CARGILL, INC. AND EXCEL CORPORATION, PETITIONERS V. MONFORT OF
COLORADO, INC.

   No. 85-473

   In the Supreme Court of the United States

   October Term, 1985

   On writ of certiorari to the United States Court of Appeals for the
Tenth Circuit

   Brief for the United States and the Federal Trade Commission as
amici curiae supporting petitioners

            TABLE OF CONTENTS
   Questions Presented
   Interest of the United States
   Statement
   Summary of argument
   Argument:
      I. The court of appeals erred in concluding that responents
         had standing to seek injunctive relief under Section 16 of
         the Clayton Act
         A. A private plaintiff seeking relief under the antitrust
            laws must allege that it will suffer antitrust injury
         B. Respondent did not allege that it would suffer antitrust
            injury
         C. The possibility of future predatory pricing should not
            afford standing to a competitor to challenge an
acquisition
     II. The lower courts erred in determining that the
         acquisition would violate Section 7 of the Clayton Act
         A. A "deep pocket" parent does not increase the likelihood
            of predatory pricing
         B. The lower courts failed to evaluate properly the
            possibility of market entry
   Conclusion

                          QUESTIONS PRESENTED

   1. Whether the court of appeals properly applied the test for
"antitrust injury" established in Brunswick Corp. v. Pueblo
Bowl-O-Mat, Inc., 429 U.S. 477 (1977), when it concluded that the
respondent had standing under Sections 7 and 16 of the Clayton Act, 15
U.S.C. 18 and 26, to seek to enjoin an acquisition by one of its
competitors.

   2. Whether the court of appeals properly analyzed the likely
anticompetitive effects of the acquisition.

                     INTEREST OF THE UNITED STATES

   The Department of Justice and the Federal Trade Commission enforce
the federal antitrust laws, including Section 7 of the Clayton Act, 15
U.S.C. 18, which prohibits anticompetitive acquisitions.  In light of
these enforcement responsibilities, the United States has a
substantial interest in ensuring that private efforts to supplement
public antitrust enforcement with respect to mergers and acquisitions
are governed by legal standards that are likely to enhance, rather
than to frustrate, the competitive policies underlying the antitrust
laws.

                               STATEMENT

   1. Petitioners are Cargill, Inc. (Cargill), a large food products
company, and Cargill's wholly owned subsidiary Excel Corporation
(Excel) (Pet. App. 26a).  In June 1983, Excel agreed to buy the
Spencer Beef Division of Land O'Lakes, Inc. (Spencer), an agricultural
cooperative that owned three beef-packing and fabrication facilities
(id. at 26a-27a).  At the time of the agreement, Excel was the second
largest integrated beef packer and fabricator in the United States
while, in terms of total productive capacity, Spencer was the third
largest producer (id. at 2a).  /1/ Excel's acquisition of Spencer's
productive capacity would have left it the second largest integrated
producer in the market found by the district court.  Excel and Spencer
notified the government of the proposed acquisition pursuant to
Section 7A of the Clayton Act, 15 U.S.C. 18a.  The Antitrust Division
of the Department of Justice opened an investigation.

   While that investigation was pending, respondent Monfort of
Colorado, Inc. (Monfort), /2/ another large beef packer, filed a
federal antitrust suit in the United States District Court for the
District of Colorado seeking to enjoin the acquisition on the ground
that it would violate Section 7 of the Clayton Act by lessening
competition in the purchase of fed cattle /3/ in certain regional
markets and in the sale of boxed beef nationwide (Pet. App. 27a).  /4/
The complaint alleged that the increased concentration in these
markets would impair Monfort's ability to purchase fed cattle and to
compete with Excel and the industry leader, IBP, Inc. (IBP), a
subsidiary of Occidental Petroleum Corporation (ibid.).  /5/
Thereafter, the Department of Justice closed its investigation and
advised the petitioner that it did not intend to challenge the
acquisition.  /6/

   2.a. At a consolidated preliminary injunction hearing and trial on
the merits in the private action, Monfort argued that it could be
injured because the acquisition would lead to a period of heightened
price competition between Excel and IBP (Pet. App. 31a).
Specifically, Monfort contended that aggressive competition between
Excel and IBP in the boxed beef market would subject Monfort and other
producers to a "price-cost squeeze" as the price of boxed beef
decreased and the cost of fed-cattle increased.  Monfort maintained
that this "squeeze" would tend to reduce profit margins for all beef
packers and that smaller firms lacking the "vast financial resources"
of Excel and IBP would be driven from the market.  Id. at 32a-33a.
Monfort did not allege in its complaint, or argue at trial, that this
"price-cost squeeze" would occur as a result of collusion between
Excel and IBP.  /7/ In fact, Monfort acknowledged that the boxed beef
industry was very competitive and that a "price-cost squeeze" had
existed throughout the industry for the last 20 years" (Tr. 132).  /8/
Monfort, however, contended that, after Excel and IBP had increased
their market shares, the prices charged customers for boxed beef would
rise, while the prices paid for fed cattle would fall (Pet. App.
32a-33a).  Monfort did not claim that this would occur as a result of
predatory practices by, or collusion between, IBP and Excel.  /9/

   Excel responded that Monfort lacked standing because the only
injury it could suffer as a result of the acquisition -- being driven
from the market as a result of an accentuated "price-cost squeeze" --
was, on Monfort's own allegation, injury that would flow from
increased competition between IBP and Excel.  Excel also contested
Monfort's claim that the acquisition violated Section 7 of the Clayton
Act (Pet. App. 33a).

   b. The district court permanently enjoined Excel from acquiring
Spencer (Pet. App. 23a-73a).  In finding that Monfort had standing to
challenge the acquisition, the district court considered it irrelevant
that Monfort did not "contend that predatory practices would be
engaged in by Excel or IBP * * * (or) assert that Excel and IBP would
act in collusion with each other in an effort to drive others out of
the market" (id. at 32a, 71a).  The court found that Monfort had
satisfied the tests for standing this Court set forth in Associated
General Contractors of California, Inc. v. California State Council,
459 U.S. 519 (1983), because "the harm alleged by Monfort has a causal
connection" and "is directly related to" the planned acquisition by
Excel.  The district court reasoned that the injury Monfort alleged
would occur only if one of the two industry leaders, Excel or IBP,
acquired Spencer (Pet. App. 34a) and concluded that the injury to
Monfort was "of the type that the antitrust laws were intended to
prevent" (id. at 38a).

   In concluding that Monfort had standing, the court noted that, at
least in the short-term, neither buyers of boxed beef nor sellers of
fed cattle would have any incentive to challenge the acquisition
because a "price-cost squeeze" would be to their advantage.  The court
said that denying Monfort standing "might leave a significant
antitrust violation unremedied." Pet. App. 35a.  Moreover, although
the court stated that the "harm alleged by Monfort might be considered
speculative" (ibid.), it held that in cases involving "only injunctive
relief, the question of standing becomes less of an issue" and
"court(s) may consider more freely other purposes behind giving
private litigants an injunctive remedy to prevent or end antitrust
violations" (id. at 36a).  Finally, notwithstanding the fact that
Monfort did "not allege that IBP and Excel will in fact engage in
predatory activities" (id. at 71a), the court held that the
acquisition would "make such practices a distinct possibility" and
that Monfort was therefore "realistically threatened with a
significant injury personal to itself" (ibid.).

   Turning to the merits, the court concluded that the merger violated
Section 7 of the Clayton Act.  It found that two relevant markets
affected by the acquisition, a regional "fed cattle" input market, and
a nationwide "boxed beef" output market (Pet. App. 41a-60a), were both
highly concentrated and that concentration would increase as a result
of the acquisition.  Id. at 60a-64a.  /10/ The court also found (id.
at 64a-67a) that there were capital, temporal, and "psychological"
difficulties associated with the acquisition of new or existing
facilities that, taken together, amounted to "significant entry
barriers" facing any "potential entrants" (id. at 64a).  /11/ In
addition, the court concluded that the fact that "enormous financial
resources (are) available to" Cargill and Occidental Petroleum, IBP's
parent, "lends further support to the conclusion that the proposed
acquisition would tend to harm competition in both" markets.  Id. at
69a.

   3. The court of appeals affirmed (Pet. App. 1a-22a).  The court
recognized that for Monfort to have standing to seek an injunction
under Section 16, 15 U.S.C. 26, it was required to allege more than
that the acquisition would violate Section 7.  The court agreed with
the district court, however, that "it is much easier for a plaintiff
to show causation of its hypothetical antitrust injury by a putative
antitrust violation" in a Section 16 injunction case than to show
actual injury in a damage action.  Pet. App. 4a.  It concluded that in
a suit seeking injunctive relief this Court's holding in Brunswick
Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477 (1977), "mandates only
an injury into the causal connection between the threatened injury and
the putative antitrust violation." Pet. App. 5a.

   The court of appeals acknowledged that if, as Monfort claimed, the
acquisition ultimately led to higher beef prices and lower cattle
prices, Monfort "would surely benefit" (Pet. App. 7a).  Turning to
Monfort's specific claim of injury, i.e., that the "price-cost
squeeze" facing the industry would be intensified for a time
immediately after the acquisition, the court reasoned that because a
"price-cost squeeze" was "what we consider to be a form of predatory
pricing," Monfort's claim of injury was "directly tied to the putative
Clayton Act section 7 violation" (id. at 7a-8a).  The court
acknowledged that because any such predatory pricing was "only
threatened," "(w)e lack the ordinary guideposts such as marginal cost
and average variable cost that might otherwise highlight a (predatory
pricing) violation," and that it was "impossible to tell" whether
Monfort would in fact be injured by the alleged Section 7 violation
(Pet. App. 9a).  It concluded, however, that Monfort had "alleged a
plausible theory for how it may be injured" by the acquisition
(ibid.), and that, even though Monfort "will only suffer antitrust
injury if Excel abuses its market power, the causal connection will
exist if the ultimate injury materialized" (id. at 13a).  Accordingly,
the court held that Monfort had standing to seek to block the
acquisition.

   The court also affirmed the district court's holding that the
acquisition violated Section 7.  The court stated that the record did
not warrant the conclusion that the district court's definitions of
relevant markets were clearly erroneous.  Pet. App. 15a.  The court of
appeals rejected as "speculative" petitioners' contention that the
district court's analysis of entry barriers was legally flawed because
the district court had assessed the likelihood of entry at the time of
the acquisition, rather than the likelihood of entry at a later date
when, as a result of the acquisition, Excel and IBP might attempt to
charge supracompetitive prices (id. at 17a).  Similarly, the court
dismissed petitioners' argument that the district court "should have
considered a variety of other factors" that they claimed made
collusion "difficult or impossible" (ibid.).  The court held that the
district court "properly confined its analysis to market share
statistics plus limited information on industry structure, history and
probable future" (id. at 18a).  Finally, "(a)lthough the district
court conceded (that) the predatory conduct was not certain to occur"
(id. at 19a), the court of appeals found it appropriate for the
district court to rely on Cargill's "deep pocket" because Cargill's
"financial resources would likely be used in an anticompetitive
fashion if Excel acquired Spencer Beef and then engaged in a period of
predatory pricing" (id. at 20).

                          SUMMARY OF ARGUMENT

   1. A private party has standing to challenge an alleged antitrust
violation only if two conditions are satisfied.  It must allege that
it will suffer actual or threatened injury as a result of the
violation.  Allen v. Wright, No. 81-757 (July 3, 1984), slip op.
11-14;  Warth v. Seldin, 422 U.S. 490, 499 (1975).  In addition, it
must allege "antitrust injury, which is to say injury of the type the
antitrust laws were intended to prevent and that flows from that which
makes defendants' acts unlawful." Brunswick Corp. v. Pueblo
Bowl-O-Mat, Inc., 429 U.S. 477, 489 (1977) (emphasis in original).
The rationale of Brunswick, ensuring that the remedies available under
the antitrust laws are not "divorce(d) * * * from the purposes of"
those laws (id. at 487), is fully applicable to suits for injunctive
relief under Section 16 of the Clayton Act.

   Respondent Monfort did not allege antitrust injury to itself.  It
alleged that the acquisition would violate Section 7 of the Clayton
Act by increasing concentration in the relevant markets, but -- and
the court of appeals recognized this key point -- as a competitor
Monfort would be helped, not hurt, if increased concentration led to
supracompetitive pricing.  Monfort also alleged that IBP and the
defendants would (by "simply increas(ing) their production by working
Saturdays" and "without them ever talking to each other" (Tr. 120))
subject Monfort to a "price-cost squeeze," but it is elementary that
injury resulting from lawful intensified competition is not antitrust
injury.

   The court of appeals, however, stated that it considered the
alleged price-cost squeeze to be "a form of predatory pricing." This
was error both because Monfort had disclaimed any contention that
Excel or IBP would engage in predatory pricing (i.e., pricing below
cost with the intent to destroy competitors and later raise prices),
and also because the facts alleged fell far short of supporting any
contention of a threat of predatory pricing.

   Competitors' challenges to acquisitions should be viewed with great
skepticism.  Competitors stand to benefit from, and have no incentive
to challenge, acquisitions that may lead to supracompetitive pricing.
On the other hand, competitors have a substantial incentive to
challenge acquisitions that will make their rivals more efficient,
make their industry more competitive, and reduce the prices they can
charge their customers.  Rigorous insistence on allegations of
antitrust injury to the plaintiff is therefore necessary if
competitors are to be prevented from using the antitrust laws for
anticompetitive purposes.

   An allegation of antitrust injury based on a fear of
post-acquisition predatory pricing by the resulting firm is clearly
insufficient where that firm would not have a dominant market share.
It is all too easy for a competitor who fears intense competition
(precisely what the antitrust laws seek to encourage) to characterize
that competition as "predatory pricing." Accordingly, plaintiffs
alleging actual predatory pricing must generally establish, inter
alia, that the defendant has a dominant position in the market.  Where
a plaintiff challenges an acquisition on the ground that it creates a
possibility of future predatory pricing, he does not allege a "real
and immediate threat" of antitrust injury to himself unless, at a
minimum, he alleges that the defendant will dominate the
post-acquisition market.  Cf. City of Los Angeles v. Lyons, 461 U.S.
95, 110 (1983)).  Thus, the court of appeals' holding here was clearly
unjustified since, according to the district court's findings, Excel's
post-acquisition share of the market would have been less than 21%,
which would not even make it the largest firm in the market.

   While the foregoing considerations are sufficient to decide this
case, there are important reasons why the Court should take the
further step of ruling that an allegation of threatened future
predatory pricing is never sufficient to give a competitor standing to
challenge an acquisition.  Injunctive actions brought by competitors
on a "predatory pricing" theory will often stifle procompetitive
acquisitions, and they are likely to do so before the matter can reach
this Court;  such anticipatory lawsuits are not necessary to combat
predatory behavior, which can be remedied if and when it actually
occurs.  In light of (1) a competitor's strong incentive to seek to
scuttle a procompetitive acquisition and the high risk that a court
challenge will do so, (2) the remoteness of the possibility that an
acquisition will lead to predatory pricing, and (3) the ability of any
competitor later faced with the actual predatory pricing to invoke the
prohibitions of the Sherman Act, the purposes of the antitrust laws
would be best served by denying competitors standing to challenge
acquisitions on the basis of predatory pricing theories.

   2. Because respondent lacked standing, this Court need not reach
the merits of its claim that the acquisition violated Section 7 of the
Clayton Act.  If the Court reaches this issue, however, the decision
below should be reversed because the lower courts did not properly
evaluate factors other than market share.

   The court of appeals' conclusion that the acquisition was
anticompetitive because it would increase the likelihood of predatory
pricing was defective because it was unsupported by any evidence
indicating that Excel could successfully pursue such a strategy.  The
court of appeals erroneously relied on the "deep pocket" of Excel's
parent, Cargill, although nothing in Monfort's complaint or the record
in this case suggested that, as a result of the acquisition, Excel was
likely to engage in predatory pricing.  Accordingly, Cargill's
resources were irrelevant to the question whether the acquisition was
likely substantially to lessen competition and therefore violated
Section 7.

   The lower courts also failed to take proper account of ease of
entry, a factor critical to their conclusions that the acquisition
would increase the likelihood of predatory pricing followed by
supracompetitive pricing.  The district court evaluated only the
likelihood of entry at current profit margins, failing to appreciate
that ease of entry constrains the exercise of market power.  The court
of appeals did not address that error, or the district court's errors
in relying on absolute cost figures and ignoring evidence of recent
entry into the market.  Accordingly, if this Court reaches the merits
of respondent's suit, the case should be remanded to consider whether
entry would be likely in the face of a significant post-acquisition
price increase.

                               ARGUMENT

 I. THE COURT OF APPEALS ERRED IN CONCLUDING THAT RESPONDENTS HAD
STANDING TO SEEK INJUNCTIVE RELIEF UNDER SECTION 16 OF THE CLAYTON ACT

   A. A Private Plaintiff Seeking Relief Under The Antitrust Laws Must
Allege That It Will Suffer Antitrust Injury

   A plaintiff in an antitrust case, as in any other case, must of
course allege that "'he personally has suffered some actual or
threatened injury' * * * (i)t is not enough that the conduct of which
the plaintiff complains will injure someone." Blum v. Yaretsky, 457
U.S. 991, 999 (1982) (emphasis in original) (quoting Gladstone v.
Village of Bellwood, 441 U.S. 91, 99 (1979));  /12/ see, e.g., Allen
v. Wright, No. 81-757 (July 3, 1984), slip op. 16-17;  Warth v.
Seldin, 422 U.S. 490, 499 (1975).  /13/ An antitrust plaintiff must
also satisfy a second, and distinct, requirement:  it must allege
"antitrust injury." Associated General Contractors of California, Inc.
v. California State Council of Carpenters, 459 U.S. 519, 535 n.31
(1983).  /14/

   The requirement of antitrust injury, established in Brunswick Corp.
v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477 (1977), serves to ensure that
the remedies available under the antitrust laws are not "divorce(d) *
* * from the purposes of" those laws (id. at 487).  In Brunswick, a
group of bowling center owners sought damages for the defendant's
acquisition of several of their competitors, claiming that they had
been injured by the acquisitions because, absent the acquisitions, the
competitors would have gone out of business.  This Court held that
plaintiffs lacked standing to bring such a claim because their
complaint was in essense that they had been deprived of the benefits
of decreased competition, a claim "inimical to the purposes" of the
antitrust laws.  Id. at 488.  Noting that "(e)very merger * * * has
the potential for producing economic readjustments that adversely
affect some persons" (id. at 487), and that the antitrust laws "were
enacted for 'the protection of competition, not competitors'" (id. at
488) (emphasis in original)), the Court rejected the contention that
every injury, "causally linked to an illegal presence in the market"
(id. at 489) is sufficient to support recovery.  Instead, a plantiff
is required to establish "antitrust injury, which is to say injury of
the type the antitrust laws were intended to prevent and that flows
from that which makes defendants' acts unlawful" (ibid. emphasis in
original)).  See also Blue Shield v. McCready, 457 U.S. 465, 478
(1982);  Associated General Contractors, 459 U.S. at 540.

   A plaintiff seeking an injunction under Section 16 need only allege
threatened, not actual, antitrust injury.  But it must still be injury
"of a sort personal to the plaintiff" (United states v. Borden, 347
U.S. 514, 518 (1954)).  And the rationale of Brunswick /15/ requires a
plaintiff seeking relief under Section 16, perhaps even more than a
plaintiff seeking relief under Section 4 (15 U.S.C. 15), to allege
"antitrust injury" personal to it:  in the absence of such a
requirement, the danger would be particularly acute in injunction
cases that the antitrust laws are being invoked not to enhance and
protect competition, but to shield competitors from it.  /16/ See Ball
Memorial Hospital, Inc. v. Mutual Hospital Insurance, Inc., 1986-1
Trade Cas. (CCH) Paragraph 66,974, at 62,001 (7th Cir. Mar. 4, 1986)
("the 'antitrust injury' rule applies to requests for damages and
injunctions alike");  Midwest Communications, Inc. v. Minnesota Twins,
Inc., 779 F.2d 444, 452-453 (8th Cir. 1985) (plaintiff "must
demonstrate threatened antitrust injury to receive injunctive relief")
(emphasis in original);  Schoenkopf v. Brown & Williamson Tobacco
Corp., 637 F.2d 205, 210-211 (3d Cir. 1980);  Central National Bank v.
Rainbolt, 720 F.2d 1183, 1186 (10th Cir. 1983);  Easterbrook &
Fischel, Antitrust Suits By Targets of Tender Offers, 80 Mich. L. Rev.
1155, 1165-1166 & n.27 (1982);  cf. Brunswick Corp. v. Riegel Textile
Corp., 752 F.2d 261, 266-268 (7th Cir. 1985), cert. denied, No.
84-1593 (June 17, 1985) (injunctive relief in the form of transferring
ownership of patent inappropriate where injury alleged does not
constitute antitrust injury);  Christian Schmidt Brewing Co. v. G.
Heileman Brewing Co., 753 F.2d 1354, 1357 (6th Cir. 1985).

   Accordingly, the court of appeals was fundamentally wrong in
concluding that "(i)n a section 16 case, Brunswick mandates only an
injury into the causal connection between the threatened injury and
the putative antitrust violation" (Pet. App. 5a).  Indeed, because the
quantum of proof necessary for securing injunctive relief is less than
is required for damages but the effect of an injunction will often be
greater, it is particularly important that courts adhere strictly to
the requirement of antitrust injury in suits seeking injunctive relief
under Section 16 if the antitrust laws are to serve their
procompetitive purpose.

   B. Respondent Did Not Allege That It Would Suffer Antitrust Injury

   1. Monfort alleged that the acquisition would violate Section 7 of
the Clayton Act by increasing concentration in the markets for fed
cattle and boxed beef.  /17/ Increased concentration in a market may
make it more likely that firms in the market will be able to charge
supracompetitive prices, and thus threaten "antitrust injury" to
customers, but no customer felt sufficiently threatened to sue here.
As the court of appeals recognized, Monfort, unlike petitioners'
customers, would be helped, not hurt, if prices rose above a
competitive level.  See Pet. App. 7a, 9a.  The threat (if any) that
the acquisition would lead to supracompetitive pricing was not a
threat to Monfort, which therefore could not assert standing on that
basis.  Matsushita Electric Industrial Co. v. Zenith Radio Corp., No.
83-2004 (Mar. 26, 1986), slip op. 19;  see Allen v. Wright, supra;
Warth v. Seldin, supra.

   2. Monfort also alleged that after the acquistion the defendants
would subject it to a "price-cost squeeze," in which the margin
between the cost of the input (fed cattle) and the price of the output
(boxed beef) would be insufficient to allow it to operate profitably.
Monfort, like the plaintiff in Brunswick, was in essence alleging that
it would be the victim not of antitrust violations but of competition.

   Monfort expressly disclaimed any allegation that the acquisition
would increase the likelihood of collusion between IBP and Excel or
intensify the squeeze for that reason.  /18/ On the contrary,
Monfort's president acknowledged that any post-acquisition pressure on
other firms in the market would occur because Excel and IBP would
compete vigorously against each other by "increas(ing) their
production by working Saturdays, by being very aggressive in the
marketplace" (Tr. 120).  Nor did Monfort allege that IBP or Excel
would price below their costs or engage in any other conduct that
could properly be viewed as predatory.  /19/ Thus, on Monfort's own
allegations, the "price-cost squeeze" on which its claim was based
reflected only vigorous competition in the purchase of fed-cattle and
the sale of boxed-beef.  In sum, Monfort alleged no injury to itself
except the effects of vigorous competition.

   The objective of the antitrust laws is to protect competition,
enhancing consumer welfare.  E.g., Reiter v. Sonotone Corp., 442 U.S.
330, 343 (1979).  Even if the injury to Monfort hypothesized in the
complaint were eventually to materialize, it would, as in Brunswick,
flow not from any diminution of competition, but from competition
itself.  Such an injury is not antitrust injury.

   3. The court of appeals ignored the allegations that Monfort
actually made and ruled that Monfort had standing to challenge the
acquisition because, in the court's view, the allegedly threatened
price-cost squeeze constituted "a form of predatory pricing" (Pet.
App. 7a).  This was error for two reasons.  First, Monfort did not
allege in its complaint or at trial that Excel or IBP would engage in
below-cost pricing, either unilaterally or as the result of collusion.
 /20/ See Associated General Contractors, 459 U.S. at 526 (footnote
omitted) (court may not, in determining standing, "assume that
(plaintiff) can prove facts that it has not alleged or that the
defendants have violated the antitrust laws in ways that have not been
alleged").  Second, and more fundamentally, there was no reason to
infer a threat of predatory pricing on the facts alleged by Monfort.

   Even if an allegation of a threat of future predatory pricing had
been made in this case, such allegations, made by competitors seeking
to block acquisitions, should be viewed with extreme skepticism, for
precisely the reason stated in Brunswick, i.e., to avoid use of the
antitrust laws to achieve "results inimical to their purposes."
Competitors have a strong incentive to seek to block acquisitions that
are likely to create more efficient rivals and so increase
competition.  Injunctive actions by competitors can easily delay and
frustrate acquisitions that will increase competition.  /21/ The
threat of increased competition following an acquisition, however, is
not antitrust injury.  See Baumol & Ordover, Use of Antitrust to
Subvert Competition, 28 J.L. & Econ. 247, 254 (1985).  /22/ Except in
the rarest of cases, price reductions following an acquisition
represent the results of intensified competition, and while they may
disturb the slumber of rivals who prefer not to "work Saturdays," they
are good, not bad.  /23/

   Competitors will understandably tend to characterize any price with
which they cannot compete as "predatory." /24/ But "cutting price in
order to increase business often is the very essence of competition"
(Matsushita Electric Industrial Co. v. Zenith Radio Corp., slip op.
19), even if, as is usually the case, it promises to increase one
seller's market share at the expense of its rivals.  /25/ The courts
should therefore be careful to avoid mistakenly condemning lawful
price cuts, which are evidence of competition at work, on the ground
that they constitute unlawful predatory pricing:  predatory pricing
occurs only when a firm sets prices below cost in an attempt to
destroy its rivals so that it can later raise prices.  /26/ As the
Court has recently indicated, "mistaken inferences" in cases involving
claims of predatory pricing "chill the very conduct the antitrust laws
are designed to protect" (ibid.).

   Since a dominant share of the market is generally a necessary
(although not a sufficient) precondition to a finding of actual
predatory pricing, /27/ a plaintiff challenging a rival's acquisition
on the theory that there is "real (and) immediate" threat of future
predatory pricing plainly should be required, at a minimum, to allege
that the acquisition will create a firm with a dominant market share.
When the defendant lacks a dominant position, the possibility that it
will successfully undertake predatory pricing and succeed in driving
out its rivals and later raising prices to a supracompetitive level is
highly speculative, /28/ whereas the likelihood that the plaintiff is
in fact seeking to inhibit vigorous competition is extremely high.
Cf. Matsushita Electric Industrical Co. v. Zenith Radio Corp., slip
op. 18-19.  The frequent result of allowing such cases to proceed will
be to stifle procompetitive acquisitions.  /29/

   Under the district court's findings, Excel's post-acquisition share
of the output market would have been less than 21%, making it clearly
not a dominant firm.  Indeed, its main rival and the largest firm in
the industry, IBP, possessed a much larger share of the market.
Monfort's president acknowledged that the beef industry is highly
competitive, and there was no allegation by Monfort that Excel or IBP
had in the past engaged in either unilateral or collusive predatory
pricing.  /30/ In these circumstances, there was no basis for a
conclusion that the merger here would create a "real (and) immediate
threat" of predatory pricing.  Accordingly, the court of appeals erred
in concluding that Monfort had standing because the price-cost squeeze
might constitute a predatory strategy.

   C. The Possibility Of Future Predatory Pricing Should Not Afford
Standing To A Competitor To Challenge An Acquisition

   Because respondent failed even to allege that petitioners would
engage in post-acquisition conduct that could properly be viewed as
predatory, the Court could await another case before deciding whether
an alleged threat of post-acquisition predatory pricing is ever
sufficient to afford a competitor standing to challenge an
acquisition.  There are, however, sound practical reasons for the
Court to consider the issue now:  an antitrust complaint that can
withstand a motion to dismiss is often not hard to frame, /31/ and the
mere pendency of lawsuits will often be fatal to future procompetitive
acquisitions before they can reach this Court.  /32/ Allowing
competitors' suits to proceed on a predatory pricing theory thus
invites competitor suits that will frustrate procompetitive
acquisitions and "chill the very conduct the antitrust laws are
designed to protect." Matsushita, slip op. 19.  Since post-acquisition
price-cuting is unlikely to constitute predatory pricing, and other
remedies are available if and when it does, there is much to be gained
from a ruling in this case that competitors may not challenge
acquisitions on the ground that there is a threat of post-acquisition
predatory pricing.

   1. As this Court has observed, "there is a consensus among
commentators that predatory pricing schemes are rarely tried and even
more rarely successful." Matsushita, slip op. 17.  /33/ At least two
essential conditions must be met before a predatory pricing strategy
will be successful.  First, in order to have the ability to engage in
predatory pricing, the would-be predator must be capable of rapidly
expanding its output to provide the additional quantity of the product
demanded as a result of its price reduction and to make up for any
resulting reduction in the quantity supplied by its competitors.  /34/
Second, barriers to entry must be sufficiently high that new firms
cannot profitably enter, or old firms profitably reenter, the market
when predatory pricing has driven out competitors and the predator
seeks to raise prices to supracompetitive levels.  If firms can easily
enter and exit a market, predatory pricing will not succeed because
the predator will be unable to recoup the losses resulting from its
earlier, below-cost pricing.  /35/

   Even if these minimum conditions are met, however, a firm may well
have no incentive to engage in predatory pricing.  For example, the
larger a firm's market share, the more expensive it will be for that
firm to undertake a predatory pricing strategy.  Matsushita, slip op.
17.  The costs of predatory pricing are immediate, while the rewards
are delayed and uncertain.  Id. at 13-14;  Easterbrook, Predatory
Strategies and Counterstrategies, 48 U. Chi. L. Rev. 263, 273-275
(1981).  Thus, even a firm with a dominant share of the market will
generally find it more profitable to exercise the market power
resulting from its dominant position by simply raising prices and
allowing competitors to price under its "umbrella." /36/

   2.  An acquisition will not necessarily increase a firm's ability
or incentive to engage in predatory pricing.  An increase in
concentration does not raise entry barriers.  Nor does the increase in
market share resulting from an acquisition have any necessary bearing
on a firm's incentive to engage in predatory pricing:  although
acquiring market share by acquisition may move a firm closer to a
point where it will be able to exercise market power to raise prices,
increased market share increases the losses it will incur if it
engages in below-cost pricing.  Finally, although it is conceivable
that an acquisition might be aimed at providing a would-be predator
with the unused productive capacity necessary to expand output as part
of a predatory pricing scheme, there is no predictable relationship
between making an acquisition that increases a firm's market share and
acquiring the unused capacity necessary to implement such a scheme.

   3. Given the strong incentive of competitors to challenge
procompetitive acquisitions, the rarity of predatory pricing, and the
absence of any predictable relationship between increased market share
and the likelihood of successful predatory pricing, it is inconsistent
with the purpose of the antitrust laws to afford competitors standing
to challenge acquisitions under such a theory.  Granting competitors
standing will inevitably frustrate many acquisitions that promise to
increase consumer welfare.  /37/ Denying competitors standing, on the
other hand, would not leave them or the public without a remedy for
anticompetitive mergers.  The government, or private parties
threatened with the antitrust injury that Section 7 seeks to prevent,
i.e., supracompetitive pricing, will be able to seek an injunction.
And competitors that are actually injured as a result of predatory
pricing following an acquisition will be able to invoke the
prohibitions of the Sherman Act.  Under such circumstances, we submit
that the danger of allowing a competitor to challenge an acquisition
on the basis of necessarily speculative claims of post-acquisition
predatory pricing far outweighs the danger that any anticompetitive
merger will go unchallenged.

 II. THE LOWER COURTS ERRED IN DETERMINING THAT THE ACQUISITION WOULD
VIOLATE SECTION 7 OF THE CLAYTON ACT

   Because the respondent lacked standing to sue under Section 16, it
is unnecessary for this Court to consider whether the court of appeals
erred in upholding the district court's finding that the acquisition
would violate Section 7.  However, should this Court determine that
the standing issue is not dispositive of this case, the decision below
should be reversed because the lower courts' analysis of the key issue
under Section 7 -- the likelihood that the proposed acquisition might
tend "substantially to lessen competition" -- was seriously defective.
 In deciding to enjoin the acquisition, the district court did not
properly evaluate any factors other than the increase in market share
in the narrowly defined markets it found.  The court of appeals
repeated this error in holding that the district court was not
required to engage in anything more than a "limited inquiry" into
factors other than market share in evaluating the legality of the
acquisition.

   A. A "Deep Pocket" Parent Does Not Increase The Likelihood Of
Predatory Pricing

   The court of appeals not only based Monfort's standing on the
supposed threat of predatory pricing but also based its conclusion
that the acquisition was illegal on the same supposed threat (Pet.
App. 19a-20a).  But nothing in the record suggests that the
acquisition was likely to lead to predatory pricing.  /38/

   The court of appeals relied primarily on its view that the "deep
pocket" of Cargill, Excel's parent, "would likely be used in an
anticompetitive fashion if Excel acquired Spencer Beef and then
engaged in a period of predatory pricing." Pet. App. 20a.  In
analyzing this issue, however, the court of appeals simply assumed its
conclusion, i.e., that Excel would engage in predatory pricing.  If
the post-acquisition structure of the industry made it impossible or
irrational for Excel to engage in predatory pricing, a "deep pocket"
would only enable Excel to lose more money.  /39/ The financial
resources of Excel's parent are thus beside the point.  Indeed, Excel,
with its "deep pocket" parent, was in this market before the
acquisition, and there is no claim that it had engaged in predatory
pricing, /40/ or had unsuccessfully sought the capital with which to
finance such predatory pricing.  Accordingly, the likelihood that the
acquisition would lessen competition by increasing the probability of
predatory pricing amounted to nothing more than an "ephemeral
possibilit(y)" that could not suffice to establish a violation of
Section 7.  Brown Shoe v. United States, 370 U.S. 294, 323 (1962).

   B. The Lower Courts Failed To Evaluate Properly The Possibility Of
Market Entry

   In determining that the acquisition was anticompetitive, the lower
courts relied primarily on its effect on concentration in the relevant
markets.  Monfort's claim of threatened injury is inconsistent,
however, with a conclusion that the acquisition would increase the
likelihood of supracompetitive pricing.  Even accepting the district
court's findings as to the relevant markets, /41/ the lower courts'
findings form an insufficient basis for a conclusion that there is a
"reasonable probability" that this acquisition will substantially
lessen competition.

   A merger's effect on concentration within an industry provides an
important starting point for merger analysis.  But market share
statistics cannot alone be determinative of the legality of an
acquisition.  /42/ Because Section 7 proscribed transactions creating
a "reasonable probability" of an adverse effect on competition, /43/
courts must necessarily consider relevant factors other than market
share statistics in deciding whether a merger would violate Section 7.
 United States v. General Dynamics Corp., 415 U.S. 486, 498 (1974);
Brown Shoe, 370 U.S. at 322 n.38.  Although both lower courts
acknowledged this responsibility, the district court erroneously
discounted a critical factor -- ease of entry -- and the court of
appeals failed to correct that error.  /44/

   The district court determined that there were significant barriers
to entry in the relevant markets on the basis of findings that it
would cost $20 to $40 million and take 12 to 18 months to construct
new slaughter and fabrication facilities with a minimally viable
capacity (Pet. App. 65a).  /43/ The court found that these costs and
delays constituted "formidable barriers to new entrants" when
"combined with the previously discussed low profit margins in the beef
industry" (Pet. App. 65a).

   The district court erred by focusing solely on current profit
margins.  Ease of entry is relevant because if an incumbent firm
attempts to raise prices and reduce output, new entry may occur,
lowering prices.  See United States v. Waste Management, Inc., 743
F.2d 976, 982-984 (2d Cir. 1984);  see also United States v. Marine
Bancorporation, Inc., 418 U.S. 602, 629-630 (1974) (noting that
regulatory barriers to entry reduce the extent to which firms outside
the market are perceived as potential entrants).  The key question,
therefore, is whether new firms would be induced to enter the market
in response to a small but significant, non-transistory increase in
price.  /46/ The district court, however, gauged the likelihood of
entry solely with reference to current profit margins, even though it
was conceded throughout the trial that the low profit margins within
the industry reflected the highly competitive nature of the market.

   Similarly flawed was the court's reliance on the absolute size --
in dollar terms -- of the investment required to enter the market.
Absolute cost figures have little or no meaning in assessing whether
entry is likely;  /47/ if the return on an investment, adjusted for
risk, is at or above market levels, well functioning capital markets
such as ours will provide the funds.  Nor does the time period for
entry cited by the district court constitute a significant barrier to
entry in a market such as this.  /48/ Finally, in concluding that
entry barriers were prohibitively high, the district court simply
dismissed the most probative evidence on this point -- the recent
entry of Val-Agri, a firm that the respondent itself testified was a
strong competitor (Tr. 126).  Nor did the district court consider
whether a post-acquisition increase in prices would elicit increased
production on the part of firms already in the industry, although the
evidence indicated that production by existing firms could be rapidly
increased without significant additional capital investment.  /49/

   The court of appeals uncritically accepted the district court's
finding that there were significant barriers to entry without
addressing petitioners' contention that the district court's analysis
of this issue was flawed.  At a minimum, the court of appeals should
have remanded this case for the district court to consider whether
entry was likely in the face of a significant, post-acquisition price
increase.  Without such a finding, there is no basis for a conclusion
that the acquisition would permit supracompetitive pricing, and thus
no basis for the lower court's holding that the acquisition violates
Section 7 of the Clayton Act.

                              CONCLUSION

   The judgment of the court of appeals should be reversed.

   Respectfully submitted.

   CHARLES FRIED

      Solicitor General

   DOUGLAS H. GINSBURG

      Assistant Attorney General

   LOUIS R. COHEN

      Deputy Solicitor General

   W. STEPHEN CANNON

      Deputy Assistant Attorney General

   JERROLD J. GANZFRIED

      Assistant to the Solicitor General

   CATHERINE G. O'SULLIVAN

   STEVE MACISAAC

   ANDREA LIMMER

      Attorneys

   MARCY J. K. TIFFANY

      Acting General Counsel

   WINSTON S. MOORE

   NOLAN E. CLARK

      Attorneys Federal Trade Commission

   APRIL 1986

   /1/ One of Spencer's plants, located in Schuyler, Nebraska,
approximately 60 miles from one of respondent's plants, accounted for
approximately half of Spencer's capacity (Tr. 160).  Spencer
apparently found it unprofitable to operate this plant because of high
labor costs and had closed it in December of 1982 (id. at 147).  At
the time of the proposed acquisition, Monfort's output was roughly
equal to Spencer's (id. at 129-130).

   /2/ At the time Monfort filed suit, it produced approximately 6-7%
of all boxed beef sold nationwide (Tr. 160).  In terms of output,
Monfort, Spencer, and another boxed beef producer, SIPCO, were all
approximately tied for the rank of third largest firm in the industry
(id. at 129).

   /3/ "Fed cattle" are steers and heifers that are fattened in
commercial feedlots for 100 to 140 days prior to slaughter (Tr.
40-41).  Fed cattle generally yield a higher quality of beef than cows
or bulls (id. at 86) or "non-fed" cattle, i.e., cattle that are not
fattened on feedlots.

   /4/ "Boxed beef" is beef that has been cut, vacuum packed, and
boxed for shipment (Pet. App. 29a-30a).  B. Marion, The Organization
and Performance of the U.S. Food System 127 (1986).  It accounted for
approximately 60% of all beef sold in 1982 (ibid.).

   /5/ See Complaint Paragraph 34.

   /6/ In a letter informing counsel that it did not intend to
challenge the acquisition, the Antitrust Division noted that the
pendency of the private suit was a factor in its decision "not to take
an enforcement action at this time." Letter from Alan L. Marx to James
D. Moe, Cargill, Inc. (Oct. 25, 1983).  As in all cases where it
states a present intention not to take enforcement action, the
Department reserved the right to take action based on information that
might subsequently come to its attention, whether from the private
suit or elsewhere.  It would be contrary to the policy of the
Department of Justice to refrain from instituting an appropriate
enforcement action simply because a private party had filed suit.

   /7/ Indeed, Kenneth Monfort, Monfort's president and principal
witness, testified that Monfort's injury, if any, would be caused by
IBP's and Excel's efforts to increase their market share, efforts that
he conceded need "(n)ot (be) collusive" (Tr. 118-119).  He testified
that in vying for market share, Excel and IBP would "simply increase
their production by working Saturdays, by being very aggressive in the
marketplace, and the happening occurs without them ever talking to
each other" (id. at 120).

   /8/ Although Mr. Monfort testified that he had "severe question(s)
whether in this kind of scenario * * * Monfort * * * could compete
with Excel/Spencer * * * or IBP" (Tr. 119), and that he believed that
the acquisition "would adversely affect (Monfort's) margins, perhaps
to such a degree that we would be forced out of business" (id. at
122), he conceded that the "price-cost squeeze" was a function of the
competitive nature of the beef industry, and that Monfort had since
its creation been successful in its efforts to compete (id. at
133-134).

   /9/ Mr. Monfort testified that he thought it was "very unlikely"
that IBP and Excel would collude to depress the price they paid for
fed cattle;  he stated that "I do not feel that they would collude
with each other" (Tr. 130).

   /10/ In the input market, the court found that the four-firm
concentration ratio would increase from 52% to 57.5%, with the top two
firms, IBP and Excel, having a combined share of 44.8% (Pet. App.
62a). In the output market, the court found that the four-firm
concentration ratio would increase from 53.8% to 59.5%, with IBP and
Excell controlling 47.7% (id. at 63a).

   /11/ The estimates offered at trial as to the cost of constructing
a new facility ranged from $20 to $40 million (Pet. App. 65a).  The
district court made no explicit finding as to which estimate was
correct but instead simply held that the "large capital costs needed
for entry" amounted to "formidable barriers to new entrants" (ibid.).

   The court also discounted the fact that a new competitor had
entered the market as recently as 1981.  Although Mr. Monfort himself
testified that this recent entrant -- Val-Agri -- was an example of
significant recent entry (Tr. 110) and that Val-Agri was currently a
competitor of Monfort's and would "be a better one" in the future (id.
at 126), the district court held that because Val-Agri "has yet to
commence full operations * * * it is difficult to assess its impact"
(Pet. App. 67a).  The court also noted that Val-Agri had acquired an
existing facility, and observed that the evidence indicated that there
were very few remaining facilities suitable for acquisition (ibid.).

   /12/ See also Central National Bank v. Rainbolt, 720 F.2d 1183,
1187 (10th Cir. 1983) ("A violation of the (Sherman) Act without
resultant injury to the party bringing the claim is insufficient to
confer standing.");  3 Penny Theater Corp. v. Plitt Theaters, Inc.,
1986-1 Trade Cas. (CCH) Paragraph 66,920, at 61,723 (N.D. Ill. Nov.
22, 1985) (plaintiff that suffered no injury as a result of illegal
"split" agreements between motion picture distributors had no standing
to challenge agreements).

   /13/ Section 16 itself commands courts to head the "same conditions
and principles" as govern "courts of equity" in granting injunctive
relief (15 U.S.C. 26). As this Court held recently in City of Los
Angeles v. Lyons, 461 U.S. 95, 110 (1983), faithful adherence to those
principles requires a plaintiff to allege a "real (and) immediate
threat" of actionable injury before it has standing to pursue an
injunction, even if the injury amounts to a constitutional violation
and would support an action for damages (id. at 111).  See also Allen
v. Wright, slip op. 18) ("Despite the constitutional importance of
curing the injury alleged by respondents * * * the federal judiciary
may not redress it unless standing requirements are met.").

   /14/ The fact that standing in an antitrust context involves
elements in addition to those required by Article III, and different
from elements recognized in other contexts, is not unusual.  Standing
doctrine comprises both constitutional and prudential components
(Allen v. Wright, slip op. 12-13), and this Court's standing decisions
have long reflected a sensitivity to the nature of the particular
claim being asserted.  Thus, the standing requirements applicable to
taxpayer suits (see, e.g., Valley Forge Christian College v. Americans
United For Separation of Church & State, Inc., 454 U.S. 464 (1982))
differ from those applicable to suits challenging state criminal law
enforcement policies (see, e.g., O'Shea v. Littleton, 414 U.S. 488
(1974)).

   /15/ Because the petitioner in Brunswick did not contest the
respondents' standing to seek an injunction (429 U.S. at 491), the
Court had no occasion specifically to address the question of Section
16 standing.

   /16/ The court of appeals in this case suggested that the standing
requirements under Section 16 were less stringent than those under
Section 4 because the "threshold of proof beyond the section 7
violation remains lower than it would be in a section 4 case" (Pet.
App. 4a).  The court of appeals cited (ibid.) two cases for this
proposition, Board of Regents v. National Collegiate Athletic
Association, 707 F.2d 1147, 1151-1152 (10th Cir. 1983), aff'd, 468
U.S. 85 (1984), and Schoenkopf v. Brown & Williamson Tobacco Corp.,
637 F.2d 205, 210-211 (3d Cir. 1980).  Neither case, however, held
that Brunswick's requirement of antitrust injury is inapplicable to
injunctive actions.  In Board of Regents the court stated that
"Brunswick does not apply with full rigor" to an injunctive action
(707 F.2d at 1151), but it did not hold that any form of injury
related to an antitrust violation was sufficient to establish
standing.  In Schoenkopf, the court specifically held that Brunswick's
antitrust injury requirement is applicable to injunctive actions and,
in fact, held that the plaintiff lacked standing because the injury it
alleged was not antitrust injury (637 F.2d at 211).

   /17/ Complaint Paragraph 34(a) and (c).

   /18/ Monfort also conceded that the "price-cost squeeze" it
complained of had been a characteristic of the market for almost
twenty years (Tr. 132) and further acknowledged that this squeeze was
a consequence of the highly competitive nature of the beef industry
(ibid.).  See generally B. Marion, supra, at 123-124 (noting that the
"1970's were particularly difficult for the beef subsector" because of
a sharp rise in feed grain prices and stable demand for beef).

   /19/ Indeed, Monfort admitted that given the intensely competitive
nature of the industry, Excel would seek to gain market share
regardless of whether the acquisition went forward (Tr. 152).  Monfort
simply objected to what it viewed as Excel's attempt to "leap-frog in
size" (id. at 159).

   /20/ As the district court correctly noted (Pet. App. 71a),
"Monfort does not allege that IBP and Excel will in fact engage in
predatory activities as part of the price-cost squeeze."

   /21/ In giving the Justice Department and the Federal Trade
Commission broad powers to review mergers and acquisitions prior to
consummation under Section 7A of the Clayton Act, 15 U.S.C. 18a,
Congress recognized that these procedures inevitably create delay that
may jeopardize socially beneficial mergers, and therefore imposed
strict deadlines on government agencies (15 U.S.C. 18a(b) and (e)(2)),
provided for maximum judicial expedition in the event the government
elects to file suit (15 U.S.C. 18a(f)), and established an "early
release" procedure for transactions determined by the government
agencies not to impose any risk of anticompetitive effects (15 U.S.C.
18a(b)(2)).  Allowing private competitors routinely to file suit to
block transactions cleared by the Antitrust Division or the Federal
Trade Commission creates some tension with the government's unique,
albeit not exclusive (see 15 U.S.C. 18a(i)(1)), antitrust enforcement
role.  Cf. United States v. Borden, 347 U.S. 514, 518 (1954) (a
private plaintiff "may be expected to (seek injunctive relief) only
when his personal interest will be served");  Buckeye Coal Co. v.
Hocking Valley Co., 269 U.S. 42, 48-49 (1925).  These provisions
suggest that the courts should recognize the congressional intention
to permit procompetitive or competitively neutral transactions to
proceed without undue delay and should be sensitive to the possibility
that a competitor may have a strong incentive to use the antitrust
laws to block or delay a merger precisely because the transactions
promises to enhance competition.

   /22/ See also Missouri Portland Cement Co. v. Cargill, Inc., 498
F.2d 851, 859-860 & n.12 (2d Cir.) (Friendly, J.), cert. denied, 419
U.S. 883 (1974);  4 P. Areeda & D. Turner, Antitrust Law Paragraph 901
(1978).  In contrast, if a merger seems likely to change market
structure so as to enable remaining firms to restrict output and raise
prices, competitors will stand to benefit and will therefore have
little incentive to sue.  Ibid.  Yet it is precisely these mergers
that Section 7 proscribes.  See 4 P. Areeda & D. Turner, supra,
Paragraph 901b (1980).

   /23/ Cf. A. Smith, The Wealth of Nations 461 (E. Canaan ed. 1937)
("it always is and must be the interest of the great body of the
people to buy whatever they want of those who sell it cheapest.  The
proposition is * * * manifest (and) could * * * (never) have been
called in question, had not the interested sophistry of merchants and
manufacturers confounded the common sense of mankind.  Their interest
is, in this respect, directly opposite to that of the great body of
the people.").

   /24/ See 3 P. Areeda & D. Turner, supra, Paragraph 711a, at 151
(1978) ("Unhappy rivals may automatically assume predation when a
competitor's price is below their costs, disregarding the possibility
that the alleged predator's cost is well below theirs and more than
covered by his price.");  R. Posner & F. Easterbrook, Antitrust:
Cases, Economic Notes and Other Materials 682 (2d ed. 1981)
("allegations of predatory pricing should be understood as attempts by
inefficient firms to obtain protection from their lower-cost (and
hence lower-price) rivals").  For example, in this case Mr. Monfort
testified that the "price-cost squeeze" that had existed for 20 years
in the beef industry resulted from competition (Tr. 133), while
claiming simultaneously that "some efficient producers have been
squeezed out, too" (id. at 134).  If -- as Mr. Monfort readily
conceded -- the industry was competitive, only the least efficient
firms would be driven from the market.

   /25/ 3 P. Areeda & D. Turner, supra, Paragraph 711a;  Kartell v.
Blue Shield of Massachusetts, Inc., 749 F.2d 922, 927 (1st Cir. 1984),
cert. denied, No. 84-1353 (Apr. 15, 1985);  Berkey Photo, Inc. v.
Eastman Kodak Co., 603 F.2d 263, 297 (2d Cir. 1979), cert. denied, 444
U.S. 1093 (1980).

   /26/ Southern Pacific Communications Co. v. AT&T, 740 F.2d 980,
1003 & n.27 (D.C. Cir. 1984), cert. denied, No. 84-1080 (Feb. 25,
1985);  Barry Wright Corp. v. ITT Grinnell Corp., 724 F.2d 227, 231
(1st Cir. 1983);  R. Posner & F. Easterbrook, supra, at 683;  3 P.
Areeda & D. Turner, supra, Paragraph 711a;  R. Bork, The Antitrust
Paradox 154-155 (1978).

   /27/ See Broadway Delivery Corp. v. United Parcel Service, 651 F.2d
122, 130 (2d Cir.), cert. denied, 454 U.S. 968 (1981) (sound analysis
permits examination of a defendant's pricing behavior only after
evidence of monopoly power is shown).  Because predatory pricing is
rational only where the predator expects to recoup its losses when it
attains sufficient market power to increase price, claims of
unilateral predatory pricing arise in the context of Section 2 of the
Sherman Act in cases alleging actual or attempted monopolization.  To
establish the offense of monopolization under Section 2, a plaintiff
must demonstrate, inter alia, that the defendant possessed monopoly
power.  United States v. Grinnell Corp., 384 U.S. 563, 570-571 (1966).
 A necessary element of an attempted monopolization case is a showing
that there is a dangerous probability that the defendant would succeed
in monopolizing the relevant market.  See, e.g., 3 P. Areeda & D.
Turner, supra, Paragraph 820;  D.E. Rogers Associates, Inc. v.
Gardner-Denver Co., 718 F.2d 1431, 1435 (6th Cir. 1983), cert. denied,
467 U.S. 1242 (1984).  "Dangerous probability" of success in
monopolizing a market does not, of course, require that a firm already
have monopoly power, but it does generally require at least that it
have sufficient market power, typically reflected in a high market
share, to dominate the market.  See Richter Concrete Corp. v. Hilltop
Concrete Corp., 691 F.2d 818, 826 (6th Cir. 1982) (dangerous
probability of success element of Section 2 attempt offense requires a
finding that the defendant possesses "market strength that approaches
monopoly power";  30% share of relevant market insufficient);
Lektro-Vend Corp. v. Vendo Co., 660 F.2d 255, 271 (7th Cir. 1981),
cert. denied, 455 U.S. 921 (1982) ("numerous courts have found a
market share of 30% or higher to be insufficient, by itself, to prove
a dangerous probability of monopolization").  But see Dimmitt Agri
Industries, Inc. v. CPC International, Inc., 679 F.2d 516, 533 & n.18
(5th Cir. 1982), cert. denied, 460 U.S. 1082 (1983).

   /28/ See Joskow & Klevorick, A Framework for Analyzing Predatory
Pricing Policy, 89 Yale L.J. 213, 220-221 (1979).

   /29/ See Missouri Portland Cement Co. v. Cargill, Inc., 498 F.2d at
870 (noting that "grant of a temporary injunction" "spells the almost
certain doom of a tender offer");  Kaplan, Antitrust Tactics In
Contested Takeover Bids (Oct. 19, 1982), reprinted in Practicing Law
Institute, Twenty-Second Annual Advanced Antitrust Seminar 759-760
(1982) ("A preliminary injunction restraining the bid on antitrust
grounds is almost always a 'showstopper' * * * .  (T)here is usually
no quick and easy means to solve the antitrust problem.").

   /30/ Mr. Monfort conceded that there was "(g)ood tough competition"
in the industry (Tr. 127), and that he thought it was "unlikely" and
had "no reason to think" that IBP and Excel would enter into a
collusive agreement to depress prices after the acquisition (id. at
130).

   /31/ Even if plaintiffs are required to allege that an acquisition
will create a firm with a dominant market position, complaints will be
subject to prompt dismissal only in those cases where the plaintiff
cannot, consistent with the requirements of Rule 11, Fed. R. Civ. P.,
contrive an alleged market in which the merged firms will have such a
position.

   /32/ As pointed out in our brief in support of the petition (at
15), it is unlikely that another case raising this issue will be
pursued to this Court.  This case has reached this Court because of an
unusual feature of the acquisition agreement:  it failed to give the
purchaser the right to back out if the acquisition was enjoined.

   /33/ Cases where predatory pricing has been successfully proven are
very rare.  See Koller, The Myth of Predatory Pricing:  An Empirical
Study, 4 Antitrust L. & Econ. Rev. 105, 111-112 (1971) (concluding
that of 26 cases where liability was imposed for predatory pricing, in
only seven was predation actually attempted, and in only three or four
was the attempt successful);  Hurwitz & Kovacic, Judical Analysis of
Predation:  The Emerging Trends, 35 Vand. L. Rev. 63, 140-143 & nn.
294-295, 156-157 (1982);  Areeda & Turner, Predatory Pricing and
Related Practices Under Section 2 of the Sherman Act, 88 Harv. L. Rev.
697, 699 (1975) (footnote omitted) ("proven cases of predatory pricing
have been extremely rare");  Miller & Pautler, Predation:  The
Changing View in Economics and the Law, 28 J.L. & Econ. 495 (1985);
cf. R. Bork, supra, at 154 (noting that predatory pricing is rare, and
that "(i)t seems unwise, therefore, to construct rules about a
phenomenon that probably does not exist or which, should it exist in
very rare cases, the courts would have grave difficulty distinguishing
from competitive price behavior").

   /34/ Cf. R. Bork, supra, at 147, 149 "(p)redation is a war of
attrition, with its outcome determined by the combatant's relative
losses and reserves" and "(t)he losses during the war will be
proportionally higher for the predator than for the victim" because
the predator must satisfy all of the increased demand at predatory
prices.

   /35/ See Ordover & Willig, An Economic Definition Of Predatory
Product Innovation (undated), reprinted in Federal Trade Commission,
Strategy, Predation, and Antitrust Analysis 301, 304-307 (1981);  3 P.
Areeda & D. Turner, supra, Paragraph 711b;  R. Bork, supra, at
149-154;  Northeastern Tel. Co. v. AT&T, 651 F.2d 76, 89 (2d Cir.
1981), cert. denied, 455 U.S. 943 (1982).

   /36/ Regardless of a firm's market share, predatory pricing is not
a rational strategy unless the expected future payoff, adjusted for
the possibility that the strategy will fail and discounted to the
present at the appropriate rate, exceeds the present value of the sum
of (1) the immediate and substantial expenses of sustained below-cost
pricing, (2) the forgone profits from an alternative strategy of
raising prices immediately, and (3) the expected value of the damage
liability if the predatory pricing is successfully challenged under
the Sherman Act.

   /37/ See note 2, supra;  see also Baumol & Ordover, supra, 28 J.L.
& Econ. at 254 ("Harassment by lawsuit or even the threat of
harassment can be a marvelous stimulus to timidity on the part of
competitors * * * intimida(ting a potential defendant) into the sort
of gentlemanly competitive behavior that is the antithesis of true
competition.");  Schneiderman, Preliminary Relief in Clayton Act
Section 7 Cases, 42 Antitrust L.J. 587, 588-590 (1973).

   /38/ Because certain portions of the record in this case are
subject to a protective order, we have not been able to review the
entire record.  The respondent, however, specifically disclaimed any
reliance on such a theory in the district court (Pet. App. 71a) and
did not attempt to justify the district court's holding on this basis
in the court of appeals.

   /39/ See 5 P. Areeda & D. Turner, supra, Paragraph 1136c (1980)
(reviewing cases expressing concern with effect of "deep pocket" on
possible predation, concluding that cases "fear predation too much * *
* .  Predation cannot be considered a significant likelihood where the
market circumstances preclude a payoff substantially exceeding the
losses suffered in the course of destroying rivals").  See also Emhart
Corp. v. USM Corp., 527 F.2d 177, 181 (1st Cir. 1975);  Missouri
Portland Cement Co. v. Cargill, 498 F.2d at 865-866.

   /40/ See R. Bork, supra, at 251 (noting that "the law certainly
cannot sensibly apply a presumption that the mere possession of
capital will probably lead to * * * predation").

   /41/ Petitioners do not challenge these specific findings in this
Court (Pet. 25-26).  They contend, however, that the district court
failed to take account of the evidence as to potential increases in
supply on the input side of the market (id. at 26), and the ability of
producers of non-boxed beef to shift to boxed-beef production on the
output side of the market (ibid.).

   /42/ Even in cases involving highly concentrated markets, the
Department of Justice and the FTC do not challenge a merger without
considering other relevant factors.  U.S. Dep't of Justice, Merger
Guidelines Section 3.11(c) (June 14, 1984);  Federal Trade Commission,
FTC Statement Concerning Horizontal Mergers 2 Trade Reg. Rep. (CCH)
Paragraph 4516 (1982).

   /43/ See Brown Shoe, 370 U.S. at 294 n.39 (citation omitted)
(noting that although Congress sought to arrest anticompetitive
tendencies without an industry in their incipiency, the legislative
history is "explicit" that the Clayton Act "'would not apply to the
mere possibility but only to the reasonable probability of the
proscribed * * * effect'").

   /44/ The lower courts' failure to analyze properly the evidence as
to each of entry also undercuts their conclusions with respect to the
likelihood of predatory pricing resulting from the acquisition.

   /45/ The court found that it also would be difficult to find and
costly to acquire and refurbish existing facilities (Pet. App. 66a).
The court's conclusion in this regard was based on Excel's internal
reports noting that there were few fully integrated beef packing
facilities available for acquisition (ibid.).  But the evidence
indicated that non-integrated facilities were available (Tr. 398,
402-403).  Indeed, Val-Agri's entry involved the purchase of existing
facilities that were modernized and expanded (id. at 282-283).  The
district court, however, without citing any evidence, stated that it
was "persuaded that * * * the cost associated with refurbishing old
facilities constitute(s a) significant barrier() to (entry)" (Pet.
App. 66a).

   /46/ The Department of Justice Merger Guidelines, supra, Sections
2.11, 3.3, posit a 5% increase lasting two years as a general rule.

   /47/ See 2 P. Areeda & D. Turner, supra, Paragraph 409e (1978).
If, as the district court concluded, $20 to $40 million ipso facto
constitutes a significant entry barrier, it would necessarily follow
that the law must presume that entry barriers are high in even
modestly capital intensive industries.  But as the record in this very
case makes clear (Tr. 111), a $20 to $40 million investment is not
beyond the capacity of even individual investors.

   /48/ See Merger Guidelines, supra, Section 3.3 (positing a two-year
period for entry).

   /49/ Tr. 143 (production doubled by adding second shift).  See also
Tr. 128, 160;  Declaration of D. Neubauer at 11-12.