Opinion ID: 409218
Heading Depth: 1
Heading Rank: 3

Heading: The Commission's Opinion

Text: 8 Against the background outlined above, the Commission concluded that the relevant market for antitrust analysis was the market for replacement shock absorbers, including conventional shock absorbers, McPherson struts and steering dampers. While the Commission found that competitive performance in this highly concentrated market improved substantially in the years just prior to the (Tenneco-Monroe) merger, it attributed the market's improved economic performance to industry fears that Tenneco was likely to attempt entry. Commission Opinion at 13-14, J. App. at 203-04. In other words, the Commission believed that Tenneco was exerting an edge effect on the industry, causing existing manufacturers to compete aggressively in an attempt to discourage entry by Tenneco. The Commission concluded that once Tenneco acquired Monroe and was no longer perceived as a potential independent competitor, the edge effect disappeared. The Commission predicted that as a result manufacturers would revert to the anticompetitive, oligopolistic activities that typify competitors in a highly concentrated market. Id. The Commission also ruled that, in addition to this alleged edge effect, which is grounded in industry perceptions, Tenneco was in fact likely to enter into the independent manufacture of replacement shock absorbers in competition with existing producers. This likelihood vanished upon the Tenneco-Monroe merger. For these reasons the Commission ruled that the effect of (Tenneco's) acquisition (of Monroe) is likely to lessen competition substantially in the sale of replacement shock absorbers through the elimination of both perceived and actual potential competition in violation of both Section 7 of the Clayton Act and Section 5 of the Federal Trade Commission Act. 4 Commission Opinion at 68, J. App. at 258. B. DISCUSSION 9 Tenneco challenges both the Commission's definition of the relevant market and its findings with respect to Tenneco's effect on that market as a potential competitor. The parties agree that our consideration of these issues is governed by the substantial evidence standard of review. Under that standard, 10 the Commission's findings of fact, if supported by substantial evidence, shall be conclusive, 15 U.S.C. § 21(c), and we may not substitute our inferences for those drawn by the Commission simply because we might have evaluated the facts differently as an original matter. See FTC v. Pacific States Paper Trade Ass'n, 273 U.S. 52, 63, 47 S.Ct. 255, (258) 71 L.Ed. 534 (1927); Simeon Management Corp. v. FTC, 579 F.2d 1137, 1142 (9th Cir. 1978). However, the Commission's findings must be supported by substantial evidence and there must also be a rational connection between those findings and its conclusions. 11 Fruehauf Corp. v. FTC, 603 F.2d 345, 351 (2d Cir. 1979). 12 Even assuming that the Commission's market definition is supported by substantial evidence, we hold that the Commission's findings on the elimination of potential competition are not. Accordingly, we do not address Tenneco's challenges to the market definition, but move directly to the potential competition issues. 13