Appellants, plaintiffs below, seek a trial on the merits of their class complaint against appellee, The Kroger Company, for an alleged attempt to monopolize the milk and dairy business in the St. Louis, Mo., Trade Territory in violation of § 2 of the Sherman AntiTrust Act, 15 U.S.C. § 2. The District Court 1 dismissed the complaint on motion for failure to state a claim on which relief could be granted.
The plaintiffs, Highland Dairy, Inc., Reiss Dairy, Inc., and Sunny Hill Farms Dairy Company, Inc., are engaged in the buying and processing of raw milk and distributing and processing of fluid milk and other dairy products at wholesale and retail in the St. Louis, Mo., Trade Territory, a geographical area denominated by them as an area .within 250 miles more or less of St. Louis, Missouri. Highland Dairy has its principal office at Springfield, Missouri; Reiss Dairy at Sikeston, Missouri; and Sunny Hill Farms Dairy at Cape Girardeau, Missouri. Defendant, The Kroger Company, operates a national chain of retail' grocery stores approximately 1500 in number located in 30 states; with its principal office at Cincinnati, Ohio. It is alleged to be the second largest retail food chain in the United States and has net annual sales exceeding 2.6 billion dollars. In addition to the retail stores, Kroger operates other plants and businesses, bakeries, dairies, a coffee roasting plant and various food and non-edible product enterprises that complement and are allied to its overall operation as a food chain. It has more than 200 retail stores in the St. Louis Trade Territory (located in Missouri, lo.wa, Illinois, Kentucky, Tennessee, and Arkansas) in which it sells approximately 8 per cent of the processed fluid milk and other dairy products at the retail level. The plaintiffs-appellants will be referred to in this opinion as “plaintiffs” and the defendant-appellee as either “defendant” or “Kroger.”
Plaintiffs’ complaint seeks to enjoin Kroger from building a dairy processing plant in the St. Louis Trade area, having a capacity to supply more than 20 per cent of the total consumers’ demand, on the basis that such plant would give Kroger the power to impose unreasonable restrictions on the sale and distribution of fluid milk and other dairy products in interstate trade and would constitute an attempt to monopolize in violation of § 2 of the Sherman Anti-Trust Act.
This is not a case of a conspiracy, combination or merger to violate §§ 1 and 2 of the Sherman Act, nor is it one based on the commission of acts, lawful or otherwise, that place an unreasonable restriction on competition or lessen competition; but represents an attempt to *971 keep Kroger out of the dairy field on the charge in the complaint that the entry into this field constitutes an attempt to monopolize under § 2 of the Act. The gist of the complaint is that the building of the plant with the specific intent to monopolize constitutes a proscribed attempt to monopolize under § 2. 2
Plaintiffs’ position is that the purpose of §§ 1 and 2 of the Sherman Anti-Trust Act is to prevent monopolistic restrictions on competition and that every act or transaction, regardless of form, that has for its purpose the restriction of competition is prohibited under the Act. They recognize the teaching of Standard Oil Company of New Jersey v. United States,
The essential doctrines of Standard Oil have been adhered to by the Court in succeeding cases. Concededly, the purpose of the Sherman Act is to preserve a system of free competition. This means no unreasonable or undue restraints are to be imposed on our competitive economic system so as to hinder or retard the free interplay of vital competition in the marketplace.- The public is to be protected from the evils incident to monopolistic practices.
Plaintiffs admit that under § 2 the attempt to monopolize must be “likely to accomplish” monopolization, Kansas City Star Company v. United States,
Kroger maintains the complaint on its face is insufficient to show any possibility of a finding of “dangerous probability of monopoly” which is a prerequisite to an illegal attempt to monopolize; that Kroger’s alleged 20 per cent of the market is far short of the minimum neees *972 sary to achieve monopoly; that Kroger under the admitted facts will not have the capacity to raise prices or exclude competition at will; that the complaint lacks the requisite allegations of any conduct establishing a specific intent to monopolize; that Kroger’s internal expansion is sanctioned by the anti-trust laws; and that the plaintiffs seek to use the anti-trust laws to freeze market shares and to insulate them from the impact of competition — a subversion of the anti-trust laws.
The District Court viewed the complaint as insufficient, pointing out that no case has ever condemned internal expansion by a food retailer to provide for its own requirements; that the fact the market is being adequately served by the plaintiffs as a class is immaterial; that the mere building of the plant, even with the intent of using milk sales as a “loss leader,” does not show a present intent of an attempt to monopolize; and concluded that § 2 of the Sherman Act does not prohibit internal expansion of a large food retailer to supply its own 8 per cent share of the market and an additional 12 per cent of the wholesale market. The District Court reasoned at 969 of 274 F.Supp.: “* * * [T]he present intent to destroy competition or build monopoly is essential to a finding of an ‘attempt to monopolize’ (Times-Picayune Pub. Co. v. United States,
“* * * [T]he mere construction of the processing plant by Kroger will not constitute a violation of Section 2 of the Sherman Antitrust Act. It may well be (and as to this we express no opinion) that Kroger’s conduct and acts subsequent to the completion of the plant will be such as to entitle plaintiffs to relief, either injunctive or otherwise.”
At the threshold of this review we are confronted with the contention that a motion to dismiss is not a proper procedure to test the merits of plaintiffs’ case as the plaintiffs have not had opportunity to elaborate and adduce evidence in support of their allegations. We likewise feel that a motion to dismiss and even a summary judgment proceeding do not generally afford a satisfactory vehicle for disposing of complex issues. The United States Supreme Court in First National Bank of Arizona v. Cities Service Co.,
“Thus neither precedent nor logic supports petitioner’s contention that the evidence to which he points is significantly probative of conspiracy and therefore, we hold that on the facts as shown summary judgment was correctly awarded to respondent.”
and rejected the contention that Rule 56(e), Fed.R.Civ.P., is not applicable to complex anti-trust cases and that plaintiffs should have a hearing on the merits of their complaint either before the court or a jury, with this pertinent observation, at 290, at 1593 of 88 S.Ct.:
“While we recognize the importance of preserving litigants’ rights to a trial on their claims, we are not prepared to extend those rights to the point of requiring that anyone who files an antitrust complaint setting forth a valid cause of action be entitled to a full-dress trial notwithstanding the absence of any significant probative evidence tending to support the complaint.”
Although we realize that a summary judgment proceeding presents different considerations than does a motion to dismiss, we think the same rationale can be applied in disposing of litigation on a motion to dismiss where well-pleaded allegations are not sufficient to base a claim upon which relief can be granted. And there is nothing in the nature of complex anti-trust litigation that would make inapplicable this procedure.
*973 A motion to dismiss for failure to state a cause of action can serve a useful purpose in disposing of legal issues with a minimum of time and expense to the interested parties and is applicable to an anti-trust complaint. In testing the legal sufficiency of the complaint the well-pleaded allegations are taken as admitted but conclusions of law and unreasonable inferences or unwarranted deductions of fact are not admitted. See, 2A Moore’s Federal Practice § 12.08, p. 2244.
The well-pleaded allegations are that Kroger is a large national chain possessing great assets and presently controlling 8 per cent of the market in question, that it intends to (and did) 4 build a processing plant for milk and dairy products capable of supplying 20 per cent of that market which includes its captive market of 8 per cent, that it uses milk as a “loss leader”, that existing processors have a capacity to and are effectively serving the needs of the territory, present and future, that the dairy facility will endow Kroger with the power to lower prices but not to raise prices, that it may attract customers by the use of milk as a “loss leader” and sell to these customers other items at higher prices, and that plaintiffs would be adversely affected by the entry of Kroger in the wholesale dairy market.
Accepting plaintiffs’ premise that the Sherman Act prohibits any kind of act or practice that unduly restrains trade or monopolizes, we do not think any case has gone as far as the plaintiffs seek to journey in this one of protecting their market shares from competition of an internal expansion of Kroger into the St. Louis, Mo., Trade Territory; nor do we think the well-pleaded facts allege an attempt to monopolize in violation of § 2 of the Sherman Act.
Plaintiffs cite many cases dealing with a monopolization of the market and cases of unfair or predatory practices that unduly restrict competition. United States of America v. American Tobacco Company,
*974
An unlawful attempt to monopolize presupposes a “dangerous probability” of monopolization if the attempt is successful. American Tobacco Co. v. United States,
The United States Supreme Court in United States v. United States Steel Corporation,
We need not decide in this case what percentage less than 50 per cent alone might produce a monopoly under certain circumstances peculiar to the market concerned, but we do think a 20 per cent market share under the circumstances of this case is competitively inadequate to sustain a monopoly and thus permit price dictation and the ability to exclude competition. In Kansas City Star, supra, this Court quoting American Tobacco Co. v. United States, 328
*975
U.S. at 811,
Plaintiffs’ complaint is not based on unfair trade practices or acts unduly restrictive of competition but on the subjective intent of Kroger to attempt a monopolization of the market in the dairy field. The complaint fails to allege acts or conduct which would show the requisite intent. A mere allegation of an attempt to monopolize is a conclusion of law and about all anyone could say is that Kroger would have the power potentially to engage in some unfair and predatory practices in this field, but there is no showing of unfair or predatory practices. And any future operations are subject to the proscription of federal and state laws that condemn monopolies and unfair and predatory trade practices that unduly restrict competition.
The specific intent necessary to support an attempted monopolization under § 2 must be shown by conduct or acts from which a wrongful intent can be inferred. Union Leader Corporation v. Newspapers of New England, Inc.,
As a general proposition internal expansion is preferable to growth by
*976
merger or purchase. As viewed in United States v. Philadelphia National Bank,
“A company’s history of expansion through mergers presents a different economic picture than a history of expansion through unilateral growth. Internal expansion is more likely to be the result of increased demand for the company's products and is more likely to provide increased investment in plants, more jobs and greater output. Conversely, expansion through merger is more likely to reduce available consumer choice while providing no increase in industry capacity, jobs or output.”
The only case condemning internal expansion is United States v. Aluminum Co. of America,
This brings us to the line of cases cited by plaintiffs holding that certain acts in the nature of unfair trade practices violated the Sherman Act. Kansas City Star Company v. United States, supra, condemned a tie-in advertising practice and a blacklisting of firms that patronized a competitor. Klor’s, Inc. v. Broadway-Hale Stores, Inc.,
In the case at bar there are no acts or conduct alleged which the plaintiffs would have the court condemn except the building of the dairy facility. This in itself is not an unfair competitive act or predatory trade practice. Plaintiffs contend that Kroger would ac *977 quire a strategic aspect of the market with its dairy facility, but this appears too speculative and not warranted under the facts alleged in the complaint and is thus insufficient to prohibit Kroger’s entry into this field by way of internal expansion.
In dealing with § 7 of the Clayton Act (15 U.S.C. § 18), the United States Supreme Court in Brown Shoe Co., Inc. v. United States,
Judgment affirmed.
Notes
. The District Court’s Memorandum Opinion by The Honorable John K. Regan is reported at
. Section 2 of the Sherman Anti-Trust Act, 15 U.S.C. § 2 reads:
“Every person who shall monopolize, or attempt to monopolize, or combine or conspire with any other person or persons, to monopolize any part of the trade or commerce among the several States, * * * shall be deemed guilty of a misdemeanor * *
. While a literal reading of the Sherman Act would condemn every contract or act that restricts the competitive operation of others, the Court recognized the necessity of applying the “rule of reason” in its interpretation of the statute, holding that only contracts or acts resulting in unreasonable or “undue” restraint of trade are prohibited.
Standard Oil,
supra at 62 of 221 Ü.S.,
. While plaintiffs sought an injunction to enjoin Kroger from building the dairy facility they did not ask for a restraining order nor post a bond for a preliminary injunction. Now, that which they sought to enjoin having already been built, plaintiffs admit that ■ their prayer should be changed to a request that Kroger be not allowed to attempt to monopolize the milk business.
. See, Report of Attorney General’s National Committee to Study the Antitrust Laws (1955) at 49.
. The nine cases considered are:
Per Cent Market Share
United States of America v. American Tobacco Company,221 U.S. 106 , 162,31 S.Ct. 632 ,55 L.Ed. 663 (1911) 86%
Standard Oil Company of New Jersey v. United States,221 U.S. 1 , 33,31 S.Ct. 502 ,55 L.Ed. 619 (1911) 90%
United States v. Eastman Kodak Co.,226 F. 62 , 79 (W.D.N.Y.1915), appeal dismissed,255 U.S. 578 ,41 S.Ct. 321 ,65 L.Ed. 795 75-80%
United States v. Pullman Co.,50 F.Supp. 123 , 135 (E.D.Pa. 1943), aff’d per curiam,330 U.S. 806 ,67 S.Ct. 1078 ,91 L.Ed. 1263 100%
United States v. Aluminum Co. of America,148 F.2d 416 , 425 (2 Cir. 1945) 90%
United States v. Paramount Pictures, Inc.,334 U.S. 131 , 167,68 S.Ct. 915 ,92 L.Ed. 1260 (1948) 70%
United States v. United Shoe Machinery Corp.,110 F.Supp. 295 , 343 (D.Mass.1953), aff’d per curiam,347 U.S. 521 ,74 S.Ct. 699 ,98 L.Ed. 910 75%
International Boxing Club of New York, Inc. v. United States,358 U.S. 242 , 249,79 S.Ct. 245 ,3 L.Ed.2d 270 (1959) 81%
United States v. Grinnell Corp.,384 U.S. 563 , 567,86 S.Ct. 1698 ,16 L.Ed.2d 778 (1966) 87%
