301 F.2d 585 (3rd Cir. 1962), 13277, A. G. Spalding & Bros., Inc. v. Federal Trade Commission
|Citation:||301 F.2d 585|
|Party Name:||A. G. SPALDING & BROS., INC., Petitioner, v. FEDERAL TRADE COMMISSION, Respondent.|
|Case Date:||March 22, 1962|
|Court:||United States Courts of Appeals, Court of Appeals for the Third Circuit|
Argued Feb. 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.
Alan B. Hobbes, Washington, D.C. (Pgad B. Morehouse, Acting General
Counsel, Jno. W. Carter, Jr., Miles J. Brown, on the brief), for the Federal Trade Commission.
Before KALODNER, STALEY and FORMAN, Circuit Judges.
FORMAN, Circuit Judge.
A.G. Spalding & Bros., Inc. (Spalding) seeks to review and set aside an order of the Federal Trade Commission (Commission) directing it to divest itself of all the capital stock and assets of Rawlings Manufacturing Company (Rawlings) which it acquired in 1955. The order was based upon the Commission's opinion concluding that the acquisition of Rawlings by Spalding violated 7 of the Clayton Act, as amended, 64 Stat. 1125, 15 U.S.C.A. § 18, which provides in pertinent part as follows:
'No corporation engaged in commerce shall acquire, directly or indirectly, the whole or any part of the stock or other share capital and no corporation subject to the jurisdiction of the Federal Trade Commission 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.'
PLEADINGS AND PRIOR PROCEEDINGS
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 Seciton 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.
Spalding further stated in its answer that Rawlings was likewise engaged in
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 Seciton 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 per-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. 1 Spalding rested without offering evidence and moved for dismissal of the complaint.
Before the Hearing Examiner counsel for the Commission selected 19 products manufactured and sold by both Spalding and Rawlings (including those that are sold by both but not manufactured by both), 2 as 'illustrative of the area in which the acquisition of Rawlings will have a substantial economic impact.' They were:
Spalding made no substantial objection to the consideration of the list as selected. The Hearing Examiner's findings with respect to the competitive effect of the merger were based primarily on an analysis of the following product
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. 3
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. 4
THE GENERAL LINE ATHLETIC GOODS COMPANIES
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 Maunfacturing 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.
Spalding had its beginning in 1876 when two brothers, Albert G. Spalding and J. Walter Spalding, formed a partnership for the sale of baseball equipment at wholesale and retail. Later a brother in law, William t. Brown, was admitted to the partnership. In 1885 the partnership was incorporated in Illinois under the name of A.G. Spalding & Bros. In 1892 A.G. Spalding & Bros. was incorporated in New Jersey. All of the capital stock of the following corporations was transferred to the New Jersey corporation:
1. A. G. Spalding & Bros., the Illinois corporation;
2. Wright & Ditson, a New Jersey corporation engaged in the manufacture of athletic goods, with emphasis on tennis rackets;
3. A. J. Reach Company, originally a partnership incorporated in about 1885, engaged principally in the manufacture of baseballs and baseball mitts and gloves;
4. George Bernard & Company, a New Jersey corporation engaged in the manufacture of uniforms and knit goods;
5. Spalding Manufacturing Company, an Illinois corporation formed to operate the A.G. Spalding & Bros. baseball-bat factory; and
6. Pect & Snyder, a retail store in New York City dealing in sporting equipment.
It continued its corporate existence without material change until the depression period of the 1930s. In 1934 another reorganizaiton occurred as a
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...
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