Document: 384 U.S. 270 86 S.Ct. 1478 16 L.Ed.2d 555 UNITED STATES, Appellant,v.VON'S GROCERY COMPANY et al. No. 303. Argued March 22, 1966. Decided May 31, Richard A. Posner, Washington, D.C., for appellant. William W. Alsup, Los Angeles, Cal., appellees. Henry J. Bison, Jr., National Ass'n of Retail Grocers United States, as amicus curiae. Mr. Justice BLACK delivered the opinion Court. 1 On 25, 1960, States brought this action charging that acquisition by Von's Grocery Company its direct competitor Shopping Bag Food Stores, both large retail grocery companies in California, violated § 7 Clayton Act which, amended 1950 Celler-Kefauver Anti-Merger Act, provides relevant part: 2 'That no corporation engaged commerce * shall acquire whole or any part assets another also commerce, where line section country, effect such may be substantially to lessen competition, tend create a monopoly.'1 3 28, three days later, District Court refused grant Government's motion temporary restraining order and immediately took over all Bag's capital stock including 36 stores Angeles area. After hearing evidence on sides, made findings fact concluded matter law there was 'not reasonable probability' merger would 'substantially competition' 'create monopoly' violation 7. For reason entered judgment defendants. 233 F.Supp. 976, 985. The Government appealed directly authorized Expediting Act.2 sole question here is whether properly facts before it had failed prove 4 record shows following our decision. market involved In 1958 sales ranked third area sixth. 1960 their together were 7.5% total two one-half billion dollars groceries sold each year. many years enjoyed great success rapidly growing companies. From 1948 number practically doubled from 14 27, while at same time jumped 15 34. During decade, increased fourfold share almost multiplied seven times tripled. these highly successful, expanding aggressive competitors created second largest chain with $172,488,000 annually. addition show owners operating single decreased 5,365 3,818 1961. By 1963, after merger, single-store dropped still further 3,590.3 roughly period, 1953 1962, chains more 96 150. While business being concentrated into hands fewer owners, small continually absorbed larger firms through mergers. According an exhibit prepared one expert witnesses, period 1949 nine top 20 acquired 126 smaller competitors.4 Figures principal defense witness, set out below, illustrate acquisitions mergers industry 1954 1961 Giant, Alpha Beta, Fox, Mayfair, among 10 leading area.5 Moreover, table Federal Trade Commission appearing reply brief, but not here, have continued rapid rate since merger.6 These alone are enough cause us conclude contrary Von's-Shopping did violate Accordingly, we reverse. 5 country's beginning has been abiding widespread fear evils which flow monopoly—that concentration economic power few. basis fear, Congress 1890, when Nation's industries already what deemed too few hands, passed Sherman attempt prevent preserve competition sellers. Several 1897, emphasized policy calling attention tendency powerful combinations restrain 'by driving dealers worthy men whose lives spent therein, who might unable readjust themselves altered surroundings.' v. Trans-Missouri Freight Ass'n., 166 290, 323, 17 540, 552, 41 L.Ed. 1007.7 protect businessmen elimination monopolistic pressures used grow ever powerful. As result 1914 Congress, viewing continuous, pervasive threat business, prohibited corporations under most circumstances merging purchasing competitors. Ingenious businessmen, however, soon found way avoid began merge simply rivals' assets. This 1926, dissent Brandeis, joined Chief Taft Justices Holmes Stone approved device avoiding 78 concentrate until now us. 6 Like 1890 1914, basic purpose American economy keeping business.9 stating purposes bill, sponsors, Representative Celler Senator Kefauver, widely shared other members businessman market.10 1940 1947, center throughout hearings debates characterized series between resulting steady erosion independent economy.11 said Brown Shoe Co. 370 294, 315, 82 1502, 1518, 8 510, 'The dominant theme pervading congressional consideration amendments considered rising tide economy.' To arrest 'rising tide' toward halt gradual demise businessman, decided clamp down vigor It revitalized 'plugging loophole' broadened scope so only prohibit competitors, 'may having effect. using terms look merely actual present instead upon future sought businesses arresting trend incipiency developed point left grip big Thus, gaining momentum market, must alert carry Congress' intent against everincreasing mergers.12 case exactly threatening wanted halt. declining decline afterwards. store moved hand significant absorptions ones. midst steadfast concentration, Bag, successful area, jointly owning 66 merged become Angeles. cannot defended ground about fail save destruction some competitor.13 What makes them even than they before. If 7, certainly does takes place long continuous owner-competitors sort do so, declared arrested. Appellees' primary argument because competitive since, continue future. Even 'requires appraisal immediate impact prediction conditions future; meant intended anti-competitive tendencies 'incipiency." Philadelphia Nat. Bank, 374 321, 362, 83 1715, 1741. enought feared marked slowly inevitably gravitate dominated giants, thereby destroyed. competition. Our cases passage faithfully endeavored enforce command.14 We adhere now. 9 Here again El Paso Gas Co., 376 651, 662, 84 1044, 1050, 12 12, appellees 'have notice antitrust charge reverse below divestiture without delay.' See E. I. du Pont De Nemours & 366 316, 81 1243, 318; Alcoa, 377 271, 281, 1283, 1289. Reversed remanded. 11 FORTAS decision case. APPENDIX TO OPINION OF THE COURT. Table 1. 13 metropolitan 1954-61 Number Year Acquiring firm Acquired 1957......Piper Mart..........Bi-Right Big Bear.3 1958......Mayfair.............Bob's Supermarket.7 18 1961......Better Foods........Border's Markets.3 19 1954......Kory's Markets......Carty Brothers .8 1958......Food Giant..........Clark Markets.10 1956......Fox.................Desert Fair.4 1959......Lucky...............Hiram's....6 1958......Fox.................Iowa Pork Shops.11 21 1961......Food Giant (and others).McDaniels's Markets.16 22 1957......Food Giant..........Panorama 1958......Pix.................Patton's Mkts.3 23 1958......Alpha Beta..........Raisin Markets.13 24 1960......Piggly Wiggly.......Rankins Markets.4 1959......Pix.................S K Markets.2 1960......Vons's..............Shopping Bag.37 25 1959......Pix.................Shop Right 1958......Yor-Way.............C. S. Smith.5 Giant..........Toluca Marts.2 26 1957......Mayfair.............U-Tell-Em 27 ..........Total ..............150 2. 28 1961-64 company (or stores) Type 29 Name Sales Horizontal Others Stores(thousands)2 30 Acme Markets.Alpha Beta Markets 45 $79.042 --- X 31 Boys Markets.......Korys Markets.5.10,000.X 32 Markets.McDaniels Markets.9.21,500 X* 33 Mayfair Markets....Yorway Markets.1.1,500.X Markets........1.1,700.X 34 1962 Markets.Schaubs Market.1.1,800 Fox Markets........1.......2,200.X 35 Ralph's Co..Imperial Supreme 916 1963 Fair Stores.Fox Markets.22.44,419 37 KrogerMarket Basket...........53.110,860.--- 38 Markets....Bi Rite Markets.1.2,569 Dales Market..1.......2,200.X Markets.1.......1,700.X 39 1964 Albertson's, Inc..Greater All 30,308 40 Markets....Gateway Market.4.8,000.X Pattons Markets....4......10,400.X Co..Cracker Barrel Supermarket. 1,000 42 Markets.7.18,350 43 Total horizontal...------------------------ 83,835 44 market.......------------------------ 134 264,629 46 extension Consists Orange Counties. (1963 census defined County only.) cases, 12-month prior acquisition. market. But 8% sales, 4.7% sixth 4.2%. four 24.4% eight 40.9% 48.8% compared 25.9%, 33.7% 38.8% 1948. very probably 10. Further, those gained lost. Also, although declined substantial amounts. 47 Given towards sellers promises continue, clear me 40% leaders lesser vulnerable absent special proof contrary. Bag. Both companies, grown 28.8%, 44% 50%. disposed firms. my view sufficiently proved monopoly. 48 STEWART, whom HARLAN joins, dissenting. 49 first gave amendment 510. thorough wrote things plain: First, standards require every corporate judged light contemporary context industry.1 Second, statutory purpose.2 Today turns back principles decisions followed them. 50 effort appraise effects food area.3 Instead, simple exercise sums, finds individual years, and, apparently theory degree invariably proportional holds historic reduction competing units invalidate within need examine level potential adverse startling per se rule previous decisions, language legislative history amendment, reality. 51 Under amended, can invalidated if, 'the monopoly.' No raised concern 52 danger addressed cumulative centripetal corporations, none itself sufficient constitute Act. buying companies.4 A major aspect perceived absentee ownership local business.5 Another, generalized, revealed stem economy.6 goals, thought, could achieved 'arresting lessening incipiency.' supra, 317, S.Ct., 1520. 53 concept restraints trade 'incipiency' innovation amendment. notion report original Senate Committee Judiciary reiterated 1950.7 That undefined. leaves doubt applicable standard measuring substantiality 'reasonable competition.8 thus stringent 'mere possibility' lenient 'certainty' other.9 I agree incipient stage effective increased. indication whole, augurs whatsoever businessman. substituted bare conjecture probability lessened.10 54 rests conclusion 'crucial point' that, 11-year 1961, 29% 3,818.11 Such should, course, investigation industry. Court, end, beginning, analysis. counting-of-headsgame played today operators becomes yard-stick automatic disposition 55 believe superficial analysis plain fallacy Court's syllogism necessarily reduced declined.12 meaningful sense, structure remains unthreatened concentration. Local vigorous fault, operators. continuing population explosion outrun expansion plans chains, offers surfeit opportunity sizes.13 Affiliated cooperatives give smallest strength competitor, new taken full advantage remarkable ease entry And, important all, cries numerical transcending social technological changes positively preclude inference suffered attrition 56 Section never use charter roll supermarket revolution. Yet hardly requiem so-called 'Mom Pop' stores—the bakery butcher shops, vegetable fish markets—that economically technologically obsolete parts country. resurrect old single-line run automobile obliterated freeway. transformation society Second World War completely shelved specialty stores, relegated much less central role economy. Today's enterprise retailing supermarket. Accessible housewife's wide radius, houses roof entire requirements family. Only reactionary philosophy ago rejected Due Process Clause read make stand still, mold pattern era.14 57 equivocal regard status question. contrary, abundant dramatic growth prosperity 58 finding increase amply supported if gauged measure units. Between 1958, Safeway, 14% 8%. combined shares 21% period; 1952—1958, three, four, five declined. true 57%. crucial existence Because turnover membership firms, group reliable indicator concentration.15 59 addition, statistics strongly suggest decade ago. rose 150, 56%. occurred overwhelmingly size, composed stores. 'chains' 104, 86%. Although during 1953.16 60 fully reveal dynamism vitality period. various 1953—1962, 269 separate doing 208 two- three-store chains. therefore, 173 appearance 119 went stores.17 vast majority turbulence represented stores; 143 born size. Testimony exception, outgrowth one-store operations.18 There comparable turmoil equally permeate operations area.19 fashioning rule, based net arithmetical operators, disregards obvious procreative reflected turbulent exit 61 support invokes sets data regarding absorption detailed Appendix, Tables opinion, Not store.20 ways. unit heavily relied place. tables reproduced Appendix trace activity involving And shown spite How then rely area? 62 market-acquisition 1954—1961,21 work sheets questionable reason. 7th, 8th, 9th, 10th, respectively, percentage acquisitions, face six considerably blunted. feature disclosed expanded period.22 63 reliance 120 withstand complete record. Forty percent representing gross $71,000,000, Yor-Way, McDaniels, 11th, 20th, according Each subsequently bankruptcy overexpansion, under-capitalization, inadequate managerial experience. post-acquisition relatively comports tacit portrayal inexorable march oligopoly. 64 sustain three-year indiscriminately lumps horizontal market-extension mergers.23 mergers, reveals course dispositions bankruptcy. failing immune International Commission, 280 291, 301—303, 89, 92—93, 74 431. concerns well 3,500, going de minimis seriously maintained negligible foreclosed meaning Cf. 329, 1526, 65 post-merger ante, type, neither nor distinctions classical mergers.24 Whatever wisdom logic assumed arithmetic proportion applied possible assumption mere occurrence adequate proceeds, establishes substantial, predominant, overtones. located southern western portions northern eastern portions. areas competed directly, least several patronage customers. 'housewife's 10-minute time' test conducted Department government slightly half position compete market.25 partially another, overlap approximately 25% overall horizontal, nowhere recognizes exists itself. 1% preempted therefore identical 0.77% foreclosure accepted 'quite insubstantial' Tampa Electric Nashville Coal 365 320, 331—333, 623, 630—631, 580. 67 irony sweeping construction detriment local, largely family-owned concerns, 5% acquisition.26 defendants punished sin competition.27 inaccurate suggestions, pp. 277-278, 'powerful' before, merger. record, demonstrate, increment obtained equated firm. 'failing company' casts strong contention competitor.28 lack qualified executive personnel29 increasing, earnings profits declining.30 clearly comported desirability retaining 'local control' industry' noted 315—316, 1518—1519. 68 With 'plight' unequivocal his secure frequently stores.31 independents attributable recent spectacular California cooperative organizations. Membership groups unrestricted; them, able purchase goods prices offered suppliers chains.32 rise organizations introduced source countervailing sacrificing advantages operation. assistance available cooperatives, implicit equation seems invalid. 69 barriers entry. contains references numerous instances modest initial investments. Many opened entrants unwanted outlets chains; chainstore executives resigned enter own. Enhancing free access absence restrictive factors patented technology, secrets, product differentiation. 70 Numerous attest pugnacious silently ignored emphasis solely Three thousand hundred ninety lot frequent price battles belie suggestion remotely threatened descent consciously interdependent pricing characteristic turning corner birth dynamic forces—discount departments department bantams superettes, deli-liquor drive-in dairies—promises unremitting shred impaired Industry witnesses testified realistic criterion, intense ever. 71 harsh prejudice irrevocably difficult choice faced medium-sized myriad markets today's will felt, expand building additional facilities.33 foreclosing sale attractive avenue eventual exit, deter stifle seeks foster. 72 sentence omnibus footnote close pronounces consistent consistency find litigation always wins. precedent sight holding 915. case, interest practical judicial administration, proposed simplified illegality: '(W)e think produces controlling undue results inherently likely enjoined showing anticompetitive effects.' 363, 1741.34 produced 1.4% resulted 1.1% 3.3% former figures 'undue percentage' latter 'significant increase' suspect Bank. fall far outside established precisely involved.35 73 tests illegality 'intended similar courts interpreting sections Act.' H.R.Rep. 1191, 81st Cong., 1st Sess., p. 8. pains demonstrate 366, 1742—1743, disdains today. Untroubled history, construing either provision laws, grounds impressionistic assertion becoming 'concentrated' emotional given however fragmented, understandable, substitute required Nothing indicates ephemeral possibility standard. met affirm Stat. 731, 1125, U.S.C. (1964 ed.). 823, 989, Despite Finding Fact 80, follows: 'There Metropolitan Area last *.' contradicted referred above. appearent term 'concentration' sense decrease here. Appellees, claim changed acquisitions: 'It should error annual volume $31,700,000. Actually change name appear Brief 1961: 1, reproducing above-mentioned table. Later, 1945, Judge Learned Hand, reviewing laws designed foster said, 'Throughout statutes constantly perpetuate preserve, own sake cost, organization effectively other.' Aluminum America, Cir., 148 F.2d 416, 429. Thatcher Manufacturing 272 554, 560, 175, 178, 405. See, e.g., 362—363, 1740—1741, 915; 280, 1289, 314. Celler, introducing bill House floor, remarked: 'Small, independent, decentralized kind built up country great, first, fast disappearing, second, dependent monster concentration.' 95 Cong.Rec. 11486. Kefauver expressed floor: 'I approaching fundamental problem Shall permit *? Or operations, enterprise?' 16450. References remarks Congressmen collected n. 1519, H.R.Rep.No.1191, 3, U.S.Code Congressional Service, 4293, described movement '* outstanding rather combining rivals. More 1940—47 $5,000,000. contrast, 93 bought held $1,000,000. Some 200 industrial average each, purchased each.' U.S., 346, 1535; 1740. 353 586, 597, 77 872, 879, 1057, 319, 1521. 1502; 1715; 1044; 1283; Continental Can 378 441, 1738, 953; FTC Consolidated Foods, 380 592, 85 1220, 95. statement counsel oral argument, take McDaniel's 1964. listed WHITE, concurring. join, hold exhibiting violates unless saved doctrine; declare illegal '(A) functionally viewed, particular industry.' 321—322, 1522. '(B)oth have, intent, recognized relevance importance places framework unique case.' Id., 322, 38, 'Taken illuminates protection desire extent competition.' reach involves distribution. Kaysen Turner, Antitrust Policy (1959), discussed terms: 'As guess, say distributive trades, especially structurally unconcentrated *. (T)he significance structural oligopoly different (these trades) manufacturing mining. traditional local-market essentially character correct quoted opinion. Mention notably history. oligopolized industries, concerned trends remote approach 'monster concentration' spoke Representatives. Hearing Subcommittee H.R. 2734, (remarks Kefauver). Much fuel derived study 1947. Report Merger Movement: Summary (1948). critical report, published pending slight. Lintner Butters, Effect Mergers Industrial Concentration, 1940—1947, Rev. Econ. Statistics (1950). Two economists later acquiesced conclusion. Blair Houghton, Lintner-Butters Analysis 63, 67, (1951). S.Rep. 698, 63d 2d 1: 'Broadly stated, treatment unlawful monopolies certain practices singly themselves, covered act July 2, (the Act), existing acts, thus, making illegal, creation trusts, conspiracies, consummation.' 1775, 4—5: cope attained justify proceeding;' id., 6: conveyed words ('may be') necessary element statute develop full-fledged violative Reports carefully delineate provisions monopolization refer appeared 1519. point: competition') means enacted, apply prescribed (sic) be' 1914. 6. 16453 14463—14464 (amendment Reed). eschewed exclusively mathematical assessing generalizations indicative proscribed, e.g.: Whether eliminated factor competition; size acquiring decisive competitors; enterprises eliminated. 36, arguably merger; aspects profit margin weak equivocal. 295—296, 298, 30, infra. stated explicitly floor illegal; rather, generally.' 16456. Eighteen ago, dictum Morton Salt 334 37, 46, 822, 828, 92 1196, adverted appropriate corresponding 14. provoked sharp 55, 58, 832, 833—834, withdrew it, Standard Oil Stations 337 293, 1051, 1371, reinstate issue, settled acrimonious exchange hearings. Hearings 160—168. year available, 3,590 breakdown concerns. extensive mational scale, 1939 109,000, 28%. $50,000. higher brackets figures, taken, included undetermined liquidating closed remaining lines nongrocery retailing, wholesaling, manufacturing, etc. Staff Economic Inquiry Into Marketing, Part I, Concentration Integration Retaining 48, (1960). generalized Bok, Merging Law Economics, Harv.L.Rev. 226, 312, 261: '(T)here serious problems connected yardstick. contributes particular, fringe affect production policies whole. Alternatively, marginal costs financial situations much, any, conditions; indeed remain operation excessive earned stronger An (exit) counting heads imply.' 4,300,000 6,800,000 695 1,439. Additional geographical division city suburbs, specific loyalty residents. Ferguson Skrupa, 372 726, 1028, 93. criticizing commentator mutatis mutandis case: Any child alive 1950's see restructuring on. adjusting itself, mechanisms profound life. word relates proliferation shopping centers, final triumph supermarket—an spread across Western world. revolution stop. Plenty living women remember era virtually 'any share.' Was high retailing? little towns had, fact, bought. typical neighborhood, range willingness lug home foot, relaxed 'competitors.' she like quality her black-string bag, board trolley car, try luck 'competitors' neighborhood.' Ways, New 'Worst' Antitrust, Fortune, April 1966, 111—112. preceding supermarkets, drew customers limited block direction happened virtual monopoly trade.' aphorism 1741, 915—that '(c)ompetition greatest sellers, share'—is peculiarly maladroit Hampe Wittenberg, Lifeline America: Development 313—372 (1964); Lebhar, Chain Stores America 1859—1962, 348—390 (1963). Joskow, Structural Indicia: Rank-Shift Supplement Ratios, VI Bulletin (1961). showed slight 1960. concurring 'All 10,' conjecture. demonstrates 1958; identifies charts subsequent national level, Small Virility Bar Monopoly, Store Age, Jan. E20. Gould, Relation Growth Size Multi-Store Retailers (1966) (inverse correlation stores). Of altogether, store, facts, witness concluded: apparent ability grocers entities staggering precludes oligopolistic foreseeable remembered 1953, best managed, They programs proportions 1953. Yet, swept aside necessity significantly greater host affiliated voluntary groups. ones convincingly don't Angeles.' Data agitation loss 132 outlet 128 single-outlet examination discloses purchases ranging somewhat misleading weights drawn favor consisting numbers one- two-store ten-store individuals. table, submitted filed eve argument. Foremost Dairies, Inc., F.T.C. 944; Beatrice Foods F.T.C.Docket 6653 (April 26, 1965); Tea 7453 (March 4, 1966). Penn-Olin Chemical 158, 1710, 775; Proctor Gamble 6901 (Nov. 1963), rev'd 358 (C.A.6th Cir.); Conglomerate 1313. Evidence indicated witness. At operated commenced partnership Von der Ahe family 1932, depression, concession store. 1930. So reveals, behavior impeccable expansion, internal growth. discussing vis-a -vis Hand '(T)he mean condemn resultant forces prime object foster: finis opus coronat. urged compete, turned he wins.' 430. Nor altogether easy escape feeling Adelman, Problems: Antimerger 1950—60, Am.Econ.Rev. 236, 243 (May 1961): 'In dictionary, connection control share. four-letter word: size.' is, sure, 4.2%, totaled $84,000,000. Compare 333—334, 631: contract preempts worth perhaps $128,000,000, 'is, insignificant insubstantial.' $128,000,000 considerable sum money, days, dollar volume, 'merger enable combination dominating market,' 1521; cf. Hearing, 5, 40—41; Hearings, 10, 6, 51; 11486, 11488, 11506; 16436; 6—8; S.Rep.No.1775, 4. However, gratuitous dictum, 277, undercuts principle confining obliged competitor. Hayden, president stockholder advanced management staff responsibilities. income 1.6% 1957 0.9% 1959, 6.6% 3.2%. 2.1% 2.3%, 12.7% 10.8%. One operator, adjacent mile others, testified, often asked successfully My answer me.' Another operator 'Competition store-by-store myself out-compete personalized service, better labor relations, personal seeing properly.' good large, actually easier independent's viewpoint. choice, operate near independent.' generally Retailing, c. VI, 'Retailer-owned Cooperative Wholesalers'; VII, 'Wholesaler-sponsored Voluntary Groups' Certified Ltd., retailer-owned principally $87,000,000 $345,000,000 exceeded Most development association Grocers, called 'mother' offer lower obtain. provided merchandising, advertising, promotions, inventory control, financing 302—303 footnote, corollary 'if preventing increases preserving deconcentration correspondingly great.' 365, 42, 1742. corollary, application 'concentration 314; 953. 332, 1527. Pillsbury Mills, 555, 572—573; Bethlehem Steel Corp., 168 576, 604—607 (D.C.S.D.N.Y.); Atty. Gen. Comm. Study Laws, 124 (1955). 14.4% 15.5%, 32.1% 35.4%. Bank 30% 59% failure reference piece theory. dwell barometers suggested commentators. note falls outside, fringe, mechanical proposed. 133—136 (1959) (horizontal prima facie accounts 20% market; producing present, influence company); Stigler, Preventive Policy, 104 U.Pa.L.Rev. 176, 179 182 (1955) (acquisition more; permitted 5—10%); 308—329 (1960) (no 2—3%; two-to-eight 7—8% existed 5—10 years; more). Markham, 7: Six-Year Appraisal, Va.L.Rev. 489, 521—522 (1957). promoted ad hoc endeavor rationalize

Category: 7