Opinion ID: 463524
Heading Depth: 2
Heading Rank: 1

Heading: The Significance of Emerson's Viability

Text: 39 Both plaintiffs argue in their briefs that the Court has misconstrued, mischaracterized, and misunderstood their statistical argument regarding the attribution of KitchenAid's market share to Whirlpool. They claim that whether or not Emerson is independently viable, all of KitchenAid's market share must be assigned to Whirlpool, not Emerson, when the transaction is complete. The fact that the plaintiffs may not consider Emerson's viability to be relevant to the question of the proper post-acquisition attribution of KitchenAid's manufactured units market share does not make it irrelevant. 40 The Court finds Emerson's independent viability to be the key to the proper post-acquisition attribution of KitchenAid's manufactured units market share. This conclusion seems the only one to logically flow from the plaintiffs' own argument. 41 Magic Chef's brief in opposition to the motion to vacate maintains that, ... KitchenAid's market share must be attributed to Whirlpool because the supply contract would place that portion of Emerson's production capacity under Whirlpool's control.... Magic Chef Brief, p. 4. Similarly, White's brief argues: 42 Whether Emerson manufactures the KitchenAid branded dishwashers for Whirlpool or Whirlpool makes them for itself makes no difference for purposes of analyzing the competitive forces in the market--for purposes of this case, to treat Emerson as an independent manufacturer of the 7% KitchenAid dishwasher market share without recognizing the entire share constituted Whirlpool's requirements is the triumph of form over substance.... That is the economic reality of the situation and it is pure fantasy to count Whirlpool's KitchenAid market share as part of the production market share of Emerson. White Brief, pp. 4-5 (emphasis in original) (footnote omitted). 43 The plaintiffs insist that if Whirlpool absolutely controls some aspect of Emerson's production, the market share represented by those units must be attributed to Whirlpool. With that premise, the Court agrees. But the inquiry does not end there. The question then becomes, does Whirlpool, in fact, absolutely control any or all of Emerson's production. 44 In its previous order, the Court found that certain restrictions placed on Emerson by the supply contract so limited its independence that it might never become a viable player in the dishwasher market. This lack of independence fueled the Court's finding that Emerson would not effectively control its own production. With the limitations in place, Emerson would be so dependent upon the requirements demands of Whirlpool that Whirlpool would have control over much of Emerson's dishwasher production. Thus, with the supply contract restrictions in place, the Court accepted the plaintiffs' market share attribution argument. 45 Under the amended contract, the restrictions have been eliminated and Emerson will be able to act as an independent force in the market. The plaintiffs insist that Emerson's independence and viability are irrelevant, but this claim ignores the basic premise of the attribution argument: that attribution should take place when one firm controls another's production. The Court finds, based on the evidence before it, that under the amended supply contract, Whirlpool would not have the control over Emerson's production which would justify attribution of KitchenAid's market share to Whirlpool rather than Emerson. 46 The amended contract affords Emerson the ability to seriously compete in the dishwasher market, making the supply contract less economically compelling for Emerson. While the supply contract will provide Emerson substantial profits during its pendency, an independent Emerson will be in the position to determine whether or not the supply contract is the most profitable deployment of its resources. Without substantial independence, Emerson would be forced to be content with the profits from the supply contract. Yet, the independence and viability which the amended contract provides Emerson also makes realistic its option to abandon the supply contract, on one year's notice, in favor of other, more profitable endeavors. 47 The plaintiffs have chosen to ignore the economic reality that Emerson is an impressive company with a long history of successful private labeling enterprises in a range of product markets. The Whirlpool/Emerson stock purchase agreement and the amended supply contract provide Emerson with virtually all that was once KitchenAid, leaving to Whirlpool only the KitchenAid name and the garbage disposer plant. 48 Under the amended supply agreement Emerson will be in complete control of its own production, with the option to maintain the supply agreement with Whirlpool or turn elsewhere with the Model 21. Emerson will be the company selling the best dishwasher in the world to the highest bidder, competing with other private label suppliers. At the end of this transaction, Whirlpool will simply become another of Emerson's private label customers in another one of its many product markets. 49 Whether or not the plaintiffs chose to accept it, their attribution argument hinges upon whether or not Whirlpool will control Emerson's production. The Court finds that the independence afforded Emerson by the amended supply contract, independence not afforded under the original supply contract, will free Emerson from any production control by Whirlpool. Accordingly, under the changed circumstances brought about by the amended supply contract, the Court finds that the attribution of post-transaction KitchenAid market share to Whirlpool would be inappropriate. KitchenAid's manufactured units market share should be attributed to Emerson, which will own the KitchenAid manufacturing plants and will control its own production destiny. 50 Given the attribution of KitchenAid's market share to Emerson, the Court finds that the pre- and post-transaction manufactured units market share four-firm concentrations and HHIs will be the same. Therefore, the Court finds that a statistical analysis of the proposed transaction in no way suggests the existence of anti-competitive agreements.