United States v. Continental Can Company

• Citation: 84 S.Ct. 1738,12 L.Ed.2d 953,378 U.S. 441
• Decision Date: 22 June 1964
• Docket Number: No. 367,367
• Parties: UNITED STATES, Appellant, v. CONTINENTAL CAN COMPANY et al
• Court: U.S. Supreme Court

378 U.S. 441

84 S.Ct. 1738

12 L.Ed.2d 953

UNITED STATES, Appellant,

v CONTINENTAL CAN COMPANY et al.

No. 367.

Argued April 28, 1964.

Decided June 22, 1964.

[Syllabus from pages 441-443 intentionally omitted] Ralph S. Spritzer, Washington, D.C., for appellant.

Helmer R. Johnson, New York City, for appellees.

Mr. Justice WHITE delivered the opinion of the Court.

In 1956, Continental Can Company, the Nation's second largest producer of metal containers, acquired all of the assets, business and good will of Hazel-Atlas Glass Company, the Nation's third largest producer of glass containers, in exchange for 999,140 shares of Continental's common stock and the assumption by Continental of all the liabilities of Hazel-Atlas. The Government brought this action seeking a judgment that the acquisition violated § 7 of the Clayton Act¹ and requesting an appropriate divestiture order. Trying the case without a jury, the District Court found that the Government had failed to prove reasonable probability of anticompetitive effect in any line of commerce, and accordingly dismissed the complaint at the close of the Government's case. United States v. Continental Can Co., 217 F.Supp. 761 (D.C.S.D.N.Y.). We noted probable jurisdiction to consider the specialized problems incident to the application of § 7 to interindustry mergers and acquisitions.² 375 U.S. 893, 84 S.Ct. 173, 11 L.Ed.2d 123. We reverse the decision of the District Court.

I.

The industries with which this case is principally concerned are, as found by the trial court, the metal can industry, the glass container industry and the plastic container industry, each producing one basic type of container made of metal, glass, and plastic, respectively.

Continental Can is a New York corporation organized in 1913 to acquire all the assets of three metal container manufacturers. Since 1913 Continental has acquired 21 domestic metal container companies as well as numerous others engaged in the packaging business, including producers of flexible packaging; a manufacturer of polyethylene bottles and similar plastic containers; 14 producers of paper containers and paperboard; four companies making closures for glass containers; and one Hazel-Atlas—producing glass containers. In 1955, the year prior to the present merger, Continental, with assets of $382 million, was the second largest company in the metal container field, shipping approximately 33% of all such containers sold in the United States. It and the largest producer, American Can Company, accounted for approximately 71% of all metal container shipments. National Can Company, the third largest, shipped approximately 5%, with the remaining 24% of the market being divided among 75 to 90 other firms.³

During 1956, Continental acquired not only the Hazel-Atlas Company but also Robert Gair Company, Inc.—a leading manufacturer of paper and paperboard products—and White Cap Company—a leading producer of vacuum-type metal closures for glass food containers so that Continental's assets rose from $382 million in 1955 to more than $633 million in 1956, and its net sales and operating revenues during that time increased from $666 million to more than $1 billion.

Hazel-Atlas was a West Virginia corporation which in 1955 had net sales in excess of $79 million and assets of more than $37 million. Prior to the absorption of Hazel-Atlas into Continental the pattern of dominance among a few firms in the glass container industry was similar to that which prevailed in the metal container field. Hazel-Atlas, with approximately 9.6% of the glass container shipments in 1955, was third. Owens-Illinois Glass Company had 34.2% and Anchor-Hocking Glass Company 11.6%, with the remaining 44.6% being divided among at least 39 other firms.⁴

After an initial attempt to prevent the merger under a 1950 consent decree failed, the terms of the decree being held inapplicable to the proposed acquisition, the Government moved for a preliminary injunction against its consummation and sought a temporary restraining order pending the determination of its motion. The temporary restraining order was denied, and on the same day the merger was accomplished. The Government then withdrew its motion for a preliminary injunction and continued the action as one for divestiture.

At the conclusion of the Government's case, Continental moved for dismissal of the complaint. After the District Court had granted the motion under Rule 41(b) of the Federal Rules of Civil Procedure but before a formal opinion was filed this Court handed down its decision in Brown Shoe Co. v. United States, 370 U.S. 294, 82 S.Ct. 1502, 8 L.Ed.2d 510; additional briefs directed to the applicability of Brown Shoe were filed. The trial judge held that under the guidelines laid down by Brown Shoe the Government had not established its right to relief under § 7 of the Clayton Act. This appeal followed.

II.

We deal first with the relevant market. It is not disputed here, and the District Court held, that the geographical market is the entire United States. As for the product market, the court found, as was conceded by the parties, that the can industry and the glass container industry were relevant lines of commerce. Beyond these two product markets, however, the Government urged the recognition of various other lines of commerce, some of them defined in terms of the end uses for which tin and glass containers were in substantial competition. These end-use claims were containers for the beer industry, containers for the soft drink industry, containers for the canning industry, containers for the toiletry and cosmetic industry, containers for the medicine and health industry, and containers for the household and chemical industry. 217 F.Supp., at 778-779.

The court, in dealing with these claims, recognized that there was interindustry competition and made findings as to its extent and nature:

'(T)here was substantial and vigorous inter-industry competition between these three industries and between various of the products which they manufactured. Metal can, glass container and plastic container manufacturers were each seeking to enlarge their sales to the thousands of packers of hundreds of varieties of food, chemical, toiletry and industrial products, ranging from ripe olives to fruit juices to tuna fish to smoked tongue; from maple syrup to pet food to coffee; from embalming fluid to floor wax to nail polish to aspirin to veterinary supplies, to take examples at random.

'Each industry and each of the manufacturers within it was seeking to improve their products so that they would appeal to new customers or hold old ones.' 217 F.Sup ., at 780—781.

Furthermore the court found that:

'Hazel-Atlas and Continental were part of this overall industrial pattern, each in a recognized separate industry producing distinct products but engaged in inter-industry competition for the favor of various end users of their products.' Id., at 781.

The court, nevertheless, with one exception—containers for beer—rejected the Government's claim that existing competition between metal and glass containers had resulted in the end-use product markets urged by the Government: 'The fact that there is inter-industry or inter-product competition between metal, glass and plastic containers is not determinative of the metes and bounds of a relevant product market.' Ibid. In the trial court's view, the Government failed to make 'appropriate distinctions * * * between inter-industry or overall com- modity competition and the type of competition between products with reasonable interchangeability of use and cross-elasticity of demand which has Clayton Act significance.' Id., at 781—782. The interindustry competition, concededly present, did not remove this merger from the category of the conglomerate combination, 'in which one company in two separate industries combined with another in a third industry for the purpose of establishing a diversified line of products.' Id., at 782.

We cannot accept this conclusion. The District Court's findings having established the existence of three product markets metal containers, glass containers and metal and glass beer containers—the disputed issue on which that court erred is whether the admitted competition between metal and glass containers for uses other than packaging beer was of the type and quality deserving of § 7 protection and therefore the basis for defining a relevant product market. In resolving this issue we are instructed on the one hand that '(f)or every product, substitutes exist. But a relevant market cannot meaningfully encompass that infinite range.' Times-Picayune v. United States, 345 U.S. 594, 612, n. 31, 73 S.Ct. 872, 882, 97 L.Ed. 1277. On the other hand it is improper 'to require that products be fungible to be considered in the relevant market.' United States v. E. I. du Pont De Nemours & Co., 351 U.S. 377, 394, 76 S.Ct. 994, 1006, 100 L.Ed. 1264. In defining the product market between these terminal extremes, we must recognize meaningful competition where it is found to exist. Though the 'outer boundaries of a product market are determined by the reasonable interchangeability of use or the cross-elasticity of demand between the product itself and substitutes for it,' there may be 'within this broad market, well-defined submarkets * * * which, in themselves, constitute product markets for antitrust purposes.' Brown Shoe Co., Inc. v. United States, 370 U.S. 294, 325, 82 S.Ct. 1502, 1524. Concededly these guidelines offer no precise formula for judgment and they necessitate, rather than avoid, careful consideration based upon the entire record.

It is quite true that glass and metal containers have different characteristics which may disqualify one or the other, at least in their present form, from this or that particular use; that the machinery necessary to pack in glass is different from that employed when cans are used; that a particular user...