United States v. Continental Can Company
| Decision Date | 15 April 1963 |
| Citation | 217 F. Supp. 761 |
| Parties | UNITED STATES of America, Plaintiff, v. CONTINENTAL CAN COMPANY, Inc. and Hazel-Atlas Glass Company, Defendants. |
| Court | U.S. District Court — Southern District of New York |
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Lee Loevinger, Asst. Atty. Gen., W. Wallace Kirkpatrick, Acting Asst. Atty. Gen., Larry L. Williams, Chief, Special Trial Section, Dept. of Justice, George D. Reycraft, Jr., Chief, Special Trial Section, Dept. of Justice, William H. McManus and Samuel V. Greenberg, Trial Counsel, Attys., Dept. of Justice, for the United States.
Willkie, Farr, Gallagher, Walton & Fitz Gibbon, New York City, for defendants; Mark F. Hughes, Helmer R. Johnson and Milton Handler, Trial Counsel, New York City, Bowie K. Kuhn and Stanley D. Robinson, New York City, of counsel.
FREDERICK van PELT BRYAN, District Judge.
This is a civil action by the United States to enjoin the proposed acquisition by defendant Continental Can Company, Inc. (Continental) of defendant Hazel-Atlas Glass Company (Hazel-Atlas) on the ground that such acquisition would violate § 7 of the Clayton Act as amended.1 The court has jurisdiction over parties and subject matter.
The Government had previously attempted to block the acquisition by invoking a consent decree which had been entered against Continental in 1950 in a civil anti-trust suit under §§ 1 and 2 of the Sherman Act and § 3 of the Clayton Act in the District Court for the Northern District of California. On August 31, 1956 the California court held that the consent decree did not cover the proposed acquisition.2
The consummation of the acquisition was delayed in the meantime at the Government's request. The Government then commenced this action. It moved for a preliminary injunction against consummation and sought a temporary restraining order pending the hearing and determination of its motion. The temporary restraining order was denied on September 13, 1956. On that day, Continental took over all of the assets, property, business and good will and assumed all of the liabilities of Hazel-Atlas which since then has been operated as the Hazel-Atlas Division of Continental.
The Government withdrew its motion for a preliminary injunction on September 18, 1956 and this action became one for divestiture.
After some considerable time, the case was assigned to me for all purposes. Extensive pre-trial proceedings were conducted at which over a thousand pages of transcript were taken. The case then came on for trial.
The Government concluded its case after six weeks of trial during which it called some 78 witnesses. Over four thousand pages of testimony were taken. The Government introduced more than twelve hundred exhibits and the defendants more than five hundred.
At the conclusion of the Government's case defendants, pursuant to Rule 41(b), F.R.Civ.P., moved for a dismissal on the ground that upon the law and the facts the Government had shown no right to relief and that they were therefore entitled to final judgment on the merits. The motion was granted in a brief oral decision which stated only the conclusions reached. In view of the importance and complexity of the case a detailed opinion was to follow.
Before that opinion could be filed, the Supreme Court decided Brown Shoe Co., Inc. v. United States, 370 U.S. 294, 82 S.Ct. 1502, 8 L.Ed.2d 510 (1962), its first decision dealing at any length with § 7 of the Clayton Act as amended in 1950. The Government then asked leave to submit material dealing with the effect of that case on the case at bar. This application was granted and both sides submitted briefs on this question. Consideration of the Brown Shoe case has not changed the conclusions which I reached at the end of the trial.
My opinion follows.
Defendants' motion under Rule 41(b) for a dismissal at the close of the Government's case, posed squarely the question of whether on the record, as it then stood, defendants were entitled to judgment.
The motion was made on the ground that "upon the facts and the law the plaintiff has shown no right to relief." In an action tried to the court without a jury, the court, when such a motion is made at the close of plaintiff's case, "as trier of the facts may then determine them and render judgment against the plaintiff or may decline to render any judgment until the close of all the evidence."
There is no doubt as to the meaning and applicability of Rule 41(b). The test to be applied in a case tried to the court alone is quite different from that on a motion to dismiss or for a directed verdict in a jury trial. In the latter case the question is whether or not the plaintiff has made out a prima facie case sufficient to go to the jury and the court must view the evidence in the light most favorable to him.
In a trial to the court alone, however, the court is authorized under Rule 41(b), to evaluate and weigh all of the evidence presented by the plaintiff, draw such inferences therefrom as it considers reasonable in the light of the record, and determine at that stage whether plaintiff has sustained the burden of proof necessary to establish its right to relief were the case to end there. If the court undertakes to make such a determination and concludes that the plaintiff has not met this burden, the defendant is entitled to judgment on the merits.3
In this case, as the trier of the facts, I determined at the conclusion of the Government's case that it had failed to sustain its burden of showing by a preponderance of the evidence that the acquisition under attack violated Section 7 of the Clayton Act in any respect. I therefore directed that judgment be rendered against the Government.
SECTION 7 OF THE CLAYTON ACT IN THE LIGHT OF THE BROWN SHOE CASE.
The Government's case is grounded solely on Section 7 of the Clayton Act as amended in 1950. There is no claim of violation or threatened violation of any provision of the Sherman Act. There is no charge of restraint of trade, monopolization or attempt to monopolize. This is strictly a Section 7 case.
Section 7 as amended forbids the acquisition of the stock or assets of one corporation by another "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."4 The Brown Shoe case, decided on June 25, 1962, some twelve years after the 1950 amendment to § 7, is the first definitive interpretation of that section by the Supreme Court since its amendment.
The facts in the Brown Shoe case were entirely different from those in the case at bar. The specific holdings of the Court on the facts presented there are therefore not determinative of the problems posed here. Indeed, Brown Shoe recognizes that the facts in each case in all likelihood will differ widely, that the framework of each industry is likely to be unique, and that each case must stand or fall on its own facts viewed within the framework of the industry pattern.5
However, the discussion in Brown Shoe of the legislative history and background of the 1950 amendment to § 7, the theory of the amended section, the interpretation to be given to it, and the principles and guidelines to be followed in applying it, is controlling.6 Brown Shoe is the authoritative declaration of the law on the subject as it now stands and the principles and guidelines which it lays down must be applied here.
Section 7 proscribes acquisition of either stock or assets where, as a result, competition in any line of commerce in any section of the country may be substantially lessened. It covers all mergers or acquisitions, horizontal, vertical or conglomerate.7
As Brown Shoe makes plain, however, the section does not prohibit all mergers. While the congressional intent was to arrest restraints of trade and monopolistic tendencies "in their incipiency and well before they have attained such effects as would justify a Sherman Act proceeding,"8 there is no per se proscription against the acquisition of the stock or assets of one corporation by another. The statute is concerned only with those acquisitions which have demonstrable anti-competitive effects.9
It is clear, moreover, that the statute was directed neither at the possibility that anti-competitive effects might occur nor at certainty of anti-competitive effects already covered by the Sherman Act.10 "Proof of a mere possibility of a prohibited restraint or tendency to monopoly will not establish the statutory requirement * * *."11 The statute is concerned with the reasonable probability of the lessening of competition or tendency toward monopoly as a result of the particular acquisition under scrutiny — a showing that such effects are reasonably likely to occur. This is what the words "may be" as used in the statute mean.12 The lessening of competition, moreover, must also be shown to be "substantial".13
Acquisitions are proscribed where substantial anti-competitive effects or tendency to monopoly are reasonably probable in any line of commerce in any section of the country. Thus, in order to determine whether there are anti-competitive effects or tendency to monopoly, it is necessary in each case to define the lines of commerce in which the acquiring and acquired companies were engaged and the sections of the country affected. Anti-competitive effects and their substantiality cannot be evaluated in a vacuum. They can only be judged in terms of the particular markets or submarkets affected — that is to say "within the area of effective competition."14
While Section 7 does not use the term "market", it is clear that "line of commerce" refers to a product market, and "section of the country" refers to a geographic market in which competition exists and in which the effects of the acquisition may be felt. A relevant product market must be a market which is meaningful in terms of competitive and commercial realities.15 A...
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