United States v. Von's Grocery Company

• Decision Date: 14 September 1964
• Docket Number: Civ. No. 336-60.
• Parties: UNITED STATES of America, Plaintiff, v. VON'S GROCERY COMPANY and Shopping Bag Food Stores, Defendants.
• Court: U.S. District Court — Southern District of California

233 F. Supp. 976

UNITED STATES of America, Plaintiff, v. VON'S GROCERY COMPANY and Shopping Bag Food Stores, Defendants.

Civ. No. 336-60.

United States District Court S. D. California, Central Division.

September 14, 1964.

James J. Coyle, John F. Hughes, and Malcolm F. Knight, Antitrust Division, Dept. of Justice, Los Angeles, Cal., for plaintiff.

O'Melveny & Myers, by William W. Alsup, William W. Vaughn, Los Angeles, Cal., Johnson, Bates & Sheffield, by James E. Bates, Los Angeles, Cal., for defendants.

CARR, Distict Judge.

This is an action instituted by the United States to enjoin the acquisition of Shopping Bag Food Stores by Von's Grocery Company which, it is alleged, violates Section 7 of the Clayton Act (15 U.S.C. § 18). Prior to March 28, 1960, the defendants operated as separate corporations; they are now merged. Jurisdiction exists in this court under Section 15 of the Clayton Act (15 U.S.C. § 25). Plaintiff contends and defendants deny that the effect of the merger between the defendants in this proceeding may be substantially to lessen competition or tend to create a monoply, in violation of Section 7 of the Clayton Act.¹

The complaint was filed on March 25, 1960, and on March 28, 1960, an application for a temporary restraining order was denied by another judge of this court. Thereafter an application was made by plaintiff for a preliminary injunction to require Von's and Shopping Bag to be operated as separate entities pending trial of the action. This application was also denied by another judge of this court on June 13, 1960, and on July 1, 1960, interlocutory findings of fact and conclusions of law and the interlocutory order denying the motion for preliminary injunction were filed.

On April 24, 1961, a pretrial conference order, signed by the parties, was approved by the court. On December 15, 1961, plaintiff filed a motion for summary judgment which was also denied by another judge of this court.

Beginning in November, 1962, and while discovery proceedings were in progress, efforts were made by the court and counsel to arrive at a method for the presentation of the evidence which would expedite the trial which had been estimated to consume from two to three months. A plan was finally formulated and stipulated to by the parties whereby either side might present, in lieu of oral testimony, affidavits of persons who had been expected to testify. Thereafter the opposing party, if it were desired, could cross-examine such witness by taking a deposition. This procedure was followed with respect to practically all of the witnesses which the parties had anticipated calling at the trial. Both parties called a relatively few witnesses to present oral testimony at the trial. As a result of the pretrial procedures, the case consumed only approximately five days in actual trial time. Also a great many of the facts in the case were either stipulated to or admitted.

In accordance with the pretrial order, as amended, the following facts were admitted and required no proof:

It was agreed that the trial should be confined to the issue of whether the merger violated Section 7 of the Clayton Act and the matter of relief; in the event it was determined that Section 7 had been violated, hearings would thereafter be held as to appropriate relief; Von's was a California corporation with its principal place of business at Los Angeles, California; subsequent to the merger it moved its offices to the former Shopping Bag headquarters at El Monte, California; Von's was one of the leading chains, of supermarkets in the Los Angeles area; it and its predecessors had been engaged in the purchase, distribution, and retail sale of a complete line of groceries and related products since 1932; in 1959, Von's operated 28 supermarkets in the Los Angeles area with a total annual sales of approximately $85,000,000 for an average of approximately $3,000,000 in sales per store; also its supermarkets are of the self-service, cash and carry type;

Von's also owned and operated a modern distribution center; direct railroad and truck shipments were made to this distribution center which provided facilities to receive and distribute the groceries to Von's supermarkets throughout the Los Angeles area; after the merger Von's sold its distribution center to a competitor and has since used the former Shopping Bag distribution center;

Shopping Bag was a California corporation with principal offices at El Monte, California; on the date of the merger, Shopping Bag was merged into Von's; prior to the merger, Shopping Bag was a leading chain of supermarkets; it and its predecessors had been engaged in the purchase, distribution, and retail sales of a complete line of groceries and related products in the Los Angeles area since 1933; in 1959, Shopping Bag operated 36 complete supermarkets in the area, which had a total annual sales of approximately $79,000,000 for an average of approximately $2,100,000 in sales per store; all of its stores were of the self-service, cash and carry type;

In 1958, Von's ranked third and Shopping Bag fifth in terms of total sales by grocery stores in the Los Angeles metropolitan area; Von's had approximately 4.10% and Shopping Bag approximately 3.09% of all grocery store sales in the area; Shopping Bag ranked sixth and Von's eighth in terms of total number of markets operated in the area in that year; combined, Von's and Shopping Bag ranked second in terms of dollar of sales and in terms of total number of supermarkets in the metropolitan area; following the merger, Von's accounted for approximately 8% of all grocery sales in the area; taken as a whole, the following products were agreed to constitute the relevant line of commerce in the case: groceries, meats, produce, bakery goods, dairy produce, delicatessen produce, frozen foods, fruits, vegetables, household supplies, drugs, and sundries; in 1959, the sale of food products accounted for 90% of all sales by grocery stores in the area;

The relevant trade area in which defendants operated prior to the merger was the Los Angeles metropolitan area consisting of Los Angeles and Orange Counties; Los Angeles ranks as the second largest metropolitan area in the United States in terms of population, income, and retail dollar sales; approximately 6,750,000 persons reside in the area and total retail sales were approximately $9,100,000,000 in 1957; the Los Angeles metropolitan area is an appreciable trade area and a section of the country within the meaning of Section 7 of the Clayton Act; sales of groceries in the area approximate $2,500,000,000 annually;

Von's and Shopping Bag prior to the merger were engaged in interstate commerce and Von's presently is engaged in interstate commerce; several cooperatives operate in the metropolitan area, some who sell to nonmembers; Orange Empire, a cooperative, services numerous retail members and nonmembers in California, Arizona, and Nevada with an annual wholesale sales of approximately $280,000,000; prior to the merger, the twenty leading chains of supermarkets were all a part of the retail grocery competition in the area and each of the chains competed with each other; there was direct competition between some of the Von's stores and some of the Shopping Bag stores, particularly in those instances where the stores were so located that they were competing for the same customers.

With respect to the issues of fact and law, the parties are in agreement as follows: (1) that the defendant corporations were engaged in interstate commerce; (2) that the court has jurisdiction; (3) that any products or groups of products which are of sufficiently peculiar characteristics and uses as to make them distinct from all other products are in line of commerce within the meaning of Section 7 of the Clayton Act and that groceries and related products, taken as a whole, have such peculiar characteristics and uses in the operation of retail grocery stores; (4) that groceries and related products are the relevant line of commerce for determining whether the instant merger violates Section 7; (5) that the area of effective competition is a section of the country in the instant case; (6) that the relevant section of the country need not be the entire nation; (7) that the Los Angeles metropolitan area is a relevant section of the country for determining the effect of the merger.

In view of the stipulations and pretrial orders, it thus appears that the court is called upon to decide only the issue as to whether the merger may be substantially to lessen competition or tend to create a monopoly in the line of commerce and section of the country here involved.

The government apparently in one of its latest memoranda insists, at least inferentially, that the impact upon suppliers is involved as one of the issues in the case. However, it is to be noted that in the pretrial order, as amended, it is stated that defendants assert that the Los Angeles area is not the relevant section of the country as to the wholesale sale and purchase of groceries. There also appears the following:

"The government assumes no burden of proof as to the relevant section of the country at the wholesale level since it intends to base its case on the probable effects of the merger in the relevant section of the country for grocery retailers which is the Los Angeles metropolitan area." (Emphasis supplied.)

Obviously the pretrial order confined the parties to the matters agreed to therein. Furthermore, the government made no attempt to predicate its case upon the basis that suppliers had been eliminated.

Both the legislative history² and decisions of the Supreme Court, beginning with Brown Shoe Co. v. United States, 370 U.S. 294, 82 S.Ct. 1502, 8 L.Ed.2d 510, set forth the purpose of Section 7 of the Clayton Act. The act was intended to prevent a merger or acquisition of assets when the effect may be to substantially lessen competition or tend to create a monopoly....