United States v. MPM, INC., Civ. A. No. C-3917.

CourtUnited States District Courts. 10th Circuit. United States District Court of Colorado
Writing for the CourtDayton Denious, Edward T. Able, Jr., Denver, Colo., for defendants
Citation397 F. Supp. 78
PartiesUNITED STATES of America, Plaintiff, v. M.P.M., INC., and Pre-Mix Concrete, Inc., Defendants.
Decision Date25 April 1975
Docket NumberCiv. A. No. C-3917.

397 F. Supp. 78

UNITED STATES of America, Plaintiff,
v.
M.P.M., INC., and Pre-Mix Concrete, Inc., Defendants.

Civ. A. No. C-3917.

United States District Court, D. Colorado.

April 25, 1975.


397 F. Supp. 79
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397 F. Supp. 80
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397 F. Supp. 81
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397 F. Supp. 82
John E. Sarbaugh, John L. Burley, James W. Ritt, Allen B. Wagner, Dept. of Justice, Chicago, Ill., for plaintiff

Dayton Denious, Edward T. Able, Jr., Denver, Colo., for defendants.

MEMORANDUM OPINION AND ORDER

FINESILVER, District Judge.

The Government commenced this action pursuant to 15 U.S.C.A. § 25 (1948) Clayton Act, challenging the acquisition by defendant M.P.M., Inc., MPM of two formerly independent ready-mix concrete firms, Mobile Concrete, Inc. Mobile and Pre-Mix Concrete, Inc. Pre-Mix, and the subsequent corporate merger of the firms as violative of Section 7 of the Clayton Act, 15 U.S.C.A. § 18 (1950). The Government seeks divestiture of the acquisition and merger and injunctive relief to prevent defendants from acquiring similar companies in the future.

The several pivotal issues in this litigation are: (1) Do the facts of this case satisfy the "engaged in commerce" jurisdictional requirement? (2) Is ready-mix concrete a "line of commerce" within the meaning of the Clayton Act? (3) What geographical area comprises the appropriate "section of the country" for purposes of this action? (4) Was Mobile a "failing company" in the sense which will avoid the strictures of the Clayton Act? (5) Did the acquisition and/or the merger complained of result in a substantial lessening of competition or tend to create a monopoly? Finally, (6) Are certain equitable and constitutional defenses available to defendants under the facts peculiar to this case which defeat plaintiff's attempt to apply the Clayton Act to them?

In this opinion, we consider in detail each of the contentions of the litigants.1 For the reasons articulated below, we find in favor of the defendants. The parties have been previously notified of this result in our Preliminary Order of January 27, 1975.

I. BACKGROUND

For an overview of this case, we recite the following uncontroverted facts and chronology of events.

During the pertinent times, Mobile was engaged in the production and sale of ready-mix concrete in the Denver metropolitan area.2

397 F. Supp. 83

For approximately 15 years prior to June 1, 1967, Mobile was principally owned by Robert Anderson.3

On June 1, 1967, Mobile was purchased by Meade, Boothby, and Fulenwider (Meade at 272-74). Meade became the majority (57%) stockholder and active company manager. Boothby and Fulenwider each held 21½% of the stock (Meade at 272-74 & 315-16; Boothby at 717-18).

Prior to June 12, 1970, defendant Pre-Mix was engaged in the production and sale of ready-mix concrete in the Denver metropolitan area (P/T 1 at 4). During this period it was owned by M. E. Moore, MEMCO Corp., and Texas Industries, Inc. (P/T 1 at 9).

On May 29, 1970, defendant MPM was incorporated under the laws of the state of Colorado. It functioned as a holding company with Meade and Boothby as the sole stockholders (Meade at 306-07).

Thereafter, on June 12, 1970, MPM acquired all of the outstanding common stock of both Mobile and Pre-Mix (P/T 1 at 4) and commenced joint operation of the two companies.

Pursuant to Colorado statutory law, on November 12, 1971, Pre-Mix, Mobile and Mobile Concrete of Colorado Springs, Colorado (an off-shoot of Mobile, Meade at 276-78) merged under the name of Pre-Mix.

Plaintiff filed the present action in 1972, claiming a violation of § 7 of the Clayton Act. The Government contends that the violation consisted of the acquisition by MPM of all of the outstanding common stock of two formerly independent ready-mix companies and the merger of Mobile and Pre-Mix. These activities, the Government alleges, substantially lessened competition or tended to cause a monopoly in the ready-mix concrete industry within the Denver metropolitan area (designated to include four counties: Denver, Adams, Arapahoe, and Jefferson).

Market sales figures for the Denver metropolitan area ready-mix concrete industry demonstrate that for the year 1969 Pre-Mix was the third largest producer and seller of ready-mix in this area with a market share of 16.5% (Appendix I).4 Mobile was the fourth largest producer and seller with a 14.8% share of the market during the same period (Appendix I). In 1970 — the year in which MPM acquired the stock of the two companies and began operation of them on a joint basis — the combined sales of Mobile and Pre-Mix aggregated 31.6% of the ready-mix concrete market in the four-county area, making this corporate combination the largest single producer and seller of ready-mix concrete in metropolitan Denver (Appendix I).

II. "ENGAGED IN COMMERCE" REQUIREMENT

Federal courts have jurisdiction to "prevent and restrain violations" of the Clayton Act. 15 U.S.C.A. § 25 (1948). Activity constituting a "violation" of the Act is defined in 15 U.S.C.A. § 18 (1950). This statute, inter alia, provides:

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
397 F. Supp. 84
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.

For our purposes, the term "commerce" means "trade or commerce among the several States . . .." 15 U.S.C.A. § 12 (1914). For a violation of the Clayton Act to occur, both the acquiring and the acquired companies in a merger case must be engaged in interstate commerce.

There is no question in this case but that all sales of ready-mix concrete by both Mobile and Pre-Mix were and continue to be solely intrastate — they sell no product outside of the state of Colorado.

The Government contends, however, that the interstate commerce jurisdictional requirement is met because both companies purchase substantial amounts of cement necessary for the production of ready-mix concrete from out-of-state suppliers. Data from the year 1969 is relied on in support of this allegation (GX 22).

Defendants counter with two arguments. First, they maintain that since early 1970 (two years prior to the April 11, 1972, filing of this action) Mobile and Pre-Mix obtained all but 4% of their cement requirements from suppliers located within Colorado. This amount, they argue, is de minimis and therefore insufficient basis upon which to posit jurisdiction in the present action. Second, they contend that even if such amount is not considered di minimis, jurisdiction cannot attach because production and sale of ready-mix concrete is purely a local business activity, and Sherman Act cases are inapposite in a § 7 Clayton Act suit — i. e., even if defendants do purchase essential ingredients from foreign suppliers and are thus within the flow of commerce, such fact is of no avail to a plaintiff in a Clayton Act prosecution.

Serious questions are thus raised as to our power to entertain this suit.

Cement is an essential ingredient of concrete (GX 22, para. 14; Thurman at 234 & 236) and is produced by grinding and heating limestone with additives (GX 16 at 6; Berkey at 33-34). Ordinarily, cement is shipped from production plants to concrete-producing customers on a daily basis by truck and rail (Barnes at 44-45; Smith at 59; GX 17 at 30; GX 18). Ready-mix companies blend the cement with other ingredients (sand, gravel, additives, and water) to make concrete (GX 17 at 4-5; GX 16 at 13; GX 15 at 17). Ready-mix concrete is delivered to the customer's job site in a plastic, viscous state and poured from mobile trucks into building forms in which the concrete subsequently hardens through the hydration process (Brown at 73).

The Government's evidence demonstrates that during the year 1969 both Mobile and Pre-Mix bought substantial amounts of their cement requirements from out-of-state suppliers and purchased, respectively, 56% and 53% of the necessary cement from sources located outside Colorado (P/T 1 at 7; GX 22) (percentages computed from figures given in these sources). These facts are undisputed.

Also undisputed, however, is the fact that early in 1970 the Martin Marietta company (a prime supplier of both defendants) opened a new cement production facility in Lyons, Colorado (Barnes at 47). Prior to that time, the cement supplied by Martin Marietta to Mobile and Pre-Mix originated from Tulsa, Oklahoma (P/T 1 at 7; GX 22, para 11). Defendants assert — as a result of this change in source of supply — that as of the time of the allegedly unlawful stock acquisition (June 12, 1970) only a small amount (4%) of the combined cement requirements of Mobile and Pre-Mix was being purchased from non-Colorado suppliers. We note that although this assertion was made several times by the defendants in pre- and post-trial pleadings,

397 F. Supp. 85
nothing was offered by defendants in the way of exhibits or testimony to substantiate this statement in the record other than the fact that after early 1970, all Martin Marietta cement came from Colorado and not Oklahoma (Barnes at 47). The Government offered no post-1969 data with respect to cement purchases by defendants. However, neither did the defendants. Thus we need not consider the issue of whether purchase of ingredients in the amount of 4% is di minimis.

Since it is uncontroverted that neither defendant in this action effectuates sales of ready-mix concrete across state lines, determination of the jurisdictional question depends upon the resolution of the following issue. Can the fact that a defendant in a § 7 Clayton Act suit uses ingredients purchased across state...

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9 practice notes
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    • United States District Courts. 4th Circuit. United States District Court (Maryland)
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    ...omitted. See also Northwest Airlines, Inc. v. CAB, 112 U.S.App.D.C. 384, 303 F.2d 395, 401 (1962); United States v. M.P.M., Inc., 397 F.Supp. 78, 95 In Citizen Publishing Co. v. United States, supra 394 U.S. at 138, 89 S.Ct. at 931, the Court stated Moreover, we know from broad experience o......
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    • United States Courts of Appeals. United States Court of Appeals (7th Circuit)
    • July 7, 1981
    ...819 (N.D.Tex.1979); United States v. Tracinda Investment Corp., 447 F.Supp. 1093, 1106 (C.D.Cal.1979); United States v. M.P.M., Inc., 397 F.Supp. 78, 91 Finally, some courts have articulated specific factors they have weighed while undertaking a General Dynamics analysis. One such case is U......
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    • United States District Courts. 9th Circuit. United States District Courts. 9th Circuit. Central District of California
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    ...& MacMillan, Inc., 361 F.Supp. 983 (S.D.N.Y.1973) (combination of firms of 41.9% and 0.6% not barred); United States v. M.P.M., Inc., 397 F.Supp. 78 (D.Col.1975) (combined market share of 31.6% held not anticompetitive); United States v. Consolidated Foods Corp., 455 F.Supp. 108, 134-141 (E......
  • Monfort of Colorado, Inc. v. Cargill, Inc., Civ. A. No. 83-F-1318.
    • United States
    • United States District Courts. 10th Circuit. United States District Court of Colorado
    • December 1, 1983
    ...Guide Pub. Co. v. Prairie Farmer Pub. Co., 293 U.S. 268, 279, 55 S.Ct. 182, 185, 79 L.Ed. 356 (1934); United States v. M.P.M., Inc., 397 F.Supp. 78 (D.Colo.1975). The product market is normally considered first because the geographic market typically depends on the nature of the product inv......
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9 cases
  • United States v. Black and Decker Mfg. Co., Civ. No. 73-964-B.
    • United States
    • United States District Courts. 4th Circuit. United States District Court (Maryland)
    • August 20, 1976
    ...omitted. See also Northwest Airlines, Inc. v. CAB, 112 U.S.App.D.C. 384, 303 F.2d 395, 401 (1962); United States v. M.P.M., Inc., 397 F.Supp. 78, 95 In Citizen Publishing Co. v. United States, supra 394 U.S. at 138, 89 S.Ct. at 931, the Court stated Moreover, we know from broad experience o......
  • 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
    ...819 (N.D.Tex.1979); United States v. Tracinda Investment Corp., 447 F.Supp. 1093, 1106 (C.D.Cal.1979); United States v. M.P.M., Inc., 397 F.Supp. 78, 91 Finally, some courts have articulated specific factors they have weighed while undertaking a General Dynamics analysis. One such case is U......
  • United States v. Tracinda Inv. Corp., No. CV 79-0174-AAH (SX).
    • United States
    • United States District Courts. 9th Circuit. United States District Courts. 9th Circuit. Central District of California
    • September 14, 1979
    ...& MacMillan, Inc., 361 F.Supp. 983 (S.D.N.Y.1973) (combination of firms of 41.9% and 0.6% not barred); United States v. M.P.M., Inc., 397 F.Supp. 78 (D.Col.1975) (combined market share of 31.6% held not anticompetitive); United States v. Consolidated Foods Corp., 455 F.Supp. 108, 134-141 (E......
  • Monfort of Colorado, Inc. v. Cargill, Inc., Civ. A. No. 83-F-1318.
    • United States
    • United States District Courts. 10th Circuit. United States District Court of Colorado
    • December 1, 1983
    ...Guide Pub. Co. v. Prairie Farmer Pub. Co., 293 U.S. 268, 279, 55 S.Ct. 182, 185, 79 L.Ed. 356 (1934); United States v. M.P.M., Inc., 397 F.Supp. 78 (D.Colo.1975). The product market is normally considered first because the geographic market typically depends on the nature of the product inv......
  • Request a trial to view additional results

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