United States v. Black and Decker Mfg. Co., Civ. No. 73-964-B.

CourtUnited States District Courts. 4th Circuit. United States District Court (Maryland)
Writing for the CourtBLAIR
PartiesUNITED STATES of America v. The BLACK AND DECKER MANUFACTURING COMPANY and McCulloch Corporation.
Docket NumberCiv. No. 73-964-B.
Decision Date20 August 1976

430 F. Supp. 729

UNITED STATES of America
v.
The BLACK AND DECKER MANUFACTURING COMPANY and McCulloch Corporation.

Civ. No. 73-964-B.

United States District Court, District of Maryland.

August 20, 1976.


430 F. Supp. 730
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430 F. Supp. 731
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430 F. Supp. 732
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430 F. Supp. 733
Ronald J. Silverman, Frank N. Bentkover, James R. Weiss, Robert W. Wilder, Antitrust Div., U.S. Dept. of Justice, Washington, D.C., for plaintiff

David C. Murchison, William J. Boyd, John DeQ. Briggs, III, Bernard J. Cooney, Howrey & Simon, Washington, D.C., Lowell R. Bowen, Miles & Stockbridge, Baltimore, Md., for defendants.

BLAIR, District Judge.

The government commenced this civil antitrust action on September 28, 1973 by filing a complaint alleging that the purchase of the McCulloch Corporation (McCulloch) by the Black and Decker Manufacturing Company (Black & Decker) violates § 7 of the Clayton Act as amended, 15 U.S.C. § 18.1 Divestiture of the acquired company is the principal relief sought.

A request by the government for a temporary restraining order to prevent consummation of the Black & Decker/McCulloch merger was denied on September 28, 1973.2 Thereafter on October 23, 1973 the parties agreed to and the court sanctioned a hold separate order whereby Black & Decker would maintain McCulloch as a separate, identifiable business entity pending resolution of this litigation.3 Trial before the court in the case commenced April 5, 1976 and consumed eight weeks. Nearly thirty witnesses testified, approximately 1000 exhibits were admitted, and the trial transcript exceeds 5000 pages. Subsequent to trial, the parties submitted proposed findings of fact and conclusions of law. Based on this entire record, the court herein makes its findings of fact and conclusions of law, as required by Federal Rule of Civil Procedure 52(a).

Government's Contentions

The government claims in this section 7 Clayton Act suit that potential competition may be substantially lessened by the acquisition of McCulloch by Black & Decker. Specifically, the government asserts a perceived potential entrant theory that the Black & Decker/McCulloch merger eliminated the pro-competitive effect Black & Decker exerted on the gasoline powered chain saw market by reason of its dominant

430 F. Supp. 734
position on the edge of the market; an actual potential entrant theory that the Black & Decker/McCulloch merger eliminated Black & Decker as the most significant potential entrant either by internal de novo expansion or toehold acquisition4 into the gasoline powered chain saw market; and an entrenchment theory that the combination of a major portable electric tool manufacturer, Black & Decker, with one of the largest gasoline chain saw manufacturers, McCulloch, will entrench and dominate an already oligopolistic gasoline powered chain saw market. The government does not contend that any actual competition, either horizontal or vertical,5 has been affected by the Black & Decker/McCulloch merger

The Merger

On October 1, 1973, pursuant to an agreement of July 11, 1973, Black & Decker acquired for 550,000 of its shares the outstanding

430 F. Supp. 735
issued stock of the McCulloch Corporation.6 See Lucier Tr 3533-35; G 1, p. 3; G 6-7; G 178 (Part II, p. 7). With activities and sales world-wide, Black & Decker is a corporation organized under the laws of Maryland, which also is its principal place of business. See G 1, p. 1; G 174 (Part I, p. 6). In 1973, the year of the merger, Black & Decker, exclusive of the McCulloch acquisition, had net sales of 427 million dollars, net earnings of 33 million dollars, and in 1972, Black & Decker had assets of 273 million dollars. See G 124, p. 10; G 125, p. 1. For the year 1972 Black & Decker ranked 372nd in sales, 206th in net income and 69th in net income as a percent of sales in Fortune magazine's ranking of the top 500 American industrial corporations. See G 174 (Part II, p. 7)

Black & Decker is primarily engaged, is recognized as, and admits to being a leader and major competitor, in the manufacturing, sale and servicing of portable electric power tools and accessories. See G 120, p. 3; G 129-31; G 167, p. 13; G 168, p. 10; G 169, p. 9; G 170, p. 12; G 205-07. These tools include electric drills, shears, screwdrivers, grinders, sanders, circular saws, lawn mowers and trimmers. In the United States these products and others are manufactured at plants in Hampstead and Easton, Maryland, Fayetteville and Tarboro, North Carolina, Beloit, Wisconsin and Anderson, Indiana. See Decker Tr 2922; G 108; G 111; G 125, p. 25; G 129-31; G 135-65. A small part of Black & Decker's business, and an area entered through acquisition, is the manufacture of portable air tools and accessories such as pneumatic drills and impact wrenches. These products are manufactured in Solon, Ohio. See Decker Tr 2927; G 108; G 111; G 129-31. Again as a result of an acquisition, Black & Decker, in a minor aspect of its business, also produces certain types of stationary woodworking and metalworking equipment, which is manufactured in the United States in Lancaster, Pennsylvania. See G 108; G 111; G 129-31. With one exception, all of Black & Decker's products are electrically or air powered; Black & Decker does sell a small gasoline powered generator, the engine for which is sourced, i. e., purchased from another company. See G 129-31; G 348. Black & Decker products are sold in over 100,000 retail outlets worldwide. See G 121, p. 5; G 168, p. 6; G 171 (Part I, p. 8). In addition to manufacturing, Black & Decker operates over 90 company-owned service centers in the United States while also supplying numerous, authorized independent service stations. See G 108; G 130-31; G 194. See also G 113, p. 16; G 128-29. Black & Decker has realized about 10% of its total business from these servicing activities. See G 172 (Part III, p. 6).

Black & Decker was founded by two inventors in 1910 in Baltimore, Maryland as a small machine shop. In 1914 the company developed the first pistol grip, trigger switch electric drill. Thereafter the company developed and manufactured numerous electric tools and innovated in the development of such products as the portable circular saw, the cordless electric drill, and the cordless electric hedge trimmer. Black & Decker pioneered the manufacture of such low cost equipment for sale to the consumer. See Decker Tr 2860-75; G 121, p. 5; G 167, p. 10; G 168, p. 8; G 169, p. 3; G 170, pp. 3, 5-6; G 171, pp. 3-4; D 923, p. 1. For the past fifteen years Black & Decker has

430 F. Supp. 736
grown at the average rate of approximately 15% a year. See G 120, p. 3; G 121, p. 2; G 122, p. 2; G 123, p. 2; G 124, p. 2; G 125, pp. 2, 4; G 167, p. 2; G 175, pp. 2-3; G 178, p. 3. By the 1970's the portable electric tool market had neared saturation and Black & Decker sought to diversify its product line to insure continued growth. See Graham Tr 3368-69, 3380; Lucier Tr 3509; G 209

At the time of the merger McCulloch was incorporated in Wisconsin with its principal place of business in California. See G 1, p. 1. McCulloch's primary activity is the manufacture and sale of gasoline powered chain saws. See D 323, pp. 7-8. Additionally, the company has manufactured and sold, among other items, chain saw components, two cycle internal combustion engines, gas generators, and gasoline powered hedge trimmers. See G 9-10; G 12-20. McCulloch, one of the nation's largest chain saw manufacturers, operates plants in California, Arizona, New York and Australia. See G 1, p. 2; G 310A-314B; D 323, pp. 27-30. In 1972, the year prior to the merger, McCulloch's net sales totalled approximately 60 million dollars, its aggregate assets were valued at between 64-65 million dollars, and it suffered an operating loss of 1.4 million dollars.7 See D 227; D 321, pp. 2, 4; D 410; D 431. See also G 19. In 1972 McCulloch sold C.D.O. gasoline powered chain saws which accounted for approximately C.D.O. of the market, the C.D.O. industry share.8 See G 312B. These chain saw sales constituted over 85% of McCulloch's total 1972 sales. See G 19; G 134, p. 9. McCulloch products were distributed through approximately 9800 retail dealers and serviced by over 5500 service facilities. See G 25, p. 12; G 79.

McCulloch was a family owned corporation, dominated by Robert P. McCulloch, the company's founder and president prior to its merger with Black & Decker. See G 11; G 289; D 323, p. 31. McCulloch has existed for about 30 years and originated as a manufacturer of aircraft engines. The company began manufacturing chain saws in the mid to late 1940's. See G 285 ("McC History & Organization"); D 323, p. 1; D 330; D 1064. McCulloch's operations have been characterized by product innovations in the gasoline powered chain saw area. In the late 1940's McCulloch pioneered the manufacture of the one man gasoline powered chain saw and the company has since been responsible for the introduction of innovative small, lightweight chain saws.9 See Straetz Tr 109-11; Shaeffer Tr 3061; G 12, pp. 6-7; G 44, p. 3; G 354. See also Straetz Tr 115.

The Market

Analysis of possible anticompetitive consequences under section 7 of the Clayton Act requires definition of the "line of commerce" and "section of the country," that is, the relevant product and geographic markets, affected by the merger. See United States v. Marine Bancorporation, 418 U.S. 602, 618, 620-21, 94 S.Ct. 2856, 41 L.Ed.2d 978 (1974); United States v. Philadelphia Nat'l Bank, 374 U.S. 321, 356, 83 S.Ct. 1715, 10 L.Ed.2d 915 (1963); Varney v. Coleman Co., 385 F.Supp. 1337, 1344 (D.N. H.1974). The relevant geographic market, that area of the country where anticompetitive

430 F. Supp. 737
effects may exist and where the acquired firm is an actual competitor, has been stipulated by the parties to be the fifty states comprising the United States. See United States v. Marine...

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10 practice notes
  • Mercantile Texas Corp. v. Board of Governors of Federal Reserve System, No. 80-1528
    • United States
    • United States Courts of Appeals. United States Court of Appeals (5th Circuit)
    • February 25, 1981
    ...a "clear trend to deconcentration;" a small decline does not constitute a clear trend. United States v. Black and Decker Mfg. Co., 430 F.Supp. 729, 751 (D.Md.1976). Even with a stronger trend towards deconcentration, years may pass before the influence of the dominant firms is substantially......
  • Lektro-Vend Corp. v. Vendo Corp., No. 65 C 1755.
    • United States
    • United States District Courts. 7th Circuit. United States District Court (Northern District of Illinois)
    • July 22, 1980
    ...¶ 62,063 (E.D.Pa.); United States v. Hughes Tool Co., 415 F.Supp. 637, 645-46 (C.D.Cal.1976); United States v. Black & Decker Mfg. Co., 430 F.Supp. 729 (D.Md.1976); Federal Trade Commission v. Tenneco, Inc., 1977-1 Trade Cases ¶ 61,449 (D.D.C.1977); United States v. Amax, Inc., 402 F.Supp. ......
  • Kaiser Aluminum & Chemical Corp. v. F. T. C., No. 79-1886
    • United States
    • United States Courts of Appeals. United States Court of Appeals (7th Circuit)
    • July 7, 1981
    ...ease of entry into the market and on the trends toward or away from concentration. In United States v. Black & Decker Manufacturing Co., 430 F.Supp. 729, 755 (D.Md.1976), the district court found that, given the lack of any trend toward deconcentration, the high level of concentrations that......
  • California v. Sutter Health System, No. C99-03803 MMC.
    • United States
    • United States District Courts. 9th Circuit. United States District Courts. 9th Circuit. Northern District of California
    • January 5, 2000
    ...and its inability to assume more debt to meet its financial obligations as they come due. In United States v. Black & Decker Mfg. Co., 430 F.Supp. 729, 778-81 (D.Md.1976), the court relied upon several factors in holding that the defendants had satisfied the first prong of the failing compa......
  • Request a trial to view additional results
10 cases
  • Mercantile Texas Corp. v. Board of Governors of Federal Reserve System, No. 80-1528
    • United States
    • United States Courts of Appeals. United States Court of Appeals (5th Circuit)
    • February 25, 1981
    ...a "clear trend to deconcentration;" a small decline does not constitute a clear trend. United States v. Black and Decker Mfg. Co., 430 F.Supp. 729, 751 (D.Md.1976). Even with a stronger trend towards deconcentration, years may pass before the influence of the dominant firms is substantially......
  • Lektro-Vend Corp. v. Vendo Corp., No. 65 C 1755.
    • United States
    • United States District Courts. 7th Circuit. United States District Court (Northern District of Illinois)
    • July 22, 1980
    ...¶ 62,063 (E.D.Pa.); United States v. Hughes Tool Co., 415 F.Supp. 637, 645-46 (C.D.Cal.1976); United States v. Black & Decker Mfg. Co., 430 F.Supp. 729 (D.Md.1976); Federal Trade Commission v. Tenneco, Inc., 1977-1 Trade Cases ¶ 61,449 (D.D.C.1977); United States v. Amax, Inc., 402 F.Supp. ......
  • Kaiser Aluminum & Chemical Corp. v. F. T. C., No. 79-1886
    • United States
    • United States Courts of Appeals. United States Court of Appeals (7th Circuit)
    • July 7, 1981
    ...ease of entry into the market and on the trends toward or away from concentration. In United States v. Black & Decker Manufacturing Co., 430 F.Supp. 729, 755 (D.Md.1976), the district court found that, given the lack of any trend toward deconcentration, the high level of concentrations that......
  • California v. Sutter Health System, No. C99-03803 MMC.
    • United States
    • United States District Courts. 9th Circuit. United States District Courts. 9th Circuit. Northern District of California
    • January 5, 2000
    ...and its inability to assume more debt to meet its financial obligations as they come due. In United States v. Black & Decker Mfg. Co., 430 F.Supp. 729, 778-81 (D.Md.1976), the court relied upon several factors in holding that the defendants had satisfied the first prong of the failing compa......
  • Request a trial to view additional results

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