United States v. International Telephone & Tel. Corp.

• Decision Date: 30 October 1969
• Docket Number: 13320.,Civ. No. 13319
• Citation: 306 F. Supp. 766
• Court: U.S. District Court — District of Connecticut
• Parties: UNITED STATES of America, Plaintiff, v. INTERNATIONAL TELEPHONE AND TELEGRAPH CORPORATION and Grinnell Corporation, Defendants. UNITED STATES of America, Plaintiff, v. INTERNATIONAL TELEPHONE AND TELEGRAPH CORPORATION and The Hartford Fire Insurance Company, Defendants.

306 F. Supp. 766

UNITED STATES of America, Plaintiff, v. INTERNATIONAL TELEPHONE AND TELEGRAPH CORPORATION and Grinnell Corporation, Defendants.

UNITED STATES of America, Plaintiff, v. INTERNATIONAL TELEPHONE AND TELEGRAPH CORPORATION and The Hartford Fire Insurance Company, Defendants.

Civ. Nos. 13319, 13320.

United States District Court D. Connecticut.

October 21, 1969.

Orders October 30, 1969.

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Joseph H. Widmar, Howard B. Myers and Donald J. Frickel, Attys., Dept. of Justice, Washington, D. C., Stewart H. Jones, U. S. Atty., and J. Daniel Sagarin, Asst. U. S. Atty., New Haven, Conn., for plaintiff United States in No. 13319.

James J. Coyle, William H. Rowan, Richard M. Clinton, Bruce A. Posnak and Seymour H. Dussman, Attys., Dept. of Justice, Washington, D. C., Stewart H. Jones, U. S. Atty., and J. Daniel Sagarin, Asst. U. S. Atty., New Haven, Conn., for plaintiff United States in No. 13320.

Henry P. Sailer, John H. Schafer and Charles E. Buffon, of Covington & Burling, Washington, D. C., Ralph C. Dixon and Richard M. Reynolds, of Day, Berry & Howard, Hartford, Conn., for defendant International Telephone and Telegraph Corp. in No. 13319.

Denis G. McInerney and William T. Lifland, of Cahill, Gordon, Sonnett, Reindel & Ohl, New York City, H. Meade Alcorn and Ralph G. Elliot, of Alcorn, Bakewell & Smith, Hartford, Conn., David D. McKinney, Gen. Counsel, Providence, R. I., for defendant Grinnell Corp. in No. 13319.

John H. Schafer, Henry P. Sailer and Charles E. Buffon, of Covington & Burling, Washington, D. C., Ralph C. Dixon and Richard M. Reynolds, of Day, Berry & Howard, Hartford, Conn., for defendant International Telephone and Telegraph Corp. in No. 13320.

Ralph C. Dixon and Richard M. Reynolds, of Day, Berry & Howard, Hartford, Conn., for defendant The Hartford Fire Insurance Co. in No. 13320.

MEMORANDUM OF DECISION AFTER EVIDENTIARY HEARING ON MOTIONS FOR PRELIMINARY INJUNCTIONS

TIMBERS, Chief Judge:

QUESTIONS PRESENTED

In these actions brought by the United States (government), pursuant to Section 15 of the Clayton Act, 15 U.S.C. § 25 (1964), for declaratory and injunctive relief to enjoin the proposed acquisitions by International Telephone and Telegraph Corporation (ITT) of the stock of Grinnell Corporation (Grinnell) and of the stock of The Hartford Fire Insurance Company (Hartford), on the ground that the effect of the proposed acquisitions may be substantially to lessen competition in violation of Section 7 of the Clayton Act, 15 U.S.C. § 18 (1964), the government's motions for preliminary injunctions present the following basic questions in each case:

(1) Whether the government has sustained its burden of establishing a reasonable probability of success in proving its case on the merits upon final hearing.

(2) Whether the alleged injury to the public interest resulting from denial of a preliminary injunction outweighs the alleged injury to defendants resulting from the granting of a preliminary injunction.

(3) Whether, under all the circumstances here present, the interests of the respective parties, as well as the public interest, would be best served by the entry of a hold separate order to preserve the status quo pending hearing and decision of the case on the merits.

For the reasons stated below, the Court denies the government's motions for preliminary injunctions and directs that hold separate orders be entered in each case.¹

JURISDICTION

Jurisdiction with respect to the preliminary injunction relief sought is based upon Section 15 of the Clayton Act, 15 U.S.C. § 25 (1964), which authorizes at any time during the proceedings the issuance of an injunction to prevent and restrain a violation of Section 7 of the Clayton Act, 15 U.S.C. § 18 (1964).

PRIOR PROCEEDINGS

The instant actions were commenced by the filing of complaints on August 1, 1969. They seek adjudications that the respective merger agreements, entered into between ITT and Grinnell on March 3, 1969 (No. 13,319) and between ITT and Hartford on April 8, 1969 (No. 13,320), violate Section 7 of the Clayton Act. Preliminary and permanent injunctions against carrying out the respective mergers likewise are sought. Answers have been filed by the defendants in each action.

The ITT-Grinnell merger agreement has been approved by the stockholders of both companies. The ITT-Hartford merger agreement has been approved by ITT's stockholders; but the meeting of Hartford's stockholders called for that purpose was adjourned to October 14, and subsequently to November 10.

Temporary restraining orders were not sought, the parties having stipulated that neither of the proposed mergers would be consummated without adequate prior notice. The Court construes this to mean there will be no consummation of either merger until the entry of orders on the pending motions for preliminary injunctions.

On August 6 the Court held a pre-trial conference with counsel at New Haven. A schedule was agreed upon for the serving and filing of papers in connection with the government's preliminary injunction motions. The motions themselves were filed on August 6 and August 21 in the Grinnell and Hartford cases, respectively. The last paper was filed on September 17.

On September 17 evidentiary hearings began at New Haven on the motions. They were concluded on September 23. Counsel agreed upon a schedule for serving and filing proposed findings of fact and conclusions of law, the last of which were filed on October 7.

The record before the Court consists of the pleadings; the government's motions for preliminary injunctions; some 328 documentary exhibits received in evidence at the hearings, including numerous affidavits; and the testimony of 9 witnesses who testified at the hearings. The Court has been greatly assisted by the briefs, oral arguments and proposed findings of fact and conclusions of law from able counsel for all parties.

PARTIES TO THE ACTIONS²

United States (Government)

Plaintiff in each action is the United States acting through attorneys on the staff of the Antitrust Division of the Department of Justice and the United States Attorney for this District, all under the direction of the Attorney General. 15 U.S.C. § 25 (1964).

International Telephone and Telegraph Corporation (ITT)

ITT is a Delaware corporation. Its principal place of business is in New York City. It transacts business and is found in the District of Connecticut.

ITT is engaged in interstate and foreign commerce in the United States and abroad. Its business includes international telecommunications, overseas telephone operations and a variety of manufacturing and service enterprises. It employs approximately 300,000 persons.

ITT is the eleventh largest industrial corporation in the United States. During 1968 it had consolidated revenues of $4,066,502,000, consolidated net income of $192,404,000 and total assets of $4,022,400,000 at the end of that year.

ITT has 63,182,320 shares of common stock issued and outstanding in the hands of 144,053 shareholders. In addition, there are 64,483 holders of various issues of ITT preferred stock, all of which is convertible into ITT common stock.

In recent years ITT has grown with respect to both volume and diversification of business. During the period 1955 through 1968, its total sales increased from $502,760,050 to $4,066,502,000. During the past decade, it has grown by mergers and acquisitions until today it has approximately 200 subsidiaries engaged in a wide variety of enterprises.

During the period 1961 through 1968, ITT acquired or merged with 52 domestic and 55 foreign companies. Among its acquisitions during 1968 were Continental Baking Company, Sheraton Corporation of America, Levitt & Sons, Inc. and Rayonier, Inc.

Since January 1, 1969, ITT's Board of Directors has approved 22 domestic and 11 foreign acquisitions. Among its consummated 1969 acquisitions is the Canteen Corporation. Among its unconsummated 1969 acquisitions are the Grinnell Corporation and The Hartford Fire Insurance Company, subjects of the instant actions.

Grinnell Corporation (Grinnell)

Grinnell is a Delaware corporation. Its principal place of business is in Providence, Rhode Island. It transacts business and is found in the District of Connecticut.

Grinnell is the 268th largest industrial corporation in the United States. During 1968 it had sales of $341,282,906, net income of $14,084,799 and assets of $184,453,229 at the end of that year.

Grinnell has 1,424,556 shares of common stock issued and outstanding in the hands of 5,939 shareholders.

In the two markets here claimed to be relevant,³ Grinnell's products are as follows:

Automatic Sprinkler Systems

Grinnell is the largest manufacturer and installer of automatic sprinkler fire protection systems in the United States. It manufactures most of the major components of its systems, with the exception of the piping (nothing to do with power piping) which it purchases. Its 1968 revenues from the manufacture and installation of such systems was $67,096,150.

Pipe Hangers

Grinnell is a leading manufacturer of pipe hangers in the United States. Pipe hangers are support devices from which piping is suspended. There are many different types, depending on the size and weight of the pipe to be suspended and the material from which the support is to hang. They vary from simple U-shaped pieces of wire to complicated suspension systems requiring precision engineering. They are standardized rather than custom built for specific application. Pipe hangers are necessary components of automatic sprinkler systems and of power piping systems. Grinnell distributes pipe hangers through its 37 branch warehouses located throughout the United States. It had total sales of $13,348,000 from pipe hangers in 1966.

The Hartford Fire Insurance Company (Hartford)

Hartford is a Connecticut corporation. Its principal place of business is in Hartford,...