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Matched Legal Cases: ['§ 7', '§ 7', '§ 7', '§ 7', '§ 2', '§ 7', '§ 7', '§ 7', '§ 7', '§ 7', '§ 7', '§ 7', '§ 7', '§ 7', '§ 7', '§ 7', '§ 7', '§ 7', '§ 7', '§ 7', '§ 7', '§ 7', '§ 7', '§ 7', '§ 3', '§ 7', '§ 3', '§ 14']

United States Vs Von S Grocery Co - Citation 101368 - Court Judgment | LegalCrystal
United States Vs. Von's Grocery Co. - Court Judgment
LegalCrystal Citation legalcrystal.com/101368
Case Number 384 U.S. 270
Respondent Von's Grocery Co.
united states v. von's grocery co. - 384 u.s. 270 (1966) u.s. supreme court united states v. von's grocery co., 384 u.s. 270 (1966) united states v. von's grocery co. no. 303 argued march 22, 1966 decided may 31, 1966 384 u.s. 270 appeal from the united states district court for the southern district of california syllabus the united states charged that the acquisition in 1960 by von's grocery company of shopping bag food stores, a competitor in the retail grocery market in the los angeles area, violated § 7 of the clayton act. after a hearing, the district court concluded that there was "not a reasonable probability" that the merger would tend "substantially to lessen competition" or "create a monopoly" in.....
United States v. Von's Grocery Co. - 384 U.S. 270 (1966)
U.S. Supreme Court United States v. Von's Grocery Co., 384 U.S. 270 (1966)
Held. The merger of two of the largest and most successful retail grocery companies in a market area characterized by a steady decline, before and after the merger, in the number of small grocery companies, combined with significant absorption of small firms by larger ones, is a violation of § 7 of the Clayton Act. Pp. 384 U. S. 274 -279.
(a) By the enactment of the Celler-Kefauver amendment to § 7 in 1950, Congress sought to preserve competition among small businesses by halting a trend toward concentration in its incipiency, and, thus, the courts must be alert to protect competition against increasing concentration through mergers especially where concentration is gaining momentum in the market. Pp. 384 U. S. 276 -277.
(b) This case presents the precise situation which Congress intended to proscribe, where two powerful companies merge to become more powerful in a market exhibiting a marked trend toward concentration. Pp. 384 U. S. 277 -278.
(c) Section 7 requires not only an appraisal of the immediate impact of the merger on competition, but a prediction of the merger's effect on competitive conditions in the future, to prevent the destruction of competition. United States v. Philadelphia Nat. Bank, 374 U. S. 321 , 374 U. S. 362 . P. 384 U. S. 278 .
(d) Since the appellees were on notice of the antitrust charge, the judgment is reversed, and the District Court is directed to order divestiture without delay. P. 384 U. S. 279 .
"That no corporation engaged in commerce . . . shall acquire the whole or any part of the assets of another corporation engaged also in commerce, where in any line of commerce in any section of the country, the effect of such acquisition may be substantially to lessen competition, or to tend to create a monopoly. [ Footnote 1 ]"
hearing evidence on both sides, the District Court made findings of fact and concluded as a matter of law that there was "not a reasonable probability" that the merger would tend "substantially to lessen competition" or "create a monopoly" in violation of § 7. For this reason, the District Court entered judgment for the defendants. 233 F.Supp. 976, 985. The Government appealed directly to this Court as authorized by § 2 of the Expediting Act. [ Footnote 2 ] The sole question here is whether the District Court properly concluded on the facts before it that the Government had failed to prove a violation of § 7.
the number of owners operating single stores in the Los Angeles retail grocery market decreased from 5,365 in 1950 to 3,818 in 1961. By 1963, three years after the merger, the number of single store owners had dropped still further to 3,590. [ Footnote 3 ] During roughly the same period, from 1953 to 1962, the number of chains with two or more grocery stores increased from 96 to 150. While the grocery business was being concentrated into the hands of fewer and fewer owners, the small companies were continually being absorbed by the larger firms through mergers. According to an exhibit prepared by one of the Government's expert witnesses, in the period from 1949 to 1958, nine of the top 20 chains acquired 126 stores from their smaller competitors. [ Footnote 4 ] Figures of a principal defense witness, set out below, illustrate the many acquisitions and mergers in the Los Angeles grocery industry from 1954 through 1961 including acquisitions made by Food Giant, Alpha Beta, Fox, and
Mayfair, all among the 10 leading chains in the area. [ Footnote 5 ] Moreover, a table prepared by the Federal Trade Commission appearing in the Government's reply brief, but not a part of the record here, shows that acquisitions and mergers in the Los Angeles retail grocery market have continued at a rapid rate since the merger. [ Footnote 6 ] These facts alone are enough to cause us to conclude contrary to the District Court that the Von's-Shopping Bag merger did violate § 7. Accordingly, we reverse.
United States v. Trans-Missouri Freight Assn., 166 U. S. 290 , 166 U. S. 323 . [ Footnote 7 ] The Sherman Act failed to protect the smaller businessmen
from elimination through the monopolistic pressures of large combinations which used mergers to grow ever more powerful. As a result, in 1914, Congress, viewing mergers as a continuous, pervasive threat to small business, passed § 7 of the Clayton Act, which prohibited corporations under most circumstances from merging by purchasing the stock of their competitors. Ingenious businessmen, however, soon found a way to avoid § 7, and corporations began to merge simply by purchasing their rivals' assets. This Court, in 1926, over the dissent of Justice Brandeis, joined by Chief Justice Taft and Justices Holmes and Stone, approved this device for avoiding § 7, [ Footnote 8 ] and mergers continued to concentrate economic power into fewer and fewer hands until 1950, when Congress passed the Celler-Kefauver Anti-Merger Act now before us.
Like the Sherman Act in 1890 and the Clayton Act in 1914, the basic purpose of the 1950 Celler-Kefauver Act was to prevent economic concentration in the American economy by keeping a large number of small competitors in business. [ Footnote 9 ] In stating the purposes of their bill, both of its sponsors, Representative Celler and Senator Kefauver, emphasized their fear, widely shared by other members of Congress, that this concentration was rapidly driving the small businessman out of the market. [ Footnote 10 ] The period from 1940 to 1947, which was at
the center of attention throughout the hearings and debates on the Celler-Kefauver bill, had been characterized by a series of mergers between large corporations and their smaller competitors resulting in the steady erosion of the small independent business in our economy. [ Footnote 11 ] As we said in Brown Shoe Co. v. United States, 370 U. S. 294 , 370 U. S. 315 ,
as not only to prohibit mergers between competitors the effect of which "may be substantially to lessen competition, or to tend to create a monopoly," but to prohibit all mergers having that effect. By using these terms in § 7 which look not merely to the actual present effect of a merger, but instead to its effect upon future competition, Congress sought to preserve competition among many small businesses by arresting a trend toward concentration in its incipiency, before that trend developed to the point that a market was left in the grip of a few big companies. Thus, where concentration is gaining momentum in a market, we must be alert to carry out Congress' intent to protect competition against ever-increasing concentration through mergers. [ Footnote 12 ]
The facts of this case present exactly the threatening trend toward concentration which Congress wanted to halt. The number of small grocery companies in the Los Angeles retail grocery market had been declining rapidly before the merger, and continued to decline rapidly afterwards. This rapid decline in the number of grocery store owners moved hand in hand with a large number of significant absorptions of the small companies by the larger ones. In the midst of this steadfast trend toward concentration, Von's and Shopping Bag, two of the most successful and largest companies in the area, jointly owning 66 grocery stores merged to become the second largest chain in Los Angeles. This merger cannot be defended on the ground that one of the companies was about to fail, or that the two had to merge to save themselves from destruction by some larger and more powerful competitor. [ Footnote 13 ] What we have, on the contrary,
"requires not merely an appraisal of the immediate impact of the merger upon competition, but a prediction of its impact upon competitive conditions in the future; this is what is meant when it is said that the amended § 7 was intended to arrest anticompetitive tendencies in their 'incipiency.' United States v. Philadelphia Nat. Bank, 374 U. S. 321 , 374 U. S. 362 . It is enough for us that Congress feared that a market marked at the same time by both a continuous decline in the number of small businesses and a large number of mergers would slowly but inevitably gravitate from a market of many small competitors to one dominated by one or a few giants, and competition would thereby be destroyed. Congress passed the Celler-Kefauver Act to prevent such a destruction of competition. Our cases since the passage of that Act have faithfully endeavored to enforce this congressional command. [ Footnote 14 ] We adhere to them now. "
Here again, as in United States v. El Paso Gas Co., 376 U. S. 651 , 376 U. S. 662 , since appellees
See also United States v. E. I. du Pont De Nemours & Co., 366 U. S. 316 ; United States v. Alcoa, 377 U. S. 271 , 377 U. S. 281 .
Thatcher Manufacturing Co. v. Federal Trade Commission, 272 U. S. 554 , 272 U. S. 560 .
See, e.g., United States v. Philadelphia Nat. Bank, 374 U. S. 321 , 374 U. S. 362 -363; United States v. Alcoa, 377 U. S. 271 , 377 U. S. 280 .
References to a number of other similar remarks by other Congressmen are collected in Brown Shoe Co. v. United States, 370 U. S. 294 , 370 U. S. 316 , n. 28.
See, e.g., Brown Shoe Co. v. United States, 370 U.S. at 370 U. S. 346 ; United States v. Philadelphia Nat. Bank, 374 U.S. at 374 U. S. 362 . See also United States v. E. I. du Pont De Nemours & Co., 353 U. S. 586 , 353 U. S. 597 , interpreting § 7 before the Celler-Kefauver Anti-Merger amendment.
See Brown Shoe Co. v. United States, 370 U.S. at 370 U. S. 319 .
See, e.g., Brown Shoe Co. v. United States, 370 U. S. 294 ; United States v. Philadelphia Nat. Bank, 374 U. S. 321 ; United States v. El Paso Gas Co., 376 U. S. 651 ; United States v. Alcoa, 377 U. S. 271 ; United States v. Continental Can Co., 378 U. S. 441 ; FTC v. Consolidated Foods, 380 U. S. 592 .
We first gave consideration to the 1950 amendment of § 7 of the Clayton Act in Brown Shoe Co. v. United States, 370 U. S. 294 . The thorough opinion The Chief Justice wrote for the Court in that case made two
things plain: first, the standards of § 7 require that every corporate acquisition be judged in the light of the contemporary economic context of its industry. [ Footnote 2/1 ] Second, the purpose of § 7 is to protect competition, not to protect competitors, and every § 7 case must be decided in the light of that clear statutory purpose. [ Footnote 2/2 ] Today the Court turns its back on these two basis principles, and on all the decisions that have followed them.
The Court makes no effort to appraise the competitive effects of this acquisition in terms of the contemporary economy of the retail food industry in the Los Angeles area. [ Footnote 2/3 ] Instead, through a simple exercise in sums, it finds that the number of individual competitors in the market has decreased over the years, and, apparently on the theory that the degree of competition is invariably proportional to the number of competitors, it holds that
The principal danger against which the 1950 amendment was addressed was the erosion of competition through the cumulative centripetal effect of acquisitions by large corporations, none of which, by itself, might be sufficient to constitute a violation of the Sherman Act. Congress' immediate fear was that of large corporations buying out small companies. [ Footnote 2/4 ] A major aspect of that fear was the perceived trend toward absentee ownership of local business. [ Footnote 2/5 ] Another, more generalized, congressional
purpose revealed by the legislative history was to protect small businessmen and to stem the rising tide of concentration in the economy. [ Footnote 2/6 ] These goals, Congress thought, could be achieved by "arresting mergers at a time when the trend to a lessening of competition in a line of commerce was still in its incipiency." Brown Shoe Co. v. United States, supra, at 370 U. S. 317 .
The concept of arresting restraints of trade in their "incipiency" was not an innovation of the 1950 amendment. The notion of incipiency was part of the report on the original Clayton Act by the Senate Committee in the Judiciary in 1914, and it was reiterated in the Senate report in 1950. [ Footnote 2/7 ] That notion was not left undefined.
The legislative history leaves no doubt that the applicable standard for measuring the substantiality of the effect of a merger on competition was that of a "reasonable probability" of lessening competition. [ Footnote 2/8 ] The standard was thus more stringent than that of a "mere possibility," on the one hand, and more lenient than that of a "certainty," on the other. [ Footnote 2/9 ] I cannot agree that the retail grocery
business in Los Angeles is in an incipient or any other stage of a trend toward a lessening of competition, or that the effective level of concentration in the industry has increased. Moreover, there is no indication that the present merger, or the trend in this industry as a whole, augurs any danger whatsoever for the small businessman. The Court has substituted bare conjecture for the statutory standard of a reasonable probability that competition may be lessened. [ Footnote 2/10 ]
The Court rests its conclusion on the "crucial point" that, in the 11-year period between 1950 and 1961, the number of single store grocery firms in Los Angeles decreased 29% from 5,365 to 3,818. [ Footnote 2/11 ] Such a decline
I believe that even the most superficial analysis of the record makes plain the fallacy of the Court's syllogism that competition is necessarily reduced when the bare number of competitors has declined. [ Footnote 2/12 ] In any meaningful sense, the structure of the Los Angeles grocery market remains unthreatened by concentration. Local competition is vigorous to a fault, not only among chain stores
themselves, but also between chain stores and single store operators. The continuing population explosion of the Los Angeles area, which has outrun the expansion plans of even the largest chains, offers a surfeit of business opportunity for stores of all sizes. [ Footnote 2/13 ] Affiliated with cooperatives that give the smallest store the buying strength of its largest competitor, new stores have taken full advantage of the remarkable ease of entry into the market. And, most important of all, the record simply cries out that the numerical decline in the number of single store owners is the result of transcending social and technological changes that positively preclude the inference that competition has suffered because of the attrition of competitors.
the entire food requirements of the family. Only through the sort of reactionary philosophy that this Court long ago rejected in the Due Process Clause area can the Court read into the legislative history of § 7 its attempt to make the automobile stand still, to mold the food economy of today into the market pattern of another era. [ Footnote 2/14 ]
The District Court's finding of fact that there was no increase in market concentration before or after the merger is amply supported by the evidence if concentration is gauged by any measure other than that of a census of the number of competing units. Between 1948 and 1958, the market share of Safeway, the leading grocery chain in Los Angeles, declined from 14% to 8%. The combined market shares of the top two chains declined from 21% to 14% over the same period; for the period 1952-1958, the combined shares of the three, four, and five largest firms also declined. It is true that, between 1948 and 1958, the combined shares of the top 20 firms in the market increased from 44% to 57%. The crucial fact here, however, is that seven of these top 20 firms in 1958 were not even in existence as chains in 1948. Because of the substantial turnover in the membership of the top 20 firms, the increase in market share of the top 20 as a group is hardly a reliable indicator of any tendency toward market concentration. [ Footnote 2/15 ]
In addition, statistics in the record for the period 1953-1962 strongly suggest that the retail grocery industry in Los Angeles is less concentrated today than it was a decade ago. During this period, the number of chain store firms in the area rose from 96 to 150, or 56%. That increase occurred overwhelmingly among chains of the very smallest size, those composed of two or three grocery stores. Between 1953 and 1962, the number of such "chains" increased from 56 to 104, or 86%. Although chains of 10 or more stores increased from 10 to 24 during the period, seven of these 24 chains were not even in existence as chains in Los Angeles in 1953. [ Footnote 2/16 ]
Yet even these dramatic statistics do not fully reveal the dynamism and vitality of competition in the retail grocery business in Los Angeles during the period. The record shows that, at various times during the period 1953-1962, no less than 269 separate chains were doing business in Los Angeles, of which 208 were two- or three-store chains. During that period, therefore, 173 new chains made their appearance in the market area, and 119 chains went out of existence as chain stores. [ Footnote 2/17 ] The vast majority of this market turbulence represented turnover in chains of two or three stores; 143 of the 173 new chains born during the period were chains of this
size. Testimony in the record shows that, almost without exception, these new chains were the outgrowth of successful one-store operations. [ Footnote 2/18 ] There is no indication that comparable turmoil did not equally permeate single store operations in the area. [ Footnote 2/19 ] In fashioning its per se rule, based on the net arithmetical decline in the number of single store operators, the Court completely disregards the obvious procreative vigor of competition in the market as reflected in the turbulent history of entry and exit of competing small chains.
in the Appendix, Tables 1 and 2 of the Court's opinion, the acquired units were grocery chains. Not one of these acquisitions was of a firm operating only a single store. [ Footnote 2/20 ] The Court cannot have it both ways. It is only among single store operators that the decline in the unit number of competitors, so heavily relied upon by the Court, has taken place. Yet the tables reproduced in the Appendix show not a trace of merger activity involving the acquisition of single store operators. And the number of chains in the area has in fact shown a substantial net increase during the period, in spite of the fact that some of the chains have been absorbed by larger firms. How then can the Court rely on these acquisitions as evidence of a tendency toward market concentration in the area?
The Court's use of market acquisition data for the period 1954-1961, [ Footnote 2/21 ] prepared by the Government from the worksheets of a defense witness, is also questionable for another reason. During that period, Food Giant, Alpha Beta, Fox, and Mayfair were ranked 7th, 8th, 9th, and 10th, respectively, on the basis of the percentage of their sales in Los Angeles in 1958, so that the impact of their acquisitions, made in the face of competition by the top six chains, is considerably blunted. The remarkable feature disclosed by these data is that none of the top six firms in the area expanded by acquisition during the period. [ Footnote 2/22 ]
Further, the table relied on by the Court to sustain its view that acquisitions have continued in the Los Angeles area at a rapid rate in the three-year period following this merger indiscriminately lumps together horizontal and market extension mergers. [ Footnote 2/23 ] Only 29 stores, representing 13 acquisitions, were acquired in horizontal mergers, and the record reveals than nine of these 29 stores were acquired in the course of dispositions in bankruptcy. Such acquisitions of failing companies, of course, are immune from the Clayton Act. International Shoe Co. v. Federal Trade Commission, 280 U. S. 291 , 280 U. S. 301 -303. Thus, at a time when the number of single store concerns was well over 3,500, horizontal mergers over a three-year period between going concerns achieved, at most, only the de minimis level of 10 acquisitions involving 20 stores. It cannot seriously be maintained that
the effect of the negligible market share foreclosed by these horizontal mergers may be substantially to lessen competition within the meaning of § 7. Cf. Brown Shoe Co. v. United States, 370 U. S. 294 , 370 U. S. 329 .
The great majority of the post-merger acquisitions detailed in Table 2 in the Appendix of the Court's opinion, ante, were of the market extension type, involving neither the elimination of direct competitors in the Los Angeles market nor increased concentration of the market. There are substantial economic distinctions between such market extension mergers and classical horizontal mergers. [ Footnote 2/24 ] Whatever the wisdom or logic of the Court's assumed arithmetic proportion between the number of single store concerns and the level of competition within the meaning of § 7 as applied to horizontal mergers, it is simply not possible to make the further assumption that the mere occurrence of market extension mergers is adequate to prove a tendency of the local market toward decreased competition.
smaller stores competing for the patronage of customers. On the basis of a "housewife's 10-minute driving time" test conducted for the Justice Department by a government witness, it was shown that slightly more than half of the Von's and Shopping Bag stores were not in a position to compete at all with one another in the market. [ Footnote 2/25 ] Even among those stores which competed at least partially with one another, the overlap in sales represented only approximately 25% of the combined sales of the two chains in the overall Los Angeles area. The present merger was thus three parts market extension and only one part horizontal, but the Court nowhere recognizes this market extension aspect that exists within the local market itself. The actual market share foreclosed by the elimination of Shopping Bag as an independent competitor was thus slightly less than 1% of the total grocery store sales in the area. The share of the market preempted by the present merger was therefore practically identical with the 0.77% market foreclosure accepted as "quite insubstantial" by the Court in Tampa Electric Co. v. Nashville Coal Co., 365 U. S. 320 , 365 U. S. 331 -333.
The irony of this case is that the Court invokes its sweeping new construction of § 7 to the detriment of a merger between two relatively successful, local, largely family-owned concerns, each of which had less than 5% of the local market and neither of which had any prior history of growth by acquisition. [ Footnote 2/26 ] In a sense, the defendants
are being punished for the sin of aggressive competition. [ Footnote 2/27 ] The Court is inaccurate in its suggestions, ante, pp. 384 U. S. 277 -278, that the merger makes these firms more "powerful" than they were before, and that Shopping Bag was itself a "powerful" competitor at the time of the merger. There is simply no evidence in the record, and the Court makes no attempt to demonstrate, that the increment in market share obtained by the combined stores can be equated with an increase in the market power of the combined firm. And, although Shopping Bag was not a "failing company" within the meaning of our decision in International Shoe Co. v. Federal Trade Commission, 280 U. S. 291 , 280 U. S. 301 -303, the record at
least casts strong doubt on the contention that it was a powerful competitor. [ Footnote 2/28 ] The District Court found that Shopping Bag suffered from a lack of qualified executive personnel [ Footnote 2/29 ] and that, although overall sales of the chain had been increasing, its earnings and profits were declining. [ Footnote 2/30 ] Further, the merger clearly comported with "the desirability of retaining "local control" over industry" that the Court noted in Brown Shoe Co. v. United States, 370 U. S. 294 , 370 U. S. 315 -316.
With regard to the "plight" of the small businessman, the record is unequivocal that his competitive position is strong and secure in the Los Angeles retail grocery industry. The most aggressive competitors against the larger retail chains are frequently the operators of single stores. [ Footnote 2/31 ] The vitality of these independents is directly
attributable to the recent and spectacular growth in California of three large cooperative buying organizations. Membership in these groups is unrestricted; through them, single store operators are able to purchase their goods at prices competitive with those offered by suppliers even to the largest chains. [ Footnote 2/32 ] The rise of these cooperative organizations has introduced a significant new source of countervailing power against the market power of the chain stores without in any way sacrificing the advantages of independent operation. In the face of
The harsh standard now applied by the Court to horizontal mergers may prejudice irrevocably the already difficult choice faced by numerous successful small and medium-sized businessmen in the myriad smaller markets where the effect of today's decision will be felt, whether to expand by buying or by building additional facilities. [ Footnote 2/33 ] And by foreclosing future sale as one attractive avenue of eventual market exit, the Court's decision may, over the long run, deter new market entry, and tend to stifle the very competition it seeks to foster.
In a single sentence and an omnibus footnote at the close of its opinion, the Court pronounces its work consistent with the line of our decisions under § 7 since the passage of the 1950 amendment. The sole consistency that I can find is that, in litigation under § 7, the Government always wins. The only precedent that is even within sight of today's holding is United States v. Philadelphia Nat. Bank, 374 U. S. 321 . In that case, in the interest of practical judicial administration, the Court proposed a simplified test of merger illegality:
United States v. Philadelphia Nat. Bank, supra, at 374 U. S. 363 . [ Footnote 2/34 ] The merger
between Von's and Shopping Bag produced a firm with 1.4% of the grocery stores and 7.5% of grocery sales in Los Angeles, and resulted in an increase of 1.1% in the market share enjoyed by the two largest firms in the market and 3.3% in the market share of the six largest firms. The former two figures are hardly the "undue percentage" of the market, nor are the latter two figures the "significant increase" in concentration, that would make this merger inherently suspect under the standard of Philadelphia Nat. Bank. Instead, the circumstances of the present merger fall far outside the simplified test established by that case for precisely the sort of merger here involved. [ Footnote 2/35 ]
The tests of illegality under § 7 were "intended to be similar to those which the courts have applied in interpreting the same language as used in other sections of the Clayton Act." H.R.Rep. No. 1191, 81st Cong., 1st Sess., p. 8. In Philadelphia Nat. Bank, the Court was at pains to demonstrate that its conclusion was consistent with cases under § 3 of the Clayton Act. See United States v. Philadelphia Nat. Bank, 374 U. S. 321 , 374 U. S. 365 -366. The Court disdains any such effort today. Untroubled by the language of § 7, its legislative history, and the cases construing either that section or any other provision of the antitrust laws, the Court grounds its conclusion solely on the impressionistic assertion that the Los Angeles retail food industry is becoming "concentrated" because the number of single store concerns has declined.
"[A] merger had to be functionally viewed, in the context of its particular industry." Brown Shoe Co. v. United States, 370 U.S. at 370 U. S. 321 -322.
Id. at 370 U. S. 322 , n. 38.
Brown Shoe Co. v. United States, supra, at 370 U. S. 320 .
Thus, the Senate Reports on both the original Clayton Act and the 1950 amendment carefully delineate the "incipiency" with which the provisions are concerned as that of monopolization or classical restraints of trade under the Sherman Act. The notion that "incipiency" might be expanded to refer also to a lessening of competition first appeared in Brown Shoe Co. v. United States, 370 U. S. 294 , 370 U. S. 317 .
"The use of these words ['may be substantially to lessen competition'] means that the bill, if enacted, would not apply to the mere possibility, but only to the reasonable probability of the prescribed [ sic ] effect. . . . The words 'may be' have been in section 7 of the Clayton Act since 1914. The concept of reasonable probability conveyed by these words is a necessary element in any statute which seeks to arrest restraints of trade in their incipiency, and before they develop into full-fledged restraints violative of the Sherman Act."
Although Congress eschewed exclusively mathematical tests for assessing the impact of a merger, it offered several generalizations indicative of the sort of merger that might be proscribed, e.g.: whether the merger eliminated an enterprise that had been a substantial factor in competition; whether the increased size of the acquiring corporation threatened to give it a decisive advantage over competitors; whether an undue number of competing enterprises had been eliminated. H.R.Rep. No. 1191, 81st Cong., 1st Sess., p. 8. See Brown Shoe Co. v. United States, 370 U. S. 294 , 370 U. S. 321 , n. 36. Only the first of these generalizations is arguably applicable to the present merger; the market extension aspects of the merger, as well as the evidence of Shopping Bag's declining profit margin and weak price competition, suggest that any conclusion under this test would be equivocal. See pp. 295- 384 U. S. 296 , 384 U. S. 298 , n. 30, infra. Senator Kefauver stated explicitly on the Senate floor that the mere elimination of competition between the merged firms would not make the acquisition illegal; rather, "the merger would have to have the effect of lessening competition generally." 96 Cong.Rec. 16456.
Eighteen years ago, a dictum in Federal Trade Commission v. Morton Salt Co., 334 U. S. 37 , 334 U. S. 46 , adverted to a "reasonable possibility" as the appropriate standard for the corresponding language ("may be to substantially lessen competition") under § 3 of the Clayton Act, 15 U.S.C. § 14. The dictum provoked a sharp dissent in that case, id. at 334 U. S. 55 , 334 U. S. 57 -58, and the Court subsequently withdrew it, Standard Oil Co. v. United States, 337 U. S. 293 , only to reinstate it again today. This issue, which appeared settled at the time of the 1950 amendment, provoked an acrimonious exchange during the Senate hearings. Hearings before a Subcommittee of the Senate Committee on the Judiciary on H.R. 2734, 81st Cong., 1st & 2d Sess., pp. 160-168.
Cf. Ferguson v. Skrupa, 372 U. S. 726 . In criticizing a recent decision of the Federal Trade Commission, one commentator has stated, in terms applicable mutatis mutandis to the Court's decision in the present case:
Thus, the Court's aphorism in United States v. Philadelphia Nat. Bank, 374 U. S. 321 , 374 U. S. 363 -- that "[c]ompetition is likely to be greatest when there are many sellers, none of which has any significant market share" -- is peculiarly maladroit in the historic context of the retail food industry. See also Hampe & Wittenberg, The Lifeline of America: Development of the Food Industry 313-372 (1964); Lebhar, Chain Stores in America 1859-1962, pp. 348-390 (1963).
See Foremost Dairies, Inc., 60 F.T.C. 944; Beatrice Foods Co., F.T.C.Docket No. 6653 (April 26, 1965); National Tea Co., F.T.C.Docket No. 7453 (March 4, 1966). Cf. United States v. Penn-Olin Chemical Co., 378 U. S. 158 ; Proctor & Gamble Co., F.T.C. Docket No. 6901 (Nov. 26, 1963), rev'd 358 F.2d 74 (C.A.6th Cir.); Turner, Conglomerate Mergers and Section 7 of the Clayton Act, 78 Harv.L.Rev. 1313.
Los Angeles is, to be sure, a big place. Although Shopping Bag's share of the Los Angeles market was only 4.2%, its sales in 1958 totaled $84,000,000. Compare the Court's statement in Tampa Electric Co. v. Nashville Coal Co., 365 U. S. 320 , 365 U. S. 333 -334:
Brown Shoe Co. v. United States, 370 U. S. 294 , 370 U. S. 319 ; cf. House Hearing, supra, n. 5, pp. 40-41; Senate Hearings, supra, n. 10, pp. 6, 51; 95 Cong.Rec. 11486, 11488, 11506; 96 Cong.Rec. 16436; H.R.Rep.No.1191, 81st Cong., 1st Sess., pp. 6-8; S.Rep.No.1775, 81st Cong., 2d Sess., p. 4. However, the Court today in a gratuitous dictum, ante, p. 384 U. S. 277 , undercuts even that principle by confining it to cases in which competitors are obliged to merge to save themselves from destruction by a larger and more powerful competitor.
United States v. Philadelphia Nat. Bank, 374 U. S. 321 , 374 U. S. 365 , n. 42. That corollary, of course, has no application here, since the Los Angeles retail grocery market can in no sense be characterized as one in which "concentration is already great." Compare United States v. Aluminum Co. of America, 377 U. S. 271 ; United States v. Continental Can Co., 378 U. S. 441 . The importance of a trend toward concentration in the particular industry in question was recognized in Brown Shoe Co. v. United States, 370 U. S. 294 , 370 U. S. 332 . See also Pillsbury Mills, Inc., 50 F.T.C. 555, 572-573; United States v. Bethlehem Steel Corp., 168 F.Supp. 576, 604-607 (D.C.S.D.N.Y.); U.S. Atty. Gen. Nat. Comm. to Study the Antitrust Laws, Report 124 (1955).