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Document:
A.G. SPALDING BROS., INC., Petitioner, v. FEDERAL TRADE COMMISSION, Respondent.
No. 13277.United States Court of Appeals, Third Circuit.Argued February 21, 1961.
Albert R. Connelly, New York City (John D. Calhoun, Arnold I. Roth, New York City, Cravath, Swaine Moore, New York City, on the brief), for petitioner.
Counsel, Jno. W. Carter, Jr., Miles J. Brown, on the brief), for the Federal Trade Commission.
Before KALODNER, STALEY and FORMAN, Circuit Judges.
The complaint, filed December 8, 1955, before the Federal Trade Commission, charged, among other things, the following allegations: that Spalding is a corporation of Delaware and Rawlings of Missouri; that on or about December 6, 1955, Spalding acquired all of the outstanding capital stock of Rawlings; that Spalding is engaged in the manufacture of athletic goods and the sale and distribution thereof in interstate commerce to “other manufacturers and distributors, sporting goods stores, department stores, mail order houses, golf professionals and others on a national basis”; that it is one of the four largest manufacturers and distributors of athletic goods in the United States, its sales for 1954 amounting to $23,350,000.
It further charged that Rawlings, prior to and at the time of the acquisition, was likewise engaged in the manufacture of athletic goods and the sale and distribution thereof in interstate commerce to “other manufacturers and distributors, sporting goods stores, department stores, mail order houses and others throughout the nation” and that its line is in direct competition with the line distributed and sold by Spalding and that Rawlings is also one of the four largest manufacturers and distributors of athletic goods in the United States, the sales of which during 1954 amounted to $10,500,000.
The complaint also alleged that by the acquisition of the capital stock of Rawlings, Spalding has eliminated one of the four largest competitors in the manufacturing and distribution of its athletic goods line and has acquired Rawlings’s manufacturing facilities to make certain athletic goods which Spalding had theretofore been compelled to purchase from Rawlings or some other manufacturer and that the acquisition “may have the effect of substantially lessening competition or tending to create a monopoly” in the manufacture, sale and distribution of athletic goods in violation of Section 7 of the Clayton Act.
In its answer Spalding admitted that it acquired all of the outstanding capital stock of Rawlings on December 8, 1955. It stated that prior to and at the time of the acquisition it manufactured certain athletic goods which it sold largely through its Spalding Sales Corporation which distributed such items nationally together with complementary items manufactured by others and that the total of its sales and those of Spalding Sales Corporation during 1954 amounted to $18,783,639.
the manufacture of certain athletic goods which it sold largely to its Rawlings Sporting Goods Company which distributed such items nationally together with complementary items manufactured by others with its total sales and those of Rawlings Sporting Goods Company amounting to $8,282,505 for the year 1954.
Spalding generally denied other allegations contained in the complaints as well as the charge that, by its acquisition of the stock of Rawlings, it violated Section 7 of the Clayton Act.
Jurisdiction of this court is properly invoked pursuant to, and venue is based upon, Section 11 of the Clayton Act, 15 U.S.C.A. § 21, as amended.
Integration of Rawlings’s facilities with Spalding’s during the pendency of the proceedings has been controlled by a stipulation executed by counsel supporting the complaint before the Commission and counsel for Spalding, whereby Spalding agreed, in substance, to maintain the pre-merger status of Rawlings and to make no changes therein without advance notice to the Commission.
Hearings commenced on April 30, 1956 before a Hearing Examiner and continued intermittently through December 16, 1958. The refusal of two witnesses to produce documents called for by subpoenas duces tecum resulted in the institution of enforcement proceedings terminating favorably to the Commission.
Spalding rested without offering evidence and moved for dismissal of the complaint.
lines: baseballs, footballs, softballs, volley balls, soccer balls and baseball gloves and mitts. The Commission likewise confined its consideration to the same product lines.
The Hearing Examiner filed his Initial Decision February 27, 1959, dismissing the complaint on the ground that the evidence failed to establish that the effect of the acquisition of Rawlings by Spalding may be substantially to lessen competition or tend to create a monopoly, in violation of Section 7 of the Clayton Act.
An appeal to the Commission followed. The Commission in effect reversed the Initial Decision by its order and opinion of March 30, 1960. It ordered divestiture and submission of a plan for compliance by Spalding within 60 days.
At the time of the acquisition there were four so-called general line companies in the athletic goods industry. A general line company was considered one which sells a variety of products either directly or through subsidiaries. A single line company markets one or possibly a few product lines. In addition to Spalding and Rawlings there were two other general line companies, Wilson Athletic Goods Manufacturing Company, Inc. (Wilson) and MacGregor Sporting Products Inc. (MacGregor).
The total number of firms engaged in the production of athletic goods is approximately 200.
Prior to the acquisition the four general line companies (Wilson, Spalding, MacGregor and Rawlings, in that order) were the principal producers of athletic products in the United States. There were a few companies such as Kennedy Sporting Goods Manufacturing Company, Hutchinson Brothers Leather Co., Dubow Manufacturing Co., Inc., George K. Reach Company and Stall and Dean Manufacturing Company which produced and sold a partial line, but the great majority of the companies are single line companies.
6. Peck Snyder, a retail store in New York City dealing in sporting equipment.
solution to the problem of reduced sales of athletic goods which on a national level had dropped about 60%. In 1939 Spalding was reorganized as a Delaware corporation under its present name of A.G. Spalding Bros., Inc., with all the assets of the former New Jersey corporation.
In December 1955, at the time of the acquisition, Spalding was engaged in the manufacture and sale of a general line of athletic goods. Its full line consists of more than 1100 different articles, including golf, baseball, football, basketball, volley ball, soccer, tennis, badminton and boxing equipment, athletic clothing and related products. Its main factory and executive offices are in Chicopee, Massachusetts. Through its wholly-owned subsidiary, Spalding Sales Corporation, it distributes its products through wholesale distributing depots and sales offices located in principal cities throughout the United States. At the time of the acquisition its assets amounted to $16,665,299 and its sales of finished products in 1955 amounted to $23,200,737.
Rawlings was originally founded in 1898 in St. Louis, Missouri, by George H. Rawlings and Charles W. Scudder for the purpose of manufacturing and selling athletic equipment and sporting goods, primarily clothing, at wholesale and retail. At the time of its acquisition by Spalding in 1955 it was a Missouri corporation engaged in the manufacture and sale of a general line of athletic goods, with its main office and principal place of business located at St. Louis, Missouri, Rawlings had three plants in Missouri, one in St. Louis, one in Newburg and one in Licking. It also had a wholly-owned subsidiary, Rawlings Sporting Goods Company, and sales offices and wholesale distribution depots in St. Louis, Chicago, and Los Angeles.
Rawlings was in sound financial condition in December 1955. Total corporate assets had increased by 22% from 1953 to 1955, to approximately $6,500,000. Net sales for 1955 were $11,209,825. Net worth had increased 25% in the same period to approximately $4,288,000. Net earnings rose from $222,524 in 1953 to $551,824 in 1955. Earnings invested in the business exceeded one million dollars in the three year period and dividends were paid on both preferred and common stock. Twenty percent of the former and 90 percent of the latter was owned by six shareholders. Rawlings distributed its products nationally for many years prior to the acquisition by Spalding.
Spalding acquired Rawlings’s capital stock for approximately $5,698,000. Rawlings Manufacturing Company was dissolved immediately thereafter. Spalding continued its business as the Rawlings Division of Spalding using the name Rawlings Manufacturing Company. Among the assets taken over by Spalding was the stock of Rawlings Sporting Goods Company, the wholly-owned subsidiary of Rawlings, which was the sales company for merchandise bearing the Rawlings trademark. It remains in existence competing with Spalding Sales Corporation for the same customers.
Another of the general line companies, Wilson, was organized in 1910 as the Ashland Manufacturing Company, a subsidiary of Wilson and Company, the Chicago meat packing firm. It underwent a number of name changes, emerging in 1941 in its present form and with a wholly-owned sales subsidiary, Wilson Sporting Goods Company. In the course of some four decades Wilson acquired at least seven smaller firms and in 1955 operated 13 manufacturing plants in various parts of the country. Wilson sells a general line of athletic goods, either manufactured by it or purchased from other manufacturers for resale through its 29 branches in 28 states and has been recognized for a number of years as the leading producer of athletic goods in the industry.
Company. Between 1875 and 1958 MacGregor acquired at least five other small producers and in 1955 it was recognized as the third-largest in the industry in point of sales.
At the time of the acquisition about 25 firms were members including the principal companies engaged in the industry.
In 1954, 74 of 184 firms to whom the questionnaire was sent responded. In 1955, 75 out of 197 firms participated.
During the years 1953-1958, one or more of the four companies, Spalding, Rawlings, Wilson and MacGregor were represented in the officer complement of AGMA.
(2) Whether there is substantial evidence to support the Commission’s findings that the acquisition of Rawlings by Spalding may substantially lessen competition or tend to create a monopoly.
At the outset, we are confronted with the task of considering whether the Commission properly determined the relevant lines of commerce in this case.
It was argued before the Commission that the AGMA Census Report price categories were designed by the manufacturers themselves, through the AGMA Census Report Committee, to define differing physical characteristics, markets, prices and end uses for all of the products for which categories were established. To support the position that the products in each of the price categories are sufficiently different and distinct from those in any other price category within the same product line to constitute each group of products so classified a separate line of commerce for this proceeding, counsel supporting the complaint called as witnesses, George J. Herrmann, Executive Secretary of AGMA, Fred J. Bowman, President of Wilson and Philip H. Goldsmith, Chairman of the Board of MacGregor. Messrs. Bowman and Goldsmith had been officers of AGMA and members of its Census Report Committee.
“Q. Was that also designed to separate any particular classes or products as to quality?
“A. Well, the price would govern whether it was the better quality or whether it might have been in the toy classification, or whether it would be high quality equipment.
“Q. Do you mean by that that the toy classification would be the lower priced equipment?
“Q. Mr. Bowman, with respect to the items set forth in the American Player catalog, Commission’s Exhibit 50-A, do I understand you correctly to say these items represent something in the nature of toys?
participate in the games and use regular equipment. It is more or less a juvenile line.
“Q. It is a juvenile line and would not be used in professional leagues and by colleges and universities?
“Q. Now, Mr. Goldsmith, I call your attention to price category shown on the A.G.M.A. census reports and ask you to state the significance of the price categories on certain product classifications.
“A. The industry as a whole felt that it was necessary to break it down for quality’s sake and you cannot take every item that is made in the athletic goods industry and examine it to find out what category it goes in so that the best thing you can do is by price route. Probably the best illustration I can give would be that of baseballs.
“Q. That is shown on page 4 of CX-70.
“A. For example, we have baseballs broken down into three price categories. Baseballs up to $9.00 a dozen is Category 1. $9.00 a dozen was just picked out at random because it was a known fact that it would be necessary, that any ball sold for under $9.00 a dozen couldn’t be a yarn-wound ball. Nobody in this country could make one for less than $9.00 and have it to be a serviceable ball. So when we look at that figure there we know that there were in that particular year over 5,000 dozen baseballs sold that were not of a yarn-wound construction, that were of an inferior nature that would not be used in league games or in regular competition games.
or no weight and that whatever weight might be given to it was destroyed by his denial that he knew which AGMA price categories were meant to embrace toys. Further Spalding alleges that Mr. Herrmann’s testimony as to the aspect of toys was uncorroborated and that in any event Mr. Herrmann merely meant by his reference to “toys” items not of official size and weight.
“We think it clear from this testimony that in each of the various product lines for which AGMA price categories were established there is a separate line of low priced items which is not sold in competition with other items in the same product line. These low priced items may properly be classified as toys or as products not suitable for use in organized competitive games. Other items within the same product line are of higher quality, more durable and are designed for use in regular competition by both professional and amateur teams and players. The products in each of these categories are physically distinct from those in the other; they are different in quality and price, as well as in the purpose for which they are made and used. There can be no doubt that these two categories within the various product lines can be distinguished competitively from each other and that they constitute separate and distinct lines of commerce within the meaning of Section 7.
and amateur teams, colleges and high schools, and all others who use baseballs in organized games. The low priced baseballs are not suitable for use by customers who make up this market and for that reason cannot be considered to be competitive with the higher priced baseballs.
“Counsel supporting the complaint contends that there are three separate lines of commerce within the baseball product line. The first or low priced line, includes baseballs selling for under $9.00 a dozen. The second, or medium priced line, includes baseballs in the $9.01 to $16.80 category. This line consists of baseballs used primarily by juveniles in organized competition. The third, or high priced line, includes baseballs selling for more than $16.80 a dozen. This line is used primarily by professional leagues, colleges, and others who require a top quality baseball.
Spalding further takes exception to the reference by the Commission to “toys” in its definition of a line of commerce in “low priced items”. The Commission used the term in its opinion saying: “These low priced items may be properly classified as toys or as products not suitable for use in organized competitive games.” The characterization of “toys” is in the disjunctive along with “products not suitable for use in organized competitive games.” Whether or not the lower priced items are actually “toys” is of little importance. The conclusion of the Commission as to the separate categories of higher-priced and lower-priced athletic goods was well within its province under the evidence before it.
would be but 24.7% against the next largest producer, Lannom with 19.2%.
On this value basis in 1955 Spalding’s share of the market was 21.8% surpassed only by Wilson with 22.9%, while de Beer and Lannom (leaders on a quantitative basis) produced 11.6% and 10.7% respectively. The combined share of Spalding and Rawlings gave it first position of 33.1%.
The contrast between market shares on a quantitative basis and those on a value basis was influenced by the fact that a large portion of the baseballs produced by Lannom and de Beer were in the low-priced category while those produced by Spalding and Rawlings were overwhelmingly in the higher-priced category. The following table, derived by counsel for the Commission from AGMA reports for 1955, reveals, by quantity and value, the production of higher priced and low priced baseballs by the reporting manufacturers.
The foregoing figures disclosed that in 1955 out of a total of higher-priced baseballs (over $9.01 per dozen) of 373,752 dozens and $5,705,492 in value, the four general line companies, Spalding, Wilson, MacGregor and Rawlings produced in the aggregate 298,863 dozens and $4,755,784 in value. Out of 315,597 dozens and $1,720,914 in value of the low-priced baseballs (up to $9.00 per dozen and molded or rubber-covered baseballs) Spalding, Wilson, MacGregor and Rawlings, together, produced 61,967 dozens and $430,730 in value, while the other companies produced 253,630 dozens and $1,289,684 in value, including Lannom and de Beer who together produced 199,611 dozens of $947,789 in value.
It is apparent then that Spalding and Rawlings were substantial competitive factors in the higher priced baseball area but that their respective production figures in the low priced area were significantly smaller. On the other hand, in the low priced baseball areas de Beer and Lannom were the production leaders. The two price categories represent areas which were separately dominated by different production leaders, the higher-priced — by Wilson, Spalding, MacGregor and Rawlings, and the low priced — by de Beer and Lannom.
use would destroy the line of commerce concept as an analytical device for probing the competitive effects of the Rawlings acquisition, Spalding submits that the Hearing Examiner was correct, and the Commission wrong, in reversing the finding that only undivided product lines can be considered areas of competition and therefore relevant lines of commerce.
(3) “Smaller than regulation” rubber-covered basketballs at $50.40 per dozen, within AGMA’s higher priced category (more than $48.00 per dozen) likewise not playable.
designed to further the general sales effort of all items within the product line.
However, more than mere price is involved in the AGMA categories. The record reveals that they represent meaningful quality differences between items in the same product line. They are adjusted from time to time to preserve their integrity. Regardless of the nature of the pricing and promotional techniques in which Spalding engaged in a given product line, items therein nevertheless still fell into areas of use denoted by AGMA price categories. Those in the higher priced classification were designed for organized competitive games and were not in the same line of commerce as the low priced items.
Spalding also argues that each product line is a competitive unity which has no meaning in terms of any one of its fragments. It asserts that price categories themselves are subject to change and that the Commission ignored the generally accepted economic concept that a manufacturer “is inhibited from raising the price of a higher priced item * * * because a price rise will cause many buyers of that article to shift to a lower priced item * * *.” It contends that price change decisions have “repercussions across the various AGMA price categories for a given product line”, that by 1955 yarn wound baseballs of regulation size and weight were produced to sell for under $9.00 per dozen and that a top grade baseball could be offered for $16.00 per dozen as compared to $16.80 in 1950 and $16.75 in 1951. Spalding also asserts that it is inevitable when technological improvements and other factors result in changes in product costs, the reflection of those changes are not limited to any one AGMA price category and that all of these considerations prohibit the fragmentation of the relevant market on the basis of mere price distinctions. It submits, as an example, that the ability to produce higher quality baseballs (i.e., yarn wound) at a lower cost permits those baseballs to be sold at prices formerly applicable only to lower quality baseballs and that the price reduction requires that lower quality baseballs be reduced in price or raised in quality if they are to remain competitive, creating a phenomenom, known as “price sensitivity and cross elasticity of demand” a characteristic which prohibits fragmentation of the relevant market on the basis of mere price distinctions.
(2) Spalding’s “`Official’, `yarn wound’ baseballs (Nos. 175 and 176) for up to $9 * * *” a dozen.
The catalogue shows Rawlings’ MM1 baseball to be “A durable ball, full regulation size * * * gum yarn wound core of resilient materials.” The significance of gum wound is unexplained. The only other gum wound Rawlings’ baseball is catalogued as R8 “a semi-hard juvenile ball” selling at $2.85 a dozen.
Spalding’s No. 176 is catalogued as “yarn wound” at $9.00 per dozen and its No. 175 is similarly “yarn wound” at $7.20 per dozen. But it is noteworthy that both of these balls ar rubber-covered.
All of these balls are apparently distinguishable from those in the category found by the Commission to be used for organized competitive play.
At all times the basic question must be kept in sight, i.e., the correctness of the determination by the Commission that the AGMA price categories define relevant lines of commerce within the product lines. Spalding’s arguments give emphasis to a few marginal instances in which price classifications are so close that there may be some interchangeability and price sensitivity between items for use in organized competitive games and those that are not. Neither the price change decisions, as cited by Spalding, whether due to technological improvements or otherwise nor the occasional closeness of prices between items in the product lines are shown in such measure as to dilute the substantiality of the evidence before the Commission upon which it based its determination. The reasonableness of its conclusion, derived therefrom that the price categories effectively differentiate playable and non-playable items, must be held to withstand Spalding’s attack in this respect.
Spalding also contends that since marketing data, such as trademarks, trade names, patents and endorsements by athletes, appear on products in all price ranges, they have no understandable meaning with regard to any one AGMA price category but must be viewed in the context of each product line as a whole. This argument also fails to derogate from the effect of the AGMA higher price categories in denoting products used in organized competitive games as defining a line of commerce.
(E.D.Mo. 1959); United States v. Columbia Pictures Corp., 189 F. Supp. 153 (S.D.N.Y. 1960).
Spalding cites the Sugar case as a rejection of “the contention that price differentials required a finding of separate lines of commerce.” There the court held that beet sugar and cane sugar were a single line of commerce although cane sold at 20 cents more per cwt. than beet and although certain users preferred cane. That case, however, is clearly distinguishable from the one at hand, for there the court found that the price difference between beet and cane was for the most part historical rather than reflective of the actual differences in characteristics and it relied on the overriding consideration that there was “substantially complete functional interchangeability” between beet and cane sugar. That cannot be said of higher-priced baseballs suitable for use in organized competitive play and lower-priced ones unacceptable for such use.
distinct from low priced items in the same product line is not in conflict with the duPont-General Motors decision. Higher priced athletic products differ from the lower in that they are distinct, physically, in quality, in price and in purpose for which they are made and sold. Higher priced baseballs are not interchangeable with those in the low priced category; each has its own peculiar characteristics and uses.
In the athletic goods industry, however, the Commission found no such interchangeability between low priced and higher priced categories. It found that the AGMA price delineations mark divisions between non-interchangeable products constituting distinct areas of effective competition. The fact pattern surrounding higher and lower priced men’s shoes in Brown Shoe is readily distinguishable from that around the higher priced and low priced categories of athletic goods in this case.
“To determine whether or not there is a reasonable probability of a substantial lessening of competition, Section 7 of the Clayton Act demands an examination into economic realities. All competition must be considered, including competition faced by the product in question from other products.” 189 F. Supp. at p. 183.
“In sum, the evidence establishes that feature films face a high degree of competition from other forms of television programming material; that they do not have peculiar characteristics or uses that are significant for television purposes; and that they are reasonably interchangeable with, and compete against, all other types of television programming material. The Court’s conclusion is that there is no line of commerce or product market limited to feature films alone.” 189 F. Supp. at pp. 191-192.
The Commission in this case faithfully followed this earlier observation.
The Commission arrived at its determination that the AGMA higher priced baseballs (and other products) constituted lines of commerce based on something more than a mere consideration that both Spalding and Rawlings manufactured the same products. Rather, the Commission was influenced by the testimony of witnesses that those price categories delineated products with peculiar characteristics and uses as described in duPont-General Motors. Those peculiar characteristics and uses were found to be in the superior raw materials and labor with which those products were constructed as distinguished from the low priced ones; in their particular suitability for use in organized competitive games and in that they were not interchangeable with lower priced items for the purposes of their purchasers in the market. The Commission found that these higher priced products constituted a distinct area of effective competition.
Segments of product lines have been held to be relevant market areas or lines of commerce in a number of cases.
In Reynolds Metals Co., FTC Dkt. 7009, CCH Trade Reg.Rep. par. 28,533 (1959) the Commission held that “decorative aluminum foil for florists” is a separate line of commerce from “aluminum foil generally” because of different physical characteristics in use, marketing characteristics, price behavior and other factors.
(S.D.N.Y. 1958) the court refused to find that “pipe” constituted a line of commerce, but found that buttweld pipe, electric-weld pipe and seamless pipe each were distinct lines of commerce, on the basis of the peculiar characteristics and uses standards.
In Crown Zellerbach Corp. v. Federal Trade Commission, FTC Dkt. 6180, 54 FTC 769 (1957), affirmed 296 F.2d 800 (9 Cir. 1961), census coarse papers were held to be lines of commerce as distinguished from other census papers.
In International Boxing Club of New York v. United States, 358 U.S. 242, 249, 79 S.Ct. 245, 3 L.Ed.2d 270 (1959), a Sherman Act case, the Court sustained the finding that the relevant market was the promotion of championship boxing contests in contrast to all professional boxing contests.
The Commission correctly found that AGMA price categories within product lines constitute separate and distinct lines of commerce and that the higher priced categories were the relevant lines of commerce for the purpose of appraising the competitive effect of the acquisition in this case.
Spalding attacks this position of the Commission claiming that it is as illogical to aggregate the various product lines into an “industry line of commerce” as it is to separate a product line into higher and low priced categories since “`a line of commerce’ may consist of only competitively indistinguishable products.” Here, it submits, the record shows that there are no competitive relationships between the product lines which can justify grouping them as a single line of commerce.
Spalding again relies on Columbia Pictures and Brown Shoe this time to support its contention that the athletic goods industry lacked the necessary competitive interrelationships to justify it as a line of commerce.
Finally Spalding argues that if there is any concept that would justify the aggregation of the product lines into an “economically related mass” it is the concept “that a host of products compete for the consumer dollars that are spent on physical recreation.” Under such a definition Spalding contends that an industry wide line of commerce in this case must include not only the product lines listed in AGMA reports, but also “equipment used in a multiplicity of other established and well recognized athletic games.” It cites the 1954 Census of Manufactures, compiled by the Department of Commerce, as supporting the conclusion that the sporting and athletic goods industry must include many products outside the “narrow AGMA frame of reference adopted by the Commission”, such as bowling and billiard equipment, gymnasium and playground equipment, hunting and fishing gear and sporting arms and ammunition.
We do not share Spalding’s view that a logical dilemma was created when the Commission aggregated what it had found to be lines of commerce in this case, viz., higher and lower priced athletic products, each competitively distinct from the other, into an industry line of commerce. Spalding’s assertion that an inconsistency is brought about because a single line of commerce may consist of only “competitively indistinguishable” products does not follow. The Commission has found from the evidence before it that there are competitive relationships between the lines of commerce warranting them to be aggregated as a group for the purpose of measuring the impact of the merger on competition.
The products are grouped together for distribution, by at least each of the four principal manufacturers and sellers, Spalding, Rawlings, Wilson and MacGregor, in their respective catalogues of merchandise, displaying the several items according to seasonal demands for equipment for games such as baseball, golf, softball, tennis, badminton and volley ball in their spring and summer catalogues. Football, basketball and boxing equipment are featured in those issued for the fall and winter. The market in which the products are sold is a recognized one with its own competitive standards. Each of the general line companies integrated its products for promotion by way of national advertising, adoption contracts and endorsements by prominent figures in the athletic world resulting in competitive interrelationships between the product lines of commerce.
The Commission did not rely for its conclusion that the athletic goods industry was a line of commerce only on its finding that AGMA listed products were manufactured and sold by both Spalding and Rawlings and that the athletic goods industry is recognized by its members and trade association as a separate and distinct industry. In addition, it had before it the foregoing evidence of the pattern of a market area on which to base its conclusion that there was an athletic goods industry and that the industry in itself, was a line of commerce whereby the impact of the merger could be measured to ascertain whether it transgressed Section 7.
and athletic goods, equipment used in games other than those specified in the AGMA reports. But that does not dictate the enlargement of the boundaries of the athletic goods industry as viewed in this case. The Census of Manufactures was designed as a statistical report upon the sporting and athletic goods manufacturers on a broad and comprehensive sweep. The athletic goods industry in this case was defined by the manufacturers of athletic equipment through AGMA as distinctive and separate. As has been said, its products were equipment for use in the established and well recognized games of baseball, softball, basketball, golf, tennis, badminton, soccer, volley ball and boxing for the most part performed to large spectator groups. The sporting and athletic goods and equipment outside the AGMA classifications are foreign to the products which were established as forming the athletic goods industry as it existed and as it was known at the time of this merger.
Spalding again refers to Columbia Pictures and urges that it “demonstrates the nature of the competitive interrelationships necessary to find an industry line of commerce.” As has been noted, supra, the court in that case refused to find a separate and distinct line of commerce or product market limited to feature films, in the light of the factors which indicated that feature films were devoid of significant distinctiveness from other types of television programming material.
The question of whether an industry may be regarded as a line of commerce was not considered in Columbia Pictures and nothing in the case militates against the conclusion by the Commission here that the athletic goods industry as a whole constitutes a line of commerce.
In United States v. Brown Shoe Company, Inc., supra, cited by Spalding, the court observed that there was “a close question as to whether `shoes — as such’ could be treated as a `line of commerce.'” Having viewed the facts of the case, i.e., “the practices in the industry, the characteristics and uses of the products, their interchangeability, price, quality and style”, it found that it could be “unfair and unjust” to classify shoes as a whole as a line of commerce.
It declared that “all `men’s shoes'”, “all `women’s shoes'” and “all `children’s shoes'”, are regarded by the entire industry and the public as separate and independent classifications, regardless of price and intended use. It held that each classification has sufficient peculiar characteristics and uses to make it distinguishable and a separate line of commerce. However, these considerations do not influence the circumstances of this case, where the Commission found facts upon which to conclude that there were significant competitive interrelationships between athletic products as a group to justify the recognition of the athletic goods industry as a line of commerce.
produce and sell the principal products of the iron and steel industry, it is an appropriate line of commerce for analyzing the effect of this merger.” 168 F. Supp. at p. 594.
“Thus, a review of the cases leads this Court to the conclusion that each case must stand upon its own facts as to the determination of the area or areas of effective competition. This area must be determined by economic reality and not necessarily by political boundaries or with mathematical precision. * * *” 179 F. Supp. at p. 733.
Here the Commission, in accordance with its own admonition in Brillo Manufacturing Company, supra, made its determination of the relevant market on more than a finding only that the products were being produced by both the acquiring and acquired companies. It has considered additional factors and properly determined that the athletic goods industry as a whole is a relevant market within which to measure the impact of the merger.
Before turning to the problem of the impact of the merger on the relevant lines of commerce a determination should be made of the geographical dimension or relevant “section of the country”, with the meaning of Section 7.
This holding of the Commission is questioned by Spalding which contends that the evidence indicates regional markets rather than a nationwide one. Spalding refers to statistics in the record arguing that 80% of Rawlings’ products were sold in 19 Southern and Midwestern states most accessible to Rawlings’ Missouri plants and that only 1.6% were sold in the 13 eastern seaboard states. Cited is the finding in American Crystal Co. v. Cuban-American Sugar Co., supra, where a 10 state area was found to be the relevant market area, despite the fact that both the acquired and acquiring companies and their competitors sold substantial amounts of sugar outside that area. However, there the geographic market was defined as 10 states — the so-called River Territory in the middle west — because there was specially active competition between the proposed merging companies and their competitors in a market that was subject to the common economic forces in the designated territory. No such characteristics define any geographic division of the United States for athletic goods. As the Commission found the record establishes that both Spalding and Rawlings distributed their products throughout the United States and that purchasers of such products and competitors of Spalding and Rawlings are located throughout the country. The Commission’s finding that the appropriate “section of the country”, as contemplated by Section 7, was in this case the entire United States was proper.
In support of its position that the impact of this merger fails to disclose the probability of lessening of competition or tending to monopoly in any line of commerce Spalding asserts that contrary to the finding of the Commission that the sporting and athletic goods industry is highly concentrated or exhibiting a tendency toward concentration, it, if anything, shows a trend toward deconcentration.
Spalding charges that any conclusions the Commission may have reached on the levels of concentration in the industry are erroneous as based upon “the unreliable quality of the quantitative data”, derived from figures in the AGMA reports. They are, asserts Spalding, defective, in that only one since 1950 have participating companies numbered as many as 80 although there are approximately 200 companies manufacturing products covered by the AGMA reports and the reporting sample not only changes from year to year but increased from 74 reporting companies in 1954 only to 75 in 1955 while the total number of manufacturers increased from 184 to 197. It cited the complete omission from AG MA records of the Royal Manufacturing Company, a firm from which Spalding made purchases of gloves and mitts prior to the acquisition and which is not even listed as a manufacturer to which AGMA questionnaires were sent.
It also complains that AGMA reports overstated the market shares of all participating companies because they fail to reflect that a substantial volume of athletic goods is imported into the United States each year.
low list selling price by the number of units produced and sold. As an illustration it cites its own practice in reporting on baseballs under instructions from AGMA. It reported that it had sold in 1955 to professional baseball leagues 20,170 dozens at its low list selling price of $21.60 per dozen or $435,672, when in fact it received only $137,798, for the baseballs thereby inflating its market share by more than 3 percentage points or by over 17 percent.
Moreover Spalding urges that AGMA dollar figures are misleading because they do not take into consideration the theoretical possibility that a manufacturer at lower cost could by reason of its advantage sell more top quality baseballs cheaper than Spalding, which, on the basis of its higher unit price, would place it, Spalding, in a rank above the competing manufacturer in terms of dollar values reported to AGMA.
that a single line company always does the largest volume of business in the various product lines.
Spalding contends that the record not only compels the inference that the concentration in the manufacture and sale of sporting and athletic goods is already low but also that it is demonstrable that the levels of concentration are declining. It states that Dudley Sports Co., a new manufacturer, began the production of baseballs in 1955 with relatively small capital investment and by 1957 had sales of $332,295, although its assets amounted to but $76,000 and it employed only five workers and that George Young Co., a manufacturer of top quality baseballs sold $175,000 with only five employees and limited floor space. Several examples were cited by Spalding in the production lines other than baseballs, where firms sold allegedly a substantial volume of sporting and athletic goods on modest capital investments and labor forces.
Spalding also speaks of two large industrial companies, Voit Rubber and General Tire Rubber, presently engaged in the manufacture of softballs, as potential entrants into baseball, a closely related product line.
As a final argument that concentration in sporting and athletic goods is low and declining Spalding submits that the combined market shares of Spalding, Rawlings, Wilson and MacGregor generally declined from 1954 to 1955 in every product line manufactured by them, namely, baseballs, footballs, softballs, volley balls and soccer balls and that the individual shares of Spalding and Rawlings decreased except in soccer balls. In this connection Spalding draws attention to the overall industry growth according to AGMA reports from $132,379,773 in 1954 to $148,521,348 in 1955, an increase of 12.2 percent and that none of the four general line companies achieved the same rate of increase. It shows that Spalding’s overall production actually declined 1 percent from 1954 to 1955 and that its production combined with that of Rawlings showed a decline of $121,239 in 1955.
approved by the Commission and is uncontradicted.
Why the production figures of the Royal Manufacturing Company in gloves and mitts for 1955 were not included in the AGMA reports is unexplained but the omission of the production of one manufacturer of a single product cannot be said to condemn the value of the AGMA data which otherwise appear to be reasonably comprehensive.
Evidence of the effect of importing or rather the lack thereof urged by Spalding to challenge the value of the AGMA data is likewise inconclusive. The evidence of imports is peripheral, revolving around the minutes of meetings of AGMA on April 21, 1954, April 19, 1955 and October 12, 1955, when Mr. Fred Bowman, as Chairman of AGMA’s Federal Agencies Committee comments on an increase in “the import of such items as tennis equipment, golf equipment, baseballs and other items from European countries and Japan” and of his endeavors to brief the United States Tariff Commission on the subject. A record of the information on financial and business operations of sporting goods firms not participating in 1954 and 1955 AGMA census of athletic and sporting goods obtained from Dun and Bradstreet disclosed two importing companies — American Import Company and General Sportscraft Company, Ltd. The former is reported to have imported sporting goods in addition to novelties, general display items, basketware, floor coverings, chairs and toys. The latter specialized in badminton accessories, ping pong sets, field hockey, tennis equipment and dart boards. Neither instance reflects with any degree of clarity the character of the importations in relation to the subject matter of the amounts thereof.
As contended by the Commission’s counsel AGMA’s records fail to disclose any manufacturers at low cost listed by Spalding that produced higher priced baseballs in quantities approaching those produced by Spalding. This effectively disposes of Spalding’s argument that as a higher cost higher priced producer a misleading inference might be drawn from AGMA’s data as to its market share in dollar value in the event a hypothetical manufacturer at lower costs undersold Spalding.
that only the respective product lines of sporting and athletic goods constitute relevant lines of commerce. Thus, Spalding’s arguments ignore factors revealing the degree of concentration present in relevant lines of commerce and the increase of concentration therein, precipitated by the acquisition.
As found by the Commission the four general line companies, Spalding, Rawlings, Wilson and MacGregor, accounted for 46.4% of the total and the next 15 companies accounted for 34.7%, leaving to all the remaining producers 18.9%. The merger brought together Spalding with 12.5% and Rawlings with 6.0% in dollar value of the industry as represented by the AGMA reports giving Spalding the edge over Wilson. Thereafter three companies instead of four, Spalding, Wilson and MacGregor sold 46.4% in dollars of the total sales volume of the industry. The shares of Voit Rubber Company and Acushnet Process Sales Co., are respectively fifth (4.6%) and sixth (3.7%), and the remaining producers’ shares drop gradually.
Lannom and de Beer were leaders in the field of inexpensive baseballs but they were not in the same area of competition with Spalding and Rawlings where the market in higher priced higher quality baseballs is concerned.
Spalding’s challenge to the finding of the Commission that there is a high concentration in the production of baseballs must fail.
a result of the acquisition, Spalding’s market share, computed on a value basis, increased from 19.8 per cent to 31.2 per cent, making Spalding the leader in this line.
“Footballs: In 1955 the sales value of higher priced footballs (leather and rubber covered selling for more than $45.00 per dozen) was approximately $1,600,000 or about 33 per cent of the total sales value of all footballs produced. In that year Spalding, Voit, Wilson, MacGregor and Rawlings had a combined market share of 86.4 per cent in this line. Spalding had been the largest producer, on the basis of dollar sales, prior to the merger and by the acquisition of Rawlings increased its lead from 24.9 per cent to over 33 per cent of the industry total.
The argument made by Spalding that concentration in the athletic goods industry is actually declining is not substantiated. It suggests that because Commission’s Exhibit 31 purports to list all manufacturers of sporting and athletic goods for 1954 and Commission’s Exhibit 32 purports to list all of them for 1955, and since there are 23 firms on Exhibit 32 which do not appear on Exhibit 31 Spalding assumes they are “most likely new entrants.” This involves too great a speculation as to where and under what circumstances these 23 firms commenced business.
It is a fact that Mr. Goldsmith, Chairman of the Board of MacGregor, a witness, as mentioned heretofore, testified that George Young Company was one of eight top quality baseball producers. This company is listed in the Dun and Bradstreet report as manufacturing baseballs principally, but also softballs (Commission’s Exhibit 367). No information is available as to the volume of each product. Dudley Sports Company is also listed in the same report as making baseballs principally but it also produces “softballs, volley balls, Dudley Automatic Pitching Machines, badminton game called Shuttleloop”. We are uninformed as to the price of the baseballs or the proportion they bore to the balance of its products.
These firms and the four others cited by Spalding did not respond to AGMA’s requests for information in 1954 and 1955 and the evidence concerning them upon which Spalding relies is gleaned from the above mentioned report of Dun and Bradstreet. It is not sufficiently informative as to the time or circumstances concerning the establishment of these companies to substantiate Spalding’s claim that concentration in the sporting and athletic goods industry is declining and particularly it lacks substance to show any decline in the concentration of producers of higher priced-higher quality athletic goods.
Speculation is further expanded by Spalding’s suggestion that Voit Rubber and General Tire may be potential entrants into the manufacture of baseballs. There is no evidence of any such impending step except that those companies now manufacture softballs, “a closely related line”.
The accuracy of Spalding’s assertions must be granted that the four general line companies failed to show increases in volume of sales from 1954 to 1955 in proportion to the AGMA reports of all sales in those years; and that the production of Spalding individually, and in combination with Rawlings declined. However, none of the changes were radical. The net decline in combined sales of Spalding and Rawlings in 1955 of $121,239 is the difference between their 1954 sales of $27,695,524 and $27,574,285 in 1955. We regard the decline as not of sufficient substance or significance to detract from the finding of the Commission that after the merger “[a]lmost 50% of the total industry production was then concentrated in three firms, Spalding, Wilson and MacGregor”, and that the concentration was intensified when consideration was given to the fact that these companies engaged primarily in the production and sale of higher quality items while many of the smaller firms engaged in the manufacture and sale of the low priced products — not significant factors in the area where Spalding and the general line firms were predominant.
While we conclude that the Commission was justified in determining that, at the time of the merger, there was a high degree of concentration in the relevant lines of commerce in this case, namely the athletic goods industry as a whole and in the higher priced-higher quality athletic goods, we are aware that concentration increased by an acquisition does not of itself taint the merger. However, it is a factor that when taken together with other market facts should be scrutinized to determine whether the impact of the merger has been such as to substantially lessen competition or tend to create a monopoly in violation of Section 7.
“In considering the various competitive factors involved in the manufacture and distribution of higher quality baseballs, it appears extremely doubtful that Spalding’s leadership in this line of commerce will be seriously challenged in the foreseeable future or that any change can be anticipated in the oligopolistic situation existing in this market. In addition to the competitive advantage of being general line distributors, Spalding, Rawlings, Wilson and MacGregor, over a period of many years have established reputations for quality resulting in consumer acceptance of their baseballs far surpassing that of any competitor. As found by the hearing examiner, Spalding’s baseballs have been the official baseball for the two major leagues from their inception, and Spalding is now under contract to supply both leagues with their entire requirements of baseballs until 1966. That Spalding recognizes that the exclusive use of its baseballs by the major leagues greatly enhances the prestige and consumer acceptability of the trade names `Reach’ and `Spalding’ is attested by the fact that these baseballs which are ordinarily sold to dealers at $21.60 a dozen are sold for $3.74 a dozen to the American League and $4.48 to the National League. Similar adoption contracts with the minor leagues are also important factors from the standpoint of advertising and promotion of baseballs. In 1954 Spalding, Rawlings, Wilson and MacGregor had exclusive contracts to supply baseballs to 32 of the 36 minor leagues then in existence. In 1955 Spalding and Rawlings together had 14 such contracts and in 1956 they had 16.
The Commission held that similar barriers existed in the manufacture and sale of other major higher priced product lines.
Spalding takes issue with the Commission and contends that there are no barriers to effective competition; that companies other than Spalding, Rawlings, Wilson and MacGregor have no difficulty in entering baseball manufacture or manufacture of any other product line and surviving therein; that the “assumption of the Commission that anti-competitive effects stem from the general line nature of Spalding, Rawlings, Wilson and MacGregor or from their use of trademarks, trade names, patents, contracts with athletes and leagues, etc.,” is without foundation.
Spalding notes that the Commission did not introduce any evidence from manufacturers which it claimed were the victims of the alleged barriers to effective competition.
Rawlings increased in 1956 after the acquisition over those of the pre-acquisition year of 1955.
Further, Spalding asserts that no competitive advantage accrued to the general line companies from their trade names or trademarks and that there was evidence that single line companies enjoyed equally fine reputations with those of the general line companies; that patents lacked importance and that in any event the universal practice is to license applicants under all patents which are obtained; that the players under endorsement contracts with the general line companies did not constitute “anywhere near all the players or star players on the teams of major or minor leagues”; and that there is no evidence as to the number of players under contracts with other baseball manufacturers or sellers; and that testimony in the case would support the contention that other manufacturers and sellers would have no difficulty in contracting for the endorsement of their products by well known athletes.
Spalding also contended that there is no evidence that the general line companies obtained any competitive advantage by reason of their contracts with baseball leagues in which their baseballs are adopted as official or that other manufacturers or sellers endeavored to obtain or were unable to obtain such contracts; and that, similarly, there is no evidence as to the competitive effect of national advertising by the general line companies or that other manufacturers are unable so to advertise.
In its reference to leadership on the part of single line companies Spalding adheres to its theory that product lines are the relevant lines of commerce. But if the Commission’s theory is accepted that higher priced higher quality categories constitute lines of commerce, then it is apparent that the single line companies manifest leadership in low-priced products in the manufacture and selling of which the general line companies play little part.
That the single line companies and Spalding and Rawlings purchased products from other manufacturers and that in 1956 after the acquisition even more such products were purchased by Spalding than in 1955 are not relevant and do not effect the Commission’s findings that the factors which it enumerated were responsible for the lead acquired by the general line companies. Despite these many contentions by Spalding the significant facts remain that the general line companies engaged vigorously in the practices enumerated which were designed to achieve consumer acceptance. Each general line company participated in national advertising and the record discloses, at least in so far as Spalding and Rawlings are concerned, that their expenditures in this regard were substantial. It safely may be presumed that Wilson and MacGregor each made proportionately large outlays in this field. All four firms had established trade names and trademarks over many years which had important consumer connotations. They were valuable assets and advertising them was necessary in order to gain their maximum effectiveness.
As found by the Commission each of the general line companies entered into contracts with baseball leagues. Both major leagues from their inception chose Spalding’s products as their official baseballs and are under obligation to use them until 1966. The advertising value of this arrangement is such that Spalding drastically reduced its selling price of baseballs to these customers. The record bears out the substantial number of minor leagues with which the general line companies had contracts for the adoption of their baseballs as official and that Spalding and Rawlings in 1954 and 1955 had a major share of such contracts.
shown, but the evidence indicates that many important personalities in the athletic world, numbering into hundreds, were in some form committed to the four general line companies. The costs in this regard were also substantial, for example in 1955 Spalding paid out approximately $148,000 for such contracts, and it is obvious that only a company with commensurate financial resources could engage in this promotional feature.
Each of the general line companies conducted research and development departments for the purpose of improving their products. When new inventions or improvements of existing patents were made it was the practice to apply for patents on them. When Rawlings was acquired by Spalding it had patent rights on approximately 80 inventions of athletic products. It is true, as Spalding asserts, that they did not affect baseballs. Apparently licenses for the use of the patents were freely granted as between general line companies and some other companies also were licensed, but the evidence is not clear that companies other than general line companies applied for and were granted licenses extensively.
In sum the general line companies over a period of many years had gained exclusive contracts to supply baseballs to the major leagues and many of the minor leagues. They had large numbers of the most prominent figures in the sports world under contract for endorsement of their products or consultation. They engaged in national advertising and publicity on a large scale. They maintained facilities for research and development and acquired patents for new inventions and improvements of their existing inventions on athletic industry products other than baseballs.
Each of these factors looms large in giving to the four general line companies their respective leading positions in the athletic goods industry. Spalding’s contentions in this regard are in the main negative, pointing to matters that were not shown by counsel supporting the complaint before the Commission. However, the evidence that does appear warranted the Commission’s finding that these factors did exist and were prevalent as far as the general line firms were concerned, in such degree particularly when considered collectively as to pose barriers to effective competition from new entrants into the field or from firms in existence.
Spalding characterized the 1952 statement of Rawlings’s president as mere puffing and contends that in any event of the $2,252,371 worth of products purchased by Rawlings in 1955 only $142,199 represented golf and tennis equipment of the nature which Spalding could manufacture and Rawlings could not, and that in 1954, 1955 and 1956 Rawlings’s purchases of these products amounted to but a very small fraction of the industry’s sales in golf and tennis equipment according to the AGMA census.
* Similar products manufactured by Spalding.
Shoes and clothing were of course not manufactured by Spalding and there is uncertainty as to the types of the large quantity of miscellaneous items purchased by Rawlings. Of course there is no support to the prediction that Spalding would prevent its Rawlings Division from purchasing for resale shoes, clothing and other items not manufactured by Spalding on an advantageous basis and it is apparent that prior to the merger Rawlings found such purchases worthwhile since there was a steady increase in handling this type of merchandise from 1941 to 1955. On the other hand Spalding did manufacture six of the items purchased from other sources for a total value of $206,176. While this is a relatively small amount it was within the competence of the Commission to conclude that there was a reasonable probability that following the merger the suppliers of Rawlings would no longer be called upon for these products.
 Commission’s Exhibit 124 reveals that in 1954 Spalding purchased gloves and mitts from manufacturers aggregating 186,243 units for $732,812.75, but it does not disclose the name of the suppliers. However, in Commission’s Exhibit 124a it appears that Wilson sold Spalding gloves and mitts to the amount of $236,742 in 1954.
 Commission’s Exhibit 126. This exhibit refers to the pre-merger period and does not disclose the value of gloves and mitts supplied by Rawlings to Spalding.
 After 1956 Spalding no longer purchased gloves and mitts from Wilson.
Spalding emphatically disagrees with the Commission, claiming that Spalding’s transfer of its purchases from certain companies was the result only of legitimate picking and choosing among glove and mitt suppliers. It conceded that its purchases from MacGregor, Wilson, Kennedy and Stall Dean declined from 1955 to 1956, but pointed to its purchases from another company, Royal, which increased from $74,187 in 1955 to $220,730 in 1956. Furthermore, Spalding suggests that it is impossible from the record in this case to distinguish between higher and lower priced gloves and mitts because the evidence concerning Spalding’s purchases shows actual dollars paid by Spalding while the AGMA price categories are based upon fictitious low selling prices for the product in question whether or not actually sold for that price.
The position of Spalding in this respect is not tenable. The above table furnishes both units and dollar value for purchases made by Spalding. It is apparent that in 1955 Spalding purchased gloves and mitts from Franklin in the amount of $141,000 and from Royal in the amount of $74,187. In 1956 Franklin was eliminated except for $3.56 and the purchases from Royal were increased to $220,730. It is true that the evidence does not disclose the actual per unit cost of these purchases, but the pattern is sufficiently clear to make it reasonably believable that the gloves and mitts sold by Wilson, Rawlings, MacGregor, Kennedy and Stall Dean were higher priced than those of Franklin and Royal.
It is also clear that Spalding did not transfer its purchases of higher priced gloves and mitts from one manufacturer to another. It simply decreased its purchases of higher priced gloves and mitts from suppliers other than Rawlings after the merger and made its lower priced purchases from Royal alone rather than from Franklin and Royal.
The Hearing Examiner found that neither Mr. Bowman, President of Wilson, nor Mr. Goldsmith, Chairman of the Board of MacGregor “suggested that his company had been adversely affected by the acquisition * * *.” Spalding agrees with him that the lack of testimony concerning competitive effect from these rivals of Spalding gives rise to the inference that they had no difficulty in selling gloves and mitts after the acquisition even though Spalding’s purchases from them declined or ceased. The Commission disagreed with the Hearing Examiner pointing out that “the statute refers to lessening of competition and not injury to competitors.” It was within the competence of the Commission to reject the inferences drawn by the Hearing Examiner and supported by Spalding in this regard.
The AGMA Census Reports indicate that the value of all gloves and mitts sold in 1955 amounted to approximately $10,597,060. Spalding was an important non-producing seller of these items. It purchased $1,144,000 of them prior to the merger of 1955 of which roughly $925,000 were the higher priced products. Spalding acquired the leading manufacturer of gloves and mitts in its merger with Rawlings which was competent to supply all its needs with a large margin over. Other manufacturers were no longer required as its suppliers of them.
Co. v. Federal Trade Commission, 185 F.2d 58 (4 Cir. 1950). Section 11 of the Clayton Act provides: “The findings of the commission * * * as to the facts, if supported by substantial evidence, shall be conclusive.” 38 Stat. 734, as amended 73 Stat. 244, 15 U.S.C.A. § 21.
The words “may be” are not to be construed lightly. Important business policies and valuable properties of great concern to the companies involved rest in the balance in litigation such as this. The connotation to be given the words “may be” is clearly stated in United States v. E.I. Du Pont De Nemours Co., 353 U.S. 586, 607, 77 S.Ct. 872, 884, 1 L.Ed.2d 1057 (1957) as follows: “* * * the test of a violation of § 7 is whether, at the time of suit, there is a reasonable probability that the acquisition is likely to result in the condemned restraints.” The Commission, in this case, acted within the limitations thus defined.
Spalding charges that the Commission has limited its inquiry into the effects of the acquisition by Rawlings to statistics dealing with rank and percentages and that it has merely construed market shares of the acquired and acquiring companies on the basis of quantitative data. Thus, asserts Spalding, the Commission relies solely upon the “quantitative substantiality” theory to support the holding that the acquisition of Rawlings violates Section 7.
Neither the Commission nor the courts have accepted a transplantation of the doctrine of quantitative substantiality from Section 3 to Section 7, which would have made for a rigid and mechanical standard, not geared to the economic realities nor designed to demonstrate whether the vigor of competition in the given industry was being reduced as contemplated by Section 7.
It is clear that the “quantitative substantiality” doctrine is not to be regarded as the sole determinative of the violative nature of an acquisition of stock or assets in Section 7 cases.
“Much has been written concerning the appropriate tests to be applied in enforcing § 7. On the one hand the comparatively simple standard based on the merged company’s percentage of the market has been suggested, — the rationale applied in Standard Oil Co. of California and Standard Stations v. United States, 337 U.S. 293, 69 S.Ct. 1051, 93 L.Ed. 1371, where there was involved the exclusive supply contract prohibitions of § 3 of the Clayton Act, 15 U.S.C.A. § 14. Although § 3 used the same language as does § 7 in referring to the lessening of competition and the tendency to monopoly, yet persuasive reasons have been given as to why this so-called `quantitative substantiality’ test is not properly applied in a § 7 case.” (Footnote omitted.) 296 F.2d at p. 826.
In this case the Commission did not rest its conclusion “on nothing more than the simple addition of the market shares of the acquired and acquiring companies,” as Spalding contends. Here the Commission gave its attention, among other things, to evidence as to whether the merger between the acquired and acquiring companies resulted in a substantial increase in the concentration of power in the absorbing concern in what it had determined were the relevant lines of commerce, i.e., athletic products in the higher priced categories and the athletic goods industry.
It further examined the testimony and concluded that smaller firms did not grow in the industry; that it was difficult for them to survive and that no firm had risen to the status held by Rawlings from the time of the organization of Wilson in 1910 until the merger. It considered the various competitive factors involved in the manufacture and distribution of higher quality baseballs, footballs and softballs and concluded that the acquisition would place Spalding in a position of leadership in an oligopolistic industry — in which insuperable barriers would be raised to competition from new or existing firms.
The Commission carried on its inquiry in the spirit of the amended Section 7 and the legislative intent of Congress, manifest in the Senate and House Reports.
Much has been written of the historical background of the Clayton Act and the 1950 amendment to Section 7. Suffice it here to repeat that the Clayton Act was passed in 1914 to check anti-competitive acts in their incipiency, i.e., before they reached Sherman Act proportions. It proved to have severe limitations which became obvious in a period of increased merger activity.
The statement in the Report is illuminating and affords a guide to the intent of Congress as to considerations to be made for the purpose of determining whether the Act has been violated.
While in this case the Commission makes no specific reference to the quoted passage from the Report it was unquestionably influenced by its statement as to the various ways in which the effect of an acquisition may be a significant reduction in the vigor of competition. Yet it comes to its final conclusion not only from these but from other considerations as well.
this case the Commission properly held that the effects of the merger were violative of Section 7 in a number of relevant lines of commerce involving substantial segments of the businesses of Spalding and Rawlings.
To recapitulate there was substantial evidence before the Commission susceptible of the inferences validly drawn by it to justify it in finding that Spalding and Rawlings were engaged primarily in the production of athletic goods in the higher priced higher quality categories, particularly with regard to baseballs, basketballs, footballs and softballs, constituting a separate and distinct line of commerce upon which the merger was to be measured. It similarly had before it substantial evidence from which to conclude that the athletic goods industry as a whole, as reported by AGMA, constituted a line of commerce within the meaning of Section 7 of the Clayton Act. We so conclude from the entire record before the Commission and the law as we have heretofore construed it.
There was likewise substantial evidence from which the Commission found that prior to the acquisition the relevant lines of commerce were dominated by four general line firms, Wilson, Spalding, MacGregor and Rawlings which, based on AGMA statistics, accounted for approximately 50 percent of the total industry production and sales in 1954 and 46.4 percent in 1955; that the next 15 firms accounted for 34.7 percent of total production and the remaining 56 companies accounted for 18.9 percent of the total; that by reason of the acquisition Spalding, the second largest with 12.5 percent when combined with Rawlings, the fourth with 6 percent, became the leader of the industry; that nearly 50 percent of the total industry was then concentrated in three firms, Spalding, Wilson and MacGregor; that thereafter Spalding’s sales were more than four times that of the fifth ranking firm and five times more than that of the sixth ranking firm.
But evidence also disclosed that the primary concern of the four general line companies was the production and sale of higher priced higher quality athletic goods; that in 1955 in the higher priced higher quality line of baseballs the four companies produced 80 percent of the quantity and 83.4 percent of the sales; that Spalding’s share was 24.5 percent of the quantity and 26.5 percent of the value, and Rawlings’s was 15.3 percent of the quantity and 13.9 percent of the value; that by reason of the merger Spalding became the leader with a percentage of 39.3 percent of the quantity and 40.4 percent of the total value, followed by Wilson with 26 percent of quantity and 29 percent of value and MacGregor with 15.4 percent of quantity and 16.1 percent of value. It was also shown that Spalding acquired similar leadership in other higher priced higher quality categories.
It was further shown that prior to the merger Rawlings was experiencing rapid growth and expansion; that from 1953 to 1955 its total assets increased by 22 percent and its net worth increased by 25 percent; that it had nation-wide distribution facilities, a well-known trade name, and financial resources to engage in active national advertising and research development; that it had exclusive adoption contracts with professional leagues and teams and endorsement contracts with star athletes; that Rawlings sold 29 of the major products in the athletic goods industry in competition with Spalding, 18 of which it manufactured; that along with Spalding, Wilson and MacGregor it was competent to compete on a general line basis.
It was further shown that of the small single line companies many were engaged in the manufacture and sale of goods in the low quality lines while none manufactured substantial quantities of the higher priced lines. They were not significant competitors in the field in which Spalding and the other general line companies predominated.
The Commission was justified in finding that the elimination of Rawlings left Wilson and MacGregor as the only firms with the capacity to compete on equal terms with Spalding in the higher priced higher quality area of production and that the concentration of the industry in that category was markedly intensified by the absorption of Rawlings.
Finally, although less clearly apparent than the aspects of horizontal merger the Commission was justified in holding that the acquisition of Rawlings by Spalding also had vertical implications and that it was reasonably probable that Spalding will foreclose manufacturers from their outlet of products to Rawlings of which Spalding was a competing manufacturer. The Commission was likewise justified in holding that there was a reasonable probability that manufacturers who competed with Rawlings will also be foreclosed from their outlet of products formerly sold to Spalding.
An examination of the entire record before the Commission persuades us that there was substantial evidence, from which together with the reasonable inferences to be drawn therefrom, the Commission was justified in holding that the effect of the acquisition by Spalding of Rawlings “may be substantially to lessen competition or to tend to create a monopoly” in each of the relevant lines of commerce designated by the Commission and that Section 7 of the Clayton Act as amended was violated by the merger.
The order of the Commission will be affirmed and enforced.
 Among the products handled by Spalding and Rawlings both manufactured the following six items: baseballs, softballs, basketballs, footballs, soccer balls and volley balls. Spalding manufactured nine items which Rawlings handled but did not manufacture, namely: tennis balls, golf balls, badminton rackets and frames, tennis rackets and frames, golf clubs (irons and woods), golf bags and golf balls. Rawlings manufactured eleven items which Spalding handled but did not make, namely: baseball mitts, gloves, masks, body protectors, leg guards, football helmets, shoulder pads, hip pads, kidney pads, boxing gloves and striking bags.
 A.G. Spalding Bros., Inc., FTC Dkt 6478, Trade Reg.Rep. par. 27,858 (1959).
 A.G. Spalding Bros., Inc., FTC Dkt 6478, Trade Reg.Rep. par. 28,694 (1960).
Ernst, an independent accounting firm. In 1955 the data was prepared by that firm but tabulated by the Accounting Division of the Federal Trade Commission.
1. Over $16.75 per dozen Over $16.00 per dozen 2. $9.01 to $16.75 per dozen $9.01 to $16.00 per dozen 3. Up to $9.00 per dozen Up to $9.00 per dozen 4. Molded or rubber-covered baseballs Molded or rubber-covered baseballs.
“Q. Would you point out * * * the price classification or price classifications to which you refer when you say that those were the ones that were designed to exclude toys?
“A. No, I can’t do that. I don’t know * * * I can look them over, but I can’t tell you because I don’t know the classifications, the price classifications that would be considered as toys.
“Q. * * * Is there * * * any price classification whatever that you can identify as being designed to exclude toys from other playing equipment?
 Mention is also made of Rawlings “BJB” basketballs of junior size and weight at $56.40 per dozen and Wilson’s smaller than regulation size “Junior Official League” baseballs at $14.50 per dozen, both unplayable products but in the higher priced categories.
 The marginal nature of Spalding’s exceptions is illustrated by its reference to baseball gloves for use in Little League competition. Although Spalding refers to these items as selling for $36.00 per dozen, “a price clearly within the lowest AGMA category”, for baseball gloves, it is to be observed that the lowest AGMA category was precisely “$36.00 or less per dozen.” The Junior size leather footballs and smaller than regulation rubber covered basketballs at higher prices are apparently isolated exceptions to the general pattern.
 Appeal to United States Supreme Court argued December 6, 1961, see 30 L.W. 3180.
 In addition to the above Spalding asserts that there are at least two other baseball producers — George Young Co., with annual sales of $175,000 and Dudley Sports Co., with sales of $332,295.
Each company is alleged to have modest manufacturing facilities and few employees.
 It is also alleged that comparisons between the years 1954 and 1955 may not be made reliably in footballs and boxing gloves because the production of three firms (Collette Manufacturing Co. and Barr Rubber Co. as to footballs and Everlast Sporting Goods Company as to boxing gloves) are unreported in 1954 but are included in substantial volume in 1955. That these companies produced at all in 1954 is left to assumption and in any event the reliability of the AGMA data as bearing upon the issues of this case is not substantially affected by the omission.
 The insistence of Spalding that only product lines are the relevant lines of commerce therefore likewise invalidates the detailed analyses of the competitive situations in the 19 product lines made by Spalding for the Commission and submitted in the Joint Appendix.
 It is true, as contended by Spalding that these figures represent only those producers who reported to AGMA and not the entire industry. However, as heretofore stated, the figures are representative of the entire industry since they comprise 90% of the total production.
 Attorneys for the Commission presented the following table dealing with higher priced baseballs.
¹ Price range for highest priced baseballs, leather covered, was over $16.00 for 1955, AGMA price range for 1954 was $16.75. Medium priced baseballs price range for 1955, leather covered was $9.01 to $16.00, AGMA price range for 1954 was $9.01 to $16.75.
² Includes Spalding, Rawlings, Wilson, MacGregor.
³ Less than one-tenth of 1 percent.
Sources: CX 278-A to Z-36, CX 353-A to Z-7.
a Price range for highest priced basketballs for 1954 and 1955: Leather molded — Up to $145.00; Over $145.00. Medium priced basketballs include leather sewed and rubber. Price range for rubber was $48.01 and over for 1955, $40.01 and over for 1954.
b Includes Spalding, Rawlings, Wilson, MacGregor.
c Includes Pennsylvania Rubber Company.
d Less than one-tenth of 1%.
e Includes acquired company, Ohio-Kentucky Mfg. Company.
Note: Rankings for companies are based on 1955 dollar value figure.
a Price range for 1954 and 1955 highest priced footballs: $90.00 and over — Leather. Price range for medium priced footballs for 1955: Leather — $48.01 to $89.99; Rubber — $45.01 and Up. AGMA price range for 1954 medium priced footballs: Leather — $48.01 to $89.99; Rubber — $42.01 and Up.
d Includes acquired company, Ohio-Kentucky Mfg. Company.
Note: Rankings of companies are based on 1955 Dollar Value Figure.
a Highest priced softballs price range for 1954 and 1955 leather covered softballs was over $16.75; medium priced softballs include Molded or Rubber and Leather Covered. Price range for Leather Covered for 1954 and 1955 was $9.01 to $16.75.
d Less than one-tenth of one percent.
Note. — Rankings of companies are based on 1955 Dollar Value Figure.
“Q. Mr. Goldsmith, you have stated that you have been in the industry for a long period covering over thirty years. Have you ever made any studies or general surveys of the mortality rate in the industry?
“A. Going back to the early 20’s I would say that I have on occasions for certain purposes made surveys.
“Q. And what has been the results of such surveys?
“A. I think the mortality rate of this business is high.
“Q. Do you recall the names of companies who were in the industry back in the 1920’s or prior thereto that are no longer in existence as such?
“MR. CONNELLY: May I ask, your question is directed toward anyone in the industry or to the group that you have previously interrogated Mr. Goldsmith about described as general line companies?
“MR. KELAHER: I am referring to the industry as a whole.
 Spalding points out that the Senate Report entitled “Concentration-American Industry”, S.Rep. No. ___ [Committee Print] 85th Cong., 1st Sess. 133-165 (Table 40), 196-219 (Table 42), 266-288 (Table 45) (1957), furnishes statistics showing that the degree of concentration in the sporting and athletic goods industry ranked as one of the lowest in concentration in comparison with other industries and that it was diminishing from 1947 to 1954. These statistics are not relevant, however, to the lines of commerce found by the Commission in this case, namely, the higher priced higher quality categories and the athletic goods industry as contemplated by the reports of AGMA.
Spalding also stresses that its net profits declined from 1954 to 1955 and suffered further declines after the merger in 1956 and 1957. Such facts, particularly during 1956 and 1957, when this litigation was already pending, bear no great weight in the determination of the main issues of this case.
 See Handler and Robinson, “A Decade of Administration of the Celler-Kefauver Antimerger Act”, 61 Colum.L.R. 629, 667 (1961).
 But see critical comments, Bork, “Anti-competitive Enforcement Doctrines Under Section 7 of the Clayton Act”, 39 Texas L.Rev. 832, 836 (1961).
(D.D.C. 1958), rev’d 362 U.S. 458 [80 S.Ct. 847, 4 L.Ed.2d 880] (1960), 167 F. Supp. 799 (D.D.C. 1958), 168 F. Supp. 880 (D.D.C. 1959), aff’d 362 U.S. 458 [80 S. Ct. 847, 4 L.Ed.2d 880] (1960)], Bethlehem [168 F. Supp. 576 (S.D.N.Y. 1958)], and Spalding [the instant case, FTC Dkt 6478, Trade Reg.Rep. par. 27,858 (1959), Trade Reg.Rep. par. 28,694 (1960)] cases), or may proceed mainl in one direction, affecting primarily customers or potential customers (as in the Crown case [54 F.T.C. 769 (1958), aff’d 296 F.2d 800 (9 Cir. 1961)]) or suppliers or potential suppliers [as in the Du Pont (General Motors) case [353 U.S. 586 [77 S.Ct. 872, 1 L.Ed.2d 1057] (1957)]].
(E.D.Mo. 1959)], and Spalding decisions.” At p. 59.
 The recent Section 7 case decided by the Ninth Circuit seems to be contra. In Crown Zellerbach Corp., v. Federal Trade Commission, 296 F.2d 800 (1961), the court notes the dual system of enforcement of Section 7 and rejects the suggestion “that because the Commission’s `specialization and expertise’ are peculiarly adapted to its intended task of policy `clarification and completion’ our power to review these findings [of the Commission] is more limited than our power to review findings of a court,” citing Matter of Pillsbury Mills, 50 F.T.C. 555, 564-565 and Davis, Administrative Law Treatise, § 29.02. In Zellerbach the court applied “the same `clearly erroneous’ test in the same manner as if the findings * * * were those of a district court.” 296 F.2d at p. 815, n. 11.
 See Bok “Section 7 of the Clayton Act and the Merging of Law and Economics,” 74 Harv.L.Rev. 226, 250-251; and see Handler and Robinson “A Decade of Administration of the Celler-Kefauver Antimerger Act,” 61 Colum.L.Rev. 629, 671-679 (1961).
See Brillo Manufacturing Co., Inc., CCH Trade Reg.Rep. § 27,243, supra (1958) and CCH Trade Reg.Rep. § 28,667 (1960).
 S.Rep. 1775, 81st Cong., 2d Sess. (1950), U.S.Code Cong.Service, 1950, p. 4293. H.R.Rep. 1191, 81st Cong., 1st Sess. (1949).
(S.D.N.Y. 1958); Handler and Robinson “A Decade of Administration of the Celler-Kefauver Anti-Merger Act,” 61 Colum.L.Rev. 629, 652-675 (1961).
 But see critical comments in Handler “Annual Review of (1960) Antitrust Developments”, 15 Record of N.Y.C.B.A. 362, 378, et seq. and Handler and Robinson, supra, at pp. 669-671.
“39 S.Rep. No. 1775 p. 5.
“* * * All that the Commission was required to do was to ascertain and find a product line which was sufficiently inclusive to be meaningful in terms of trade realities. If it were otherwise, it would be a practical impossibility to apply the prohibitions of § 7 in the case of an absorbed concern which produced a multitudinous number of inconsequential and minor products. In the statutory phrase `in any line of commerce’, the word entitled to emphasis is `any’. Any line of commerce does not mean the same as the entire line of commerce, or all lines of commerce engaged in or touched upon by the acquired concern. The line of commerce need not even be a large part of the business of any of the corporations involved.” (Footnote omitted.) 296 F.2d at pp. 811-812.
 The characterization “oligopolistic” as used by the Commission is warranted in the category of higher priced baseballs where prior to the merger four firms produced 80 percent of the quantity at prices practically parallel as reported to AGMA and in their respective price lists.
KALODNER, Circuit Judge (concurring in part and dissenting in part).
I do not subscribe to the majority’s view that the Federal Trade Commission properly classified the “athletic goods industry” as a “relevant line of commerce.” The Commission used too broad a brush and to wide a sweep in doing so. The product lines included by the Commission in the “athletic goods industry” range from baseballs, basketballs, footballs, golf balls, soccer balls, softballs, tennis balls, volley balls and badminton shuttlecocks to such diverse items as shoes, hip, kidney and shoulder pads, leg guards, golf clubs, football helmets, boxing gloves, masks, tennis racket frames, etc., etc. Numerous of the items mentioned have little in common in terms of physical characteristics, raw materials, manufacturing processes, end uses, pricing or consumers.
I concur, however, with the holding of my brethren that “there was substantial evidence before the Commission susceptible of the inferences validly drawn by it to justify it in finding that Spalding and Rawlings were engaged primarily in the production of athletic goods in the higher priced, higher quality categories, particularly with regard to baseballs, basketballs, footballs and softballs, constituting a separate and distinct line of commerce upon which the merger was to be measured.” On this score the record justifies the holding of the Commission that the effect of the acquisition by Spalding of Rawlings “may be substantially to lessen competition, or to tend to create a monopoly” in violation of Section 7 of the Clayton Act.

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