. If a merger achieving 70Although parties’ the sum of pre-existing shares the mar normally equal ket will their post- combined share of the immediate merger market, recognize we that this share need not remain stable Nevertheless, provide future. graphic such picture statistics a impact of the immediate of merger, and, such, provide also meaningful upon base which to probable build conclusions of the merger. future effects 71See Co., United States v. E. I. du Pont de Nemours & S.U. 586, 595-596; Spaulding A. G. & Bros. v. Comm’n, Federal Trade (C. 301 F. 2d Cir.); 612-615 3dA. United States Bethlehem v. Corp., Supp. 576, Steel (D. 168 F. 603-611 Y.). C. S. D. N. Cf. Bok, Clayton Section 7 of the Merging Act and the of Law and Eco nomics, 74 226, 279, Harv. L. Rev. 308-311 (1960). *42 to required be might we approved, now control were
5% competitors Brown’s by efforts merger future approve Congress oligopoly The shares. market seeking similar it be and would furthered be would then sought to avoid approved. previously combinations the difficult to dissolve if the com- industry, even fragmented in this Furthermore, market, a particular a share of controls but bination small chain a national by large held this share is fact that the in Testimony competition. adversely can affect retailers, based independent from record numerous market, in demonstrates experience actual their can insulate chain of stores strong, national that in competition par- vagaries of outlets from the selected can set large chains locations and that ticular renders the in an extent styles footwear to alter competitive maintain inventories. independents unable to it merger is that creates significant aspect A of third a manu- integrated chain which is large national integrated facturing outlets of operation. retail increasing companies, by eliminating wholesalers division purchases manufacturing from the the volume prices at can market their own brands enterprise, retailers. Of competing independent below those integrated or chain course, large some the results of expansion operations are beneficial to consumers. Their is not unlawful the mere fact that small inde- rendered pendent adversely compe- stores It is affected. tition, competitors, not which Act protects. But cannot fail recognize Congress’ we to pro- desire competition through mote protection viable, small, locally Congress appreciated owned businesses. higher prices might occasional costs and from result of fragmented maintenance industries and markets. It competing resolved these in considerations favor of decen- give tralization. We must effect to that decision. factors to Other be considered in evaluating the prob- of a able effects the relevant market lend addi- support tional to the District Court’s conclusion that this substantially competition. merger may lessen One such history tendency factor toward concentration As industry.72 previously out, we have pointed industry has, years, prime example shoe recent been a of such a trend. Most combinations have been between and retailers, larger pro- manufacturers as each of the sought has an capture increasing ducers number of assured Although mergers outlets its wares. these primarily have been vertical their aim and effect, they the extent that brought greater have ever numbers *43 of they retail outlets within fewer and hands, fewer have an had additional important impact on horizontal the plane. By merger in case, largest this single group of independent retail stores still large one of the manu- facturers was absorbed already into an aggre- substantial gation of more or less controlled retail outlets. aAs result of this merger, Brown into place moved second in terms of nationally retail directly stores In- owned. cluding the stores its plan, merger placed franchise under Brown’s control 1,600 almost outlets, shoe or about of the Nation’s retail “shoe stores” as defined 7.2% Bureau,73 the Census and of the total Nation’s retail 2.3% 72 swpra. 38, company’s history See note expansion A through presents mergers a picture history different economic expan than a through growth. sion expansion unilateral likely Internal is more result company’s products of increased demand for the and likely is provide more jobs plants, increased investment in more greater output. Conversely, expansion through merger likely is more to reduce available consumer providing choice while no increase industry capacity, jobs output. or reasons, among It was for these others, Congress expressed disapproval its acquisitions. of successive prevent Section was enacted to mergers even small that added to industry. concentration Rep. in an 1775, See S. Cong., No. 81st 2d Sess. 5. United States v. Cf. Jerrold Corp., Supp. Electronics 187 F. (D. Pa.) aff’d, 567; C. E. D. 365 U. S. v. United States Corp., Bethlehem Supp. Steel (D. 168 F. Y.). C. S. D. N. supra. See note avoid the mandate Con- We cannot
shoe outlets.74 industry that toward concentration gress tendencies when incipiency, particularly in their are to be curbed through giant accelerated being those tendencies are In at a time. striding a hundred cities steps across industry agree we with the in this light of the trends is appro- below that this an Government and the court at call a halt. place which to priate presented mitigating At time has no appellant the same inadequate factors, such as business failure parties prevented have resources of one of maintaining competitive position, from its nor dem- it companies small need for combination to enable onstrated meaningful competition with those to enter into more dominating the relevant markets. On the basis its us, we believe Government sustained record before District was proof. We hold that Court burden concluding merger may tend to lessen correct competition substantially men’s, in the retail sale of overwhelming major- children’s in the women’s, and shoes and their environs which both Brown ity those cities outlets. Kinney through owned or controlled sell judgment *44 Affirmed. in part no the decision took Frankfurter Mr. Justice of this case. part no the consideration
Mr. Justice White took decision of case. 74Although concerning degree of concentration and statistics Brown-Kinney stores in each in terms of controlled retail the rank product geographic have been markets would of the relevant helpful analyzing merger, side has the results of this neither more figures record, based national presented such statistics. industry. depicting are, nevertheless, rank, useful in the trends A APPENDIX *46 Source: GX 4939- 9, 214, 60-70, 1223-1227; R. RR, DDDD-1, DDDD-2, 3892-4315, DX R. 5300-5652. B APPENDIX *47 through percentages Brown owned in these columns reflect of Brown brand *The sales shoes single they exception which case outlets, Manitowoc, Wis., controlled or through regardless control, brand ownership Brown shoes outlets, all reflect sale high. marginally too therefore, are, *48 GX Source: 1228-1232; DX 9, 214, RR, 60-70, 3892-4315, R. DDDD-1, DDDD-2, R. 5300-5652. 4939-5299,
APPENDIX C *49 60-70, EE, Source: GX E. 1219-1222; DDDD-2, DX DDDD-1, E. 3892-4315, 4939-5299, 5300-5652. *50 D
APPENDIX industry Brown-Kinney percentage Comparison shoe sales selected metropolitan areas or standard counties cities, adjusted percentages (Appellant's dollar sales include sales Brown franchise oí 1954 plan stores] Wohl from DDDD-1. R. 7155-7313. GX241D, R. 2014-2365. R. Total 5300-5652, Based on dollar values area 5780-5818, dollar estimates Area dollar sales DDDD-2, NNNN, 7155-7313; from of footwear sales from offootwear DX GX241D, DDDD-1, UUUUUU, R. 2014-2365. Brown and DDDD-2, R. GX242, 4939-5299, Kinney NNNN, R. 2807-2819,and 5300-5652, owned or controlled UUUUUU, 5780-5818,7155-7313; DXUUUUUU, R. 4939-5299, outlets Clark, Mr. concurring. Justice *51 agree
I long that so as the Expediting S. C. Act, U. § is on the books we have no alternative but to accept jurisdiction in this case. The appeals declares that Act in civil in antitrust cases which the States United complainant only lie to this deprives Court. It thus parties of an intermediate of appeal and this Court benefit of consideration aby Appeals. of Court Under system our a party should be entitled to at least one appellate review, and since opportunity the sole in cases under the in Expediting Act is usually this Court we note jurisdiction. A fair consideration of requires the issues carry us to out the a function of of Appeals Court examining the whole resolving record and all questions, whether or not they great are substantial. This is a burden on the Court and expedi- seldom results in much tion, as in years this case passed where have since the 2% District Court’s decision. presents
On the merits the case question whether, of § under 7 of the Clayton Act, the acquisition by Brown of the Kinney retail stores substantially lessen com petition in shoes on a national any basis or in section country.* To 7me § is definite and clear. It prohibits acquisitions, either of stock or assets, where competition in any any line of commerce section country may be substantially lessened. The test as stated in the Report Senate bill is whether there is “a reasonable probability” competition may that be lessened. analysis
An (1) record indicates that Brown, which makes all types of is the fourth shoes, largest manufacturer in the country; (2) Kinney that likewise manufactures some shoes primarily but deals in retailing, having almost 400 that stores handle a substantial volume judgment supported
*Since the below can be theory, on this there inquire any tendency need monopoly. is no into to create a give Brown would sales; acquisition (3) that its making it the second retail 1,600 outlets, total of some Kinney’s stores Nation; (4) that largest retailer strategically placed a national and local basis are on both areas in suburban standpoint from a retail market Kinney's sup- (5) 10,000 population; towns of over (6) that Brown’s manufacturers; are small shoe pliers indi- years, in number five seven acquisitions, earlier through shoes increase the sale Brown pattern cate outlets, resulting independent acquisition manufacturers; (7) that competing small loss of sales Brown, after these outlets indicate statistics on shipments its materially has increased acquisition, *52 (8) as much as and that 50%; some them, Brown shoes on a effect the small would have direct acquisition the Kinney the previously enjoyed who manufacturers requirements market. line of commerce appear
It would that relevant the This is types. emphasized be of all would shoes plan its manufacturing activity of Brown’s nature its The Kinney operations. into integrate stores line handled thereby be competition affected would line of manufac- which is the full shoes by these stores keeping is more in by Brown. This conclusion tured at avoids with the record as I read it and the same time charge product Likewise, the splintering line. Kinney stores a national points location of the more to regional market shoes than number of markets staked municipal artificial boundaries. Brown’s business is policy integration on a national scale and its manufacturing retailing I is on that basis. would conclude, therefore, that it would be more reasonable to line define the of commerce as shoes—those sold in the ordinary retail store —and the market the entire country.
On this e., record but one can conclusion i. that follow, acquisition by Kinney Brown of the 400 stores for the purposes operation its integrating their into manufac- turing activity probability” created “reasonable that competition in the manufacture and sale of shoes on a might substantially national basis I lessened. would therefore affirm. Harlan,
Mr. Justice dissenting part and concurring in part.
I would dismiss this appeal for lack of jurisdiction, believing present posture case its prema- is turely here the judgment sought because to be reviewed yet not final. Since the Court, holds however, is properly case Ius, before consider it appropriate, after noting my dissent to this holding, express my views on the merits because issues of great impor- are tance. On that I aspect, concur in judgment Court but do not join its I opinion, go which consider to far beyond necessary what is to decide the case.
Jurisdiction. authority Court’s to entertain appeal depends of the Expediting § Act of 1903. That statute, in its
present form, provides (15 29): U. S. §C.
“In every brought any civil action district court of the United any States under of said [antitrust] Acts, wherein the United States is complainant, an appeal from the judgment of the district court final only will lie to Supreme the Court.” (Emphasis added.) passed
The Act was by a Congress which thereby “sought ... to ensure speedy disposition of suits in equity brought by the United States under the Anti- Cooperative v. States Act.” United
Trust California con- major policy This Canneries, 279 U. S. leg- meager clearly from the otherwise emerges sideration 57th No. Rep. H. Act. See R. history of the islative 1679, 1744, 1747. Rec. Cong. (1903); Cong., 2d Sess. lim- “Congress this purpose keeping was in It decree an from the appeal to of review right ited the . . . precluded . . . and of all matters disposed which Supreme Court either appeal of an to possibility the [the interlocutory de- an . . . from Appeals] Court of or the Canner- Cooperative States v. cree.” United California with its desire ies, entirely it consistent supra. For was have Congress to eliminated these cases for expedite interlocutory time-consuming delays occasioned or to this to intermediate courts Court. appeals either appeal present this at the taking jurisdiction over By if that, affirmed, even case despite the fact time, if reappear the Court’s docket would doubtless are unsat- terms of District divestiture decree Court’s to the the Court isfactory appellant Government, or to government paving way appeals is for dual all are judgments cases where intricate divestiture antitrust procedure such a is advisable involved. Whether not prac- standpoint administration or judicial from questions I tical business considerations —and think such contrary it from doubt —I believe that by no means free Expediting Act, and provisions purposes to the and given construction now the Act does violence to “final meaning of the federal accepted judgment” judicial system. appeal from which this is taken directs
The judgment dispose stock, of the share appellant “relinquish Kinney Company R. capital and assets” G. interlocking enjoins further interests between the two corporations. specify It does not how the divestiture is appellant directs out, proposed but to file “a be carried
359 plan carry to grants into effect the order”.and divestiture days following filing 30 such Government which “opposition submit suggestions thereto.” When in light considered of the District Court’s this opinion, reservation emerges as much more than a mere retention jurisdiction purpose for the ministerially executing definite and precise g., Ray e. judgment. final See, v. Law, 3 Shoemaker, French 179; Cranch 12 86, v. Wall. 98. light In of this Court’s remarks United States I. v. E. du Pont de Co., Nemours & 353 586, 607-608, U. S. District Court concluded that particular form which the divestiture order was to take was a matter which “could have far-reaching and consequences,” effects F. Supp., at 741, and that it appropriate would be the court to conduct hearings the manner in which the Kinney ought stock disposed to be of by the appellant. Hence it is not farfetched particular to assume that terms of the remedy ordered the District Court will be con- tested, and that this Court well be asked examine the details relating anticipated to the g., divestiture. E. United E. States v. I. du Pont de Nemours & Co., U. S. 316.
The exacting obligation respect to the terms antitrust decrees upon cast Expediting Court Act was upon commented In United only last Term. I. States v. E. du Pont Co., de Nemours & 316, 366 U. S. it was noted that it was the “particu- Court’s practice, larly cases of direct from the appeal a single decree of ... judge, to examine the District Court’s closely action satisfy ourselves the relief effective to redress the antitrust proved.” violation S.,U. 323; at see Club, Inc., Boxing States, International v. United In present U. case the Court and the parties nothing know more of significant “this most phase Co., United States v. United States Gypsum case,” U. S. than that Brown will generally be
360 Kinney. in interest any of divest itself to
required has accomplished not is to be separation how this Exactly knowing way no now determined, and there is yet been sat- will find the decree parties to the suit whether both will further review or both seek isfactory or whether one in Court. this separate thus created for re- opportunity the
Despite “relief” at their “merits” and kinds cases views of these in now effect judgment the holds that the stages, Court 308) finality” {ante, p. to render indicia of has “sufficient notwithstanding that the terms now, appealable it yet been have fixed. This con- ordered divestiture not upon is three discrete none considerations, clusion based in to the “final which, my opinion, serves overcome requirement Expediting Act, of the as judgment” in has hitherto been federal law.1 term understood any suggests proceedings The Court further First. “sufficiently be in District Court are inde- to conducted presented by issues pendent of, to, subordinate permit to them considered and reviewed appeal” this to be judicially to separately. exception But this created finality embracing principle of has never heretofore been permit separate this to review of Dis- utilized Court underlying on of a claim trict decision merits Court’s when the details of the relief that to are is be awarded yet present uncertain. does not present case Cohen v. possibility, did Industrial Loan Beneficial Conrad, Corp., Forgay 337 S. v. 6 U. How. delay appellate that a review would irreparable result 1 judgment disposes subject, “A final one which of the whole contemplated, gives provides the relief that all was reasonable judgment completeness, giving nothing for effect to and leaves superintend, ministerially, be done in cause save the execu City Levi, Louisa v. See, F. tion of the decree.” 2d 514. g., Co., 429; Taylor Phoenix Ins. e. Grant v. v. Board of U. Education, 2d 600. 288 F.
harm, equivalent any effect to a denial review point at issue. See 337 at S., 546; U. How., at Nor is complaint's case which prayers so relief are diversified that the resolution of one branch independent case “is by, and unaffected another of, litigation with which happens entangled.” it Radio WOW, Inc., Station Johnson, v. S. 120, 126; 326 U. see Louisiana, Carondelet Canal 362, 372-373; Co. v. S.U. *56 For gay Conrad, v. supra.
If appellant the compelled entry were await to the a particularized being granted divestiture order before appellate review, it would suffer loss; no irremediable in this indeed, merger case the was proceed allowed to pendente lite, any so delay, to the extent that it could affect the parties, would appellant. benefit the Nor can it suggested well be particular that the conditions under which the divestiture is to be executed are matters that only fortuitously are “entangled” with the merits of the complaint. Despite seemingly mandatory the tone of the judgment “divestiture” us, plain now before the fact remains that it own inoperative is its terms extent proceedings substantial until further are held in the District Court. Unlike the cases relied upon Court, therefore, up this case appeal comes on before the appellant knows exactly what it has been ordered to do or not do. This surely is not the type judgment “which litigation ends the on the merits and leaves noth- ing for the court to do but the judgment.” execute Catlin v. States, United 229, 233; 324 U. S. Covington see v. Covington First Bank, National 185 U. S. 277.
Second. significant The Court finds the “character of Ante, decree still to be entered this suit.” p. Since the order of full divestiture requires “careful, and often extended, negotiation formulation,” ante, p. 309, it is suggested a delay carrying that out its terms might render them impractical or Apart unenforceable. appro- more is policy fact consideration
from the that this Court, it to this than Congress addressed priately to that contrary directly a result to me to call appears divestiture For terms of if the by the Court. reached interrelated so difficult to formulate and are indeed so the decree unlikely that it is most conditions, market be will turn out to satis- Court by the District to be issued on Court’s Consequently, factory parties. to both case on our of this appearance a second reasoning, own a reason- possibility but imaginative an is not docket portion the divestiture stating In able likelihood. nothing’ an 'all or disputed here on “is judgment of this now, will, there- ripe is for review and that “it basis,” hardly can after, ante, 309, the foreclosed,” p. Court be will or the Government appellant mean that either if terms seeking review of divestiture from precluded unsatisfactory. Indeed, neither side it deems them propriety to the appeal has addressed itself remedy, such, independently divestiture whether the itself runs afoul question *57 Clayton Act.
Moreover, if is delay it between formulation the thought damaging, and its execution that is be decree delay reason is haz- what there to believe that this or its any brought will be if entire greater up ards the case is if separately sought here once than review from the is its have Nor divestiture decree once terms been settled? if can it maintained are now that the merits affirmed question appeal improbable. then an on the of relief is complex “negotiation and For insofar as formulation” is an probability appeal equally likely a the is factor, instance. either reason for holding
Third. Court’s final this judg- The is judgments that similar have appealable ment often past reviewed here the with no issue ever having been regarding jurisdiction. raised But the been cases are
363 legion given which have echoed answer Chief Jus- tice a that was bound Marshall contention Court the merits jurisdictional point by its consideration on gone jurisdictional question case in which had question unnoticed: “No in that as made, case, was silentio, sub jurisdiction. passed It and the court does not consider that case.” United States itself bound More, States, 3 see Snow v. United v. 159, 172; Cranch Burke, Cross v. Louis- 346, 118 354; U. S. 82, 87; 146 U. S. Knott, ville Trust Co. Nexo v. Okla- 225, v. 236; U. S. homa, United ex rel. States Arant v. 256; U. Lane, Mo S. 166, 170; Stainback v. Hock Ke Lok U. Po, L. 379; United States v. A. Tucker U. S. Lines,
Truck U. S. 38. The fact the Court may, past, have finality overlooked the lack of some of judgments that came here for in sim- review posture ilar to this one does not now it from free requirements of Expediting Act. Nor fact does the that none of the cases reviewed in what now appears to have been an interlocutory stage again was ever appealed justify disregard the statute. This history might point desirability to the of an Expediting amendment to the Act, but it does not make into a “final judgment” a decree which reserves future determination the terms of the precise relief to be afforded. suggests Court that a “pragmatic approach” to
finality is called for in light of policies of the Federal Rules of Civil Procedure, which direct the “just, speedy, and inexpensive Ante, determination of every action.” p. 306. But this misconceives the nature issue presented. Whether judgment is final and appeal- *58 able is question not a turning on the Federal Rules of Civil or on any Procedure balance of policies by this Court. Congress has seen fit to Court, make this for reasons which are less than obvious, sole appellate the tribunal for civil antitrust suits by instituted the United limit this Court’s to has chosen it doing, In so
States. first the Whether “final power judgments.” to reviewing in when made determinations, legislative of these rather than rule the Court was right of to this as appeal in Court’s expansion survive should exception, Judiciary to the development, pursuant and the docket discretionary certiorari of of Court’s Act consid- given adequate been may never have jurisdiction, Congress.2 by eration certainly there mounting dockets period of
At this this Court relieving in of be said favor much to trial voluminous searching through task of often arduous single dis- a whether testimony and to determine exhibits legal supportable. are findings of fact judge’s trict so novel longer no civil antitrust cases are issues most for appropriate especially as to unsettled make them Court, compared by this consideration appellate initial law. areas of federal variety with those a other it well be doubted And under modern conditions truly by direct of such cases this Court whether review underlay orig- purpose expedition serves the which Expediting predict inal Act. I venture to passage a lead reappraisal problem critical would also, “expedition” over-all, the conclusion that satisfactory appellate more review would be achieved example, report accompanied For which the 1925 Act to the appeal floor of the Senate said of the cases in which direct from a known, Supreme District Court to the Court was retained: “As is well which, present law, may be there are certain cases under taken directly Supreme from the district Without court Court. entering description cases, into four it is sufficient of these classes say existing are be heard that under the law these cases which must judges, judge.” Rep. three one of whom No. is a circuit (1924). (Emphasis added.) Cong., generaliza This 68th 1st Sess. 3 obviously provided Expediting tion was erroneous since the Act government cases decided direct review this Court antitrust judge. single district *59 appellate returned primary jurisdiction these cases were leaving to the of Appeals, Court this Court free to power respect exercise its certiorari to particular deserving cases deemed things further review. As now stand government this Court must deal with all civil anti- cases, unnecessary trust often at expenditure either of its own inadequate time or at the risk of appellate if a summary review disposition appeal of the is made. Further, jurisdictional change such would bid fair to satisfy arguments the very “policy” suggested by the Court case. For the of Appeals, Courts whose dockets are generally less crowded than those of this Court, would then be authorized to hear appeals from orders such as the one here in question. Since this order grants an injunction against interlocking interests between Brown and Kinney, it would come within 28 U. C. § 1292 (a)(1) were this not a case “where a direct review may be had in the Supreme Court.” long,
So however, as the present Expediting Act con- tinues to Congress commend itself to this Court is bound by its limitations, since for already given the reasons the decree appealed cannot, my opinion, be properly considered a “final I judgment,” think appeal, at this juncture, should have been dismissed.
The Merits. Since the Court nonetheless holds that the judgment is appealable in its present form, and since the underlying questions are far-reaching, I a duty consider it express my view on the merits. On this aspect of the case I join disposition which judgment affirms the of the District Court, though I am not prepared to subscribe to all that or implied said in the opinion of this Court. question presented by this case can be stated in narrow and concise terms: Are the District Court’s con- clusions that the effect of the Brown-Kinney merger may Clayton Act, “substan-
be, language § in the monop- or to to create tend competition, tially to lessen *60 any section of the in of commerce oly” “any in line indefinite In other does the country” words, sustainable? pur- congressional in 7 manifest a language general § and Brown con- of this sort? proscribe a combination to pose District Court finding merger illegal the that tends of com- are in fact “lines together what discrete lumped “section appropriate an failed to define merce,” that it viewed properly when the is country,” that case caused may that be any lessening competition I below, stated For reasons “substantial.” merger not untenable. of these contentions is that each think I found are, think, dispositive considerations effects merger, is, the of the that effects the “vertical” manu- combining from Brown’s be foreseen reasonably to my In Kinney’s facturing retail outlets. facilities such effects District Court’s conclusions to opinion the record, and suffice to condemn supported are regard might what be deemed § under without merger “horizontal” effects of the transaction. to be the hori- considering both the 1. “Line Commerce.” —In aspects the District and vertical of this merger, zontal analyzed the probable impact competition Court shoes, of three relevant “lines of commerce” —men’s terms rejected It Brown’s women’s and children’s shoes. shoes, construction or of different claim that shoes of different constituted distinct lines of commerce. What- price range might merit there be to Brown’s contention ever narrowly should be more defined when product market vantage point of the ultimate con- it is viewed from may his (whose pocketbook, example, limit sumer price range), is surely to a definite the same not purchase Although manufacturer. con- record true shoe tending prove manufacturing that a shoe evidence tains plant may managed be economically more if produc- its tion is only limited to type grade one shoe, the his- tory of Brown’s own factories reveals a single plant be used successive or years, even at the same time, for the varying manufacture of grades of shoes and may, without undue difficulty, shifted from the produc- tion of children’s or shoes to men’s women’s shoes, vice versa.
Because of this flexibility of manufacture, product respect market with between man- Brown’s ufacturing facilities and Kinney’s might retail outlets accurately more be defined as the complete wearing- apparel market, combining shoe in one the three com- ponents which the District Court separate treated as lines *61 of commerce. Such an taking into analysis, account the interchangeability of production, would seem a more gauge realistic of the possible anticompetitive effects the manufacturing industry shoe a merger between shoe manufacturer and a retailer than the District Court’s compartmentalization buying of the public. terms For if a manufacturer of women’s shoes able, albeit at some plant his expense, production convert to the of men’s shoes, possibility the of such a should be shift considered in deciding whether the market for either men’s shoes or women’s shoes can monopolized be or whether par- merger ticular substantially lessens competition among product. manufacturers of either See Economic Adelman, Aspects of the Bethlehem Opinion, 45 Va. L. Rev. 684, 689-691; cf. United States Co., v. Columbia Steel but see United 495, 510-511; U. S. States Bethlehem v. Corp.,
Steel F. Supp. 576, speaks § The fact of the lessening that competition any “in line commerce” (emphasis added) does not, course, mean that product the market on which the effect merger is considered be narrowly defined as define it.3 chooses Government broadly as the
or as ultimately Court, District with duty rests appropriate is the what Court, to determine consid economic of the relevant appraisal on an market “a necessary market is product Discovering erations. Act,” Clayton violation of the of a finding ato predicate Co., de Nemours & E. I. du Pont States v. United statutory language of the and the breadth 586, 593, U. S. necessary of this for an abdication no license provides demon flexibility production light In function. I think the case, in this facts undisputed by strated aspects of which the vertical line of commerce wearing- judged is the merger should be Brown-Kinney generally. industry shoe apparel Country.” merger involves 2. “Section of —This shoes purchase which sell and nationwide concerns that it throughout country, so localities various market for geographical the most suitable appears alleged anticompetitive effects of the ver- appraising the finding This is the Nation as a whole. tical combination (limited aspect of to the vertical of the District Court merger) properly is not contested Brown and is is in order, however. accepted here. One caveat In on the judging anticompetitive effect recognized it market, any national must decline *62 might that a uniform competition in result need not have if throughout country. effect the entire It is sufficient v. As the noted in United States E. du Pont de Court Nemours I. Co., 377, 393, monopolistic “one can we & 351 U. S. theorize that have commodity competition every in nonstandardized with each manu production having power price the and over of his own facturer permitted product.” If were "line the Government choose its narrowly presumably it could draw the market in a of commerce” power monopoly vel non that turns on existence case broadly question parties merger when the is whether both draw it a competitive market. are within the same proves the record that as a merger competi- result generally lessened, tion will though its most serious impact be felt certain localities. “Substantially to Lessen re- Competition.” —The
maining quéstion is the merger whether of Brown’s manufacturing Kinney’s facilities with retail outlets . “may substantially . . competition” lessen or “tend to create a monopoly” in the nationwide in which market shoe manufacturers sell shoe findings retailers. The of the District Court, supported the evidence, when taken together with undisputed appearing facts justify record, the conclusion substantial lessening competition in the relevant market “reasonable probability.” Rep. No. 81st 2d Sess. 6 Cong., (1950).
On the date Kinney’s retail stores num- bered 352, figure and this had to more increased than 400 Nearly time trial. all men’s, these stores sell women’s, and children’s shoes and are located down- town areas of 10,000 cities at least population. In 116 of these cities, Kinney’s pairage combined sale of shoes for 1955 of all city during shoes sold in the exceeded 10% year. Its total retail during year shoe sales con- stituted of the national total terms of'dollar vol- 1.2% ume and in terms of pairage. shoes, only Of these 1.6% were supplied by the Kinney manufacturing plants, 20% coming remainder from some other sources.4 Prior to Kinney bought had none its outside- source shoes from Brown, and its records for 1955 reveal year’s purchases that the were made from a diverse num- ber of independent shoe manufacturers. There were 66 suppliers (including Brown) in year each of whose Kinney total sales to exceeded $50,000, only three of Kinney’s The schedule in the record of suppliers outside shoe year the calendar vendors, 1955 lists 319 but 122 of supplied these $1,000 goods year. less than during worth of *63 Shoe Georgia Co., and (Brown, Endicott-Johnson
these output whose companies Co.) large Manufacturing were nonrubber productive the 25 most among them placed Consequently, in States. United shoe manufacturers purchaser Kinney a substantial it was appears manu- independent shoe by many small produced shoes In the record country. fact, throughout facturers suppliers, Kinney’s affirmatively at least five of shows that York, one in of New are located the State three of which relied in each Hampshire, in New one Pennsylvania, its total than upon Kinney more purchase to 40% in 1955. production production shoe Brown’s
That between to foreclose Kinney’s retail outlets will tend plants manufac- smaller shoe large some of the which market hardly open seems Kinney found sales turers following by the supported This doubt. conclusion (1) In record: emerge from the indisputably facts which of a others, purchase in many as industry, the shoe increased by a manufacturer results an retail chain retail shoes to the purchasing manufacturer’s flow of it find independent store. Hence shoe manufacturers retail chain acquired sell their shoes an more difficult to of Brown’s independent (2) than to an one. The result in- was, chains each acquisition earlier of two retail in the Brown quantity increase stance, substantial independent chains.5 purchases previously shoe Company, oper purchased Shoe which In 1951 Brown the Wohl department throughout departments stores shoe ated leased supplied acquisition Wohl, country. Brown had Before its 12.8% requirements; supplying it was of Wohl’s shoe 33.6% needs. Wohl’s partial purchased a small chain of interest in In Brown Angeles Wetherby-Kayser. Before in Los known retail stores Wetherby’s shoes; supplied within purchase, Brown had this 10.4% year percentage increased to almost one 50%.
371 (3) The history many of plants of proves Brown’s they may readily be adapted the production of the grade style and of customarily shoes in Kinney sold stores.6 (4) Although supplied Brown Kinney’s require- none of ments before merger, was supplying it almost 8% requirements of these years just two thereafter. dollar Kinney’s volume of outside purchases shoe
in 1955 was between 16 and million dollars, and this amount had to 19.4 by increased million 1957. While Kinney making only was about of the total retail 1.2% dollar sales percentage United States hardly can be deemed an accurate reflection its propor- of tion purchases of nationwide shoe since retailers figure retail-sales a computation is based on that includes all retail stores, they whether or vertically not were inte- grated or otherwise In affiliated. terms of available mar- independent kets for shoe manufacturers, percentage of Kinney’s purchases substantially must have been larger though precise figure is unavailable on the — record before us.7
If the controlling test as it were, be under the similar language § of of Clayton one of Act, "quanti- addition, appears shortly In it from the record that after the merger effected, Kinney was policy selling abandoned its earlier only Kinney-brand (80% up” shoes of which were “made for it manufacturers) began its selling a considerable number of Brown’s Along branded and advertised shoes. with the indications Kinney beginning record that higher-priced was also to sell shoes in outlets, its suburban suggests supply this that Brown could much Kinney’s only capital needs with a minimal additional investment. gaps The existence of such in the record make a fair assessment merger effects this more difficult than it would otherwise be. why One of the I aspect reasons not would consider the horizontal merger my supplied by conviction that the data the Govern entirely inadequate proper ment is impact evaluation of the merger competition. of the horizontal Co. v. Oil United Standard substantiality,” compare
tative v. Nash- Electric Co. Tampa States, 337 U. S. Co., ville probable foreclosure 365 U. S. Coal share this substantial manufacturers from independent enough to ren- retail shoe market would the available under § unlawful merger of this aspect the vertical der injurious have an be shown to since the can But among manufacturers among competition effect on the Stand- unnecessary whether *65 it is to consider retailers, ard Stations formula applicable. is manufac- between this shoe affiliation vertical surely as not, is organization retail primarily and a turer in Standard thought tie the contractual the dissenters rather waging competition” Stations “a for be, device S., 337 U. competition.” suppressing than “a for device merger to is reason this Brown able at 323. Since for a independent captive into market purchaser turn an for inevitably diminishes the available market its it shoes re- compete. If Brown shoes which manufacturers shoe others, produced by place which had been previously those no have choice but displaced manufacturers Since go out of business. enter some other market including competed had Brown, all manufacturers, unaffiliated, Brown’s when was Kinney’s patronage it a merger Kinney potentially with withdraws share independent previously the market available to shoe manufacturers. a stand- may merger, judged from vertical only
Not compete Brown; who with it point, affect manufacturers retailing competition may adversely also affect on the a such Brown behind large level. With manufacturer as great a Kinney competitive chain would have it, advantage retail vies over the stores which it for con- outlet, a patronage. sumer As manufacturer-owned store would at Kinney doubtless able to sell its shoes a independent profit margin competi- lower and outlast an prevent tor. The effectively would also the retail competitor dealing might from in Brown since these shoes, Kinney at prices be offered lower stores than elsewhere.8 if anticompetitive Brown contends even these effects are probable, they upon insignificant touch an market not, therefore, share and are “substantial” meaning within the Tampa of 7. Our decision in Elec- § Co., tric Co. v. Nashville Coal 365 U. S. is cited as authority proposition for the that a foreclosure about of the relevant necessarily market insubstantial. 1% But opinion Tampa Electric carefully noted that “substantiality given case” depends variety on a factors. S., 365 U. at 329. Two of the considerations that were mentioned were “the strength relative parties” probable and “the immediate and future effects which pre-emption of that share of the might market have on competition effective therein.” Ibid. When, here, the foreclosure what may be considered small percentage of purchases retailers’ be caused *66 of the country’s combination largest third seller of shoes largest country’s the family-style shoe chain, store and when the volume the purchases latter’s from inde- pendent manufacturers parts various country the is large enough to render it probable that these suppliers, if displaced, will have to by fall the wayside, it cannot, in my opinion, be said that the effect on industry the shoe is or “remote” “insubstantial.”
I reach this result considering without the findings of the District respecting Court the trend in the shoe indus- try towards “oligopoly” and vertical integration. The change Kinney policy whereby it now carries shoes bear ing (see the Brown 6, supra) brand note tends make retailer competition still more difficult. any me convincing fall short in the record
statistics judg- Court’s I consider the District trend exists.9 such findings. these apart from ment warranted the Court’s decision that bowing to the Accordingly, us, join judgment I before properly case is affirmance. or quantity owned numbers, of retail outlets of bare In terms undoubtedly by major has been increas manufacturers
controlled incomplete in the ing But much of the data record since 1947. varying Thus, regard while standards. in this because it is based percentage national argues that the increase Government owning outlets from by 101 more sales shoe chains retail 20.9% “oligopoly,” the proves the trend toward in 1954 in 1948 25.5% (includ upon by retail sales all outlets appellant’s statistics, founded clothing ing stores), show that retail general sales merchandise by of national dollar of 11 or more stood at constant chains 19.5% Moreover, apparent decline in volume in both 1948 and country’s supplied shoe needs proportional share of the any largest and 1955 belies claim that between 1947 manufacturers largest becoming “oligopolistic.” four Whereas production is shoe needs in supplied of the Nation’s manufacturers 25.9% largest supplied 36.2%, largest supplied 31.4%, eight and the 22%, 27%, equivalent percentages were 32.5%. purchases suggestion earlier no in the record as whether There is reduced the number of inde- shoe manufacturers of retail chains *67 competition. harmed Conse- or otherwise pendent manufacturers been does establish that manufacturers have quently, while the record entirely outlets, it is silent on increasing of their retail the number expansion. effects of this vertical