White Consol. Industries, Inc. v. Whirlpool Corp.
| Decision Date | 29 January 1986 |
| Docket Number | No. 85-3622,85-3622 |
| Citation | 781 F.2d 1224 |
| Court | U.S. Court of Appeals — Sixth Circuit |
| Parties | , 1986-1 Trade Cases 66,930 WHITE CONSOLIDATED INDUSTRIES, INC. and Magic Chef, Inc., Plaintiffs-Appellants, v. WHIRLPOOL CORPORATION; Dart & Kraft Corporation; Hobart Corporation and Emerson Electric Company, Defendants-Appellees. |
H. Stephen Madsen, Baker & Hostetler, Cleveland, Ohio, Joseph G. Scoville, Warner Norcross, & Judd, Grand Rapids, Mich., George F. Karch, Jr., Thompson, Hine, & Flory, Neal Rains, Arter & Hadden, Cleveland, Ohio, Theodore L. Banks, Dart & Kraft, Inc., Northbrook, Ill., Arthur F. Golden, Davis, Polk, & Wardwell, New York City, William K. Holmes, Warner, Norcross, & Judd, Grand Rapids, Mich., Tefft W. Smith, Donald G. Kempf, Jr., Chicago, Ill., for defendants-appellees.
James M. Porter (argued), Thomas S. Kilbane, Walter J. Rekstis, III, John E. Lynch, Jr., Stacy D. Ballin, Squire, Sanders & Dempsey, Mark O'Neill, Weston, Hurd, Fallon, Paisley & Howley, Cleveland, Ohio, John K. Train, III, Martin J. Elgison, Alston & Bird, Atlanta, Ga., for plaintiffs-appellants.
Before KEITH and MILBURN, Circuit Judges, and PECK, Senior Circuit Judge.
The plaintiffs, White Consolidated Industries, Inc. and Magic Chef, Inc., appeal from a district court order, 619 F.Supp. 1022, vacating a preliminary injunction which enjoined defendant Whirlpool Corporation from purchasing the KitchenAid Division of defendant Dart & Kraft Corporation. We affirm the judgment below for the following reasons.
The parties in this anti-trust action are competitors in the household appliance market. Plaintiffs White Consolidated Industries, Inc. and Magic Chef, Inc. manufacture and distribute major household appliances nationwide as does the defendant Whirlpool Corporation. Defendant Dart & Kraft is a diversified food and consumer products company which acquired defendant Hobart Corporation as a subsidiary in 1981. Hobart Corporation primarily manufactures kitchen equipment through its KitchenAid Division which is known in particular for producing top-of-the-line dishwashers. The defendant Emerson Electric Company, mainly noted for its broad range of electrical and electronic products, manufactures and distributes nationally a line of garbage disposers and dishwashers.
In February 1985, plaintiffs filed suit in the United States District Court for the Northern District of Ohio alleging that Whirlpool's proposed acquisition of KitchenAid violated Section 7 of the Clayton Act, 15 U.S.C. Sec. 18 and Sections 1 and 2 of the Sherman Act, 15 U.S.C. Secs. 1 and 2. Plaintiffs sought to preliminarily and permanently enjoin defendant Whirlpool from acquiring the KitchenAid Division from defendants Dart & Kraft and Hobart Corporation. Under the proposed acquisition agreement, Whirlpool would purchase from Dart & Kraft all of Hobart's KitchenAid stock, including the manufacturing assets of the dishwasher facility held by a Hobart subsidiary. Upon acquiring KitchenAid, Whirlpool proposed tendering a "curative divestiture" designed to defuse the anti-competitive effects of the transaction. The curative divestiture entailed Whirlpool selling KitchenAid manufacturing assets to defendant Emerson. After this partial divestiture After three months of discovery, the district court conducted a five week long hearing to determine whether a preliminary injunction against the deal should issue. On June 28, 1985, the district court entered an order and lengthy memorandum opinion granting plaintiffs' motion for a preliminary injunction. See White Consolidated Industries, Inc. v. Whirlpool Corporation, 612 F.Supp. 1009 (N.D.Ohio 1985). The district court determined that, despite the "curative divestiture" provisions of the proposed acquisition, the small number of top appliance manufacturers would garner even larger shares of the dishwasher market after the acquisition, id. at 1020-21, and that the combination of Whirlpool and KitchenAid in an already highly concentrated market would substantially reduce competition. Id. at 1030. Specifically, the trial court expressed concern that the curative divestiture provisions of the agreement failed to accord Emerson sufficient latitude in marketing the Model 21 dishwasher for it to freely compete against other dishwasher distributors. Id. at 1029. Moreover, the divestiture provisions failed to eradicate agreement restrictions on Emerson's ability to private label and distribute the Model 21, factors which in the district court's view, precluded Emerson from independently competing with Whirlpool and replacing KitchenAid in the market. Id.
Whirlpool would keep the KitchenAid brand name and garbage disposer manufacturing assets and Emerson would agree to supply Whirlpool's quota of the KitchenAid Model KD21 dishwashers, compactors and service parts for a guaranteed twenty percent net profit. Aside from providing Whirlpool's inventory, Emerson would be allowed to market a differentiated Model KD21 only through its own "In Sink Erator" brand name and distribution network.
Prior to finding that this evidence established a prima facie illegal transaction, the court noted:
For this divestiture to be curative, Emerson would have to be free to manufacture, distribute and market the Model 21 under any name not confusingly similar to KitchenAid's. In addition, Emerson would have to be free to distribute the Model 21 through any means it chose. Finally, Emerson would have to be free to private label the Model 21. The court finds that these restrictions are sufficiently inhibitive of Emerson's ability to compete in the market that Emerson will not act as a post-transaction check on Whirlpool and will not in any way make up for the loss of KitchenAid.
612 F.Supp. at 1029. The district court thereupon concluded the defendants had failed to overcome the plaintiffs' prima facie case showing that the transaction would substantially reduce competition by affording Whirlpool an increasing ability to control Emerson, restrict dishwasher output and raise prices. Id. at 1029-30. The preliminary injunction thereafter issued.
The defendants immediately amended the agreement to incorporate the curative measures suggested in the district court opinion and moved to vacate the injunction. In considering defendants' motion to vacate the preliminary injunction, the court determined that the amendments allowed post-transaction Emerson to (1) manufacture, distribute and market the Model 21 dishwasher under any name not similar to KitchenAid's; (2) distribute the Model 21 through any system Emerson chose; and (3) issue the Model 21 under private label. Appendix A at 1229. With these changes, the court determined that Emerson gained complete control from Whirlpool over its own dishwasher production and distribution as well as the ability to replace KitchenAid as a willing and viable competitor in the dishwasher market. Appendix A at 1231. The court concluded the amendments eliminated the anti-competitive effects of Whirlpool's proposed acquisition and ordered the preliminary injunction vacated:
Given the amended supply contract, the Court finds that KitchenAid's manufactured units market share should be attributed to Emerson, and that a statistical analysis would not lead to the conclusion that the proposed transaction is at Accordingly, the Court finds that the plaintiffs have not demonstrated a substantial likelihood of success of proving an antitrust violation, have not shown that the transaction would cause irreparable injury, and have not shown that the transaction would be detrimental to the public interest. Accordingly, the preliminary injunction shall be vacated.
all likely to substantially lessen competition in the dishwasher market. In addition, the Court finds that the amended supply contract gives Emerson the independence to be viable in the dishwasher market and that Emerson, with others, will be able to act as a check on the market leaders.
Our review of the district court order vacating the preliminary injunction is limited to determining whether the trial court abused its discretion. Christian Schmidt Brewing v. G. Heilman Brewing, 753 F.2d 1354, 1356 (6th Cir.1985). Four factors determine whether the order constitutes an abuse of discretion: (1) the plaintiffs' likelihood of success in proving the claimed violation; (2) the likelihood of irreparable harm to others if relief is granted or denied; (3) the impact on the public interest; and (4) the likelihood of substantial harm to others. Id., Tate v. Frey, 735 F.2d 986, 990 (6th Cir.1984); Warner v. Central Trust Co., 715 F.2d 1121, 1123 (6th Cir.1983); Mason County Medical Association v. Knebel, 563 F.2d 256, 261 (6th Cir.1977).
On appeal the plaintiffs first contend that the district court abused its discretion in vacating the preliminary injunction because the amended agreement fails to sufficiently ensure Emerson's ability to replace KitchenAid as a viable competitor. Specifically, plaintiffs argue that the amended agreement still leaves Whirlpool in control of Emerson's production levels and that Emerson's marketing ability is limited because Emerson is not an integrated household appliance business with a recognized brand name, distribution network and experienced sales personnel. We do not agree. The district court expressly found that the amendments rendered Emerson an independent force in the market and that Emerson is an experienced and capable manufacturing company. Appendix A at 1231. The district court also determined that under the amended agreement Emerson had been freed to transcend entry barriers and compete in the dishwashing business as it had succeeded in entering other businesses in the past:
It is important to recognize that Emerson is not entering the market faced with traditional entry barriers. Along with its history of...
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