United States v. Continental Can Co. - 378 U.S. 441 (1964)
U.S. Supreme Court
United States v. Continental Can Co., 378 U.S. 441 (1964)
United States v. Continental Can Co.
Argued April 28, 1964
Decided June 22, 1964
378 U.S. 441
The Government seeks an order requiring the divestiture, as a violation of § 7 of the Clayton Act, by Continental Can Company (CCC), the second largest producer of metal containers, of the assets acquired in 1956 of Hazel-Atlas Glass Company (HAG), the third largest producer of glass containers. CCC, which had a history of acquiring other companies, produced no glass containers in 1955, but shipped 33% of all metal containers sold in this country. HAG, which produced no metal containers, shipped 9.6% of the glass containers that year. The geographic market was held by the District Court to be the entire country. The Government had urged ten product markets, including the can industry, the glass container industry, and various lines of commerce defined by the end use of the containers. The District Court found three product markets, metal containers, glass containers, and metal and glass beer containers. Although finding inter-industry competition between metal, glass and plastic containers, the District Court held them to be separate lines of commerce. Holding that the Government had failed to prove reasonable probability of lessening competition in any line of commerce, the District Court dismissed the complaint at the end of the Government's case.
1. Inter-industry competition between glass and metal containers may provide the basis for defining a relevant product market. Pp. 378 U. S. 447-458.
(a) The competition protected by § 7 is not limited to that between identical products. P. 378 U. S. 452.
(b) Cross-elasticity of demand and interchangeability of use are used to recognize competition where it exists, not to obscure it. Brown Shoe Co. v. United States, 370 U.S. at 370 U. S. 326. P. 378 U. S. 453.
(c) There has been insistent, continuous, effective and substantial end-use competition between metal and glass containers; and though interchangeability of use may not be so complete and cross-elasticity of demand not so immediate as in the case of some intra-industry mergers, the long-run results bring the competition between them within § 7. Pp. 378 U. S. 453-455.
(d) There is a large area of effective competition between metal and glass containers, which implies one or more other lines of commerce encompassing both industries. Pp. 378 U. S. 456-457.
(e) If an area of effective competition cuts across industry lines, the relevant line of commerce must do likewise. P. 378 U. S. 457.
(f) Based on the present record, the inter-industry competition between glass and metal containers warrants treating the combined glass and metal container industries and all end uses for which they compete as a relevant product market. P. 378 U. S. 457.
(g) Complete inter-industry competitive overlap is not required before § 7 is applicable, and some noncompetitive segments in a proposed market area do not prevent its identification as a line of commerce. P. 378 U. S. 457.
(h) That there may be a broader product market, including other competing containers, does not prevent the existence of a submarket of cans and glass containers. Pp. 378 U. S. 457-458.
2. On the basis of the evidence so far presented, the merger between CCC and HAG violates § 7 because it will have a probable anticompetitive effect within the relevant line of commerce. Pp. 378 U. S. 458-466.
(a) In determining whether a merger will have probable anticompetitive effect, it must be looked at functionally in the context of the market involved, its structure, history, and future. P. 378 U. S. 458.
(b) Where a merger is of such magnitude as to be inherently suspect, detailed market analysis and proof of likely lessening of competition are not required in view of § 7's purpose of preventing undue concentration. P. 378 U. S. 458.
(c) The product market of the combined metal and glass container industries was dominated by six companies, of which CCC ranked second and HAG sixth. P. 378 U. S. 461.
(d) The 25% of the product market held by the merged firms approaches the percentage found presumptively bad in United States v. Philadelphia National Bank, 374 U. S. 321, and nearly the same as that involved in United States v. Aluminum Co. of America, 377 U. S. 271, and the addition to CCC's share is larger here than in Aluminum Co. P. 378 U. S. 461.
(e) Where there has been a trend toward concentration in an industry, any further concentration should be stopped. P. 378 U. S. 461.
(f) Where an industry is already highly concentrated, it is important to prevent even slight increases therein. Pp. 378 U. S. 461-462.
(g) The argument that CCC's and HAG's products were not in direct competition at the time of the merger, and that therefore the merger could have no effect on competition, ignores the fact that the removal of HAG as an independent factor in the glass container industry and in the combined metal and glass container market foreclosed its potential competition with CCC, neglects the further fact that CCC, already a dominant firm in an oligopolistic market, has increased its power and effectiveness, and fails to consider the triggering effect that a merger of such large companies has on the rest of the industry, which seeks to follow the pattern, with anticompetitive results. Pp. 378 U. S. 462-465.
217 F. Supp. 761, reversed and remanded.