United States v. General Dynamics Corp. - 415 U.S. 486 (1974)


U.S. Supreme Court

United States v. General Dynamics Corp., 415 U.S. 486 (1974)

United States v. General Dynamics Corp.

No. 72-402

Argued December 5, 1973

Decided March 19, 1974

415 U.S. 486

Syllabus

Material Service Corp., a deep mining coal producer, and its successor, appellee General Dynamics Corp., acquired, through stock purchases, control of appellee United Electric Coal Companies, a strip-mining coal producer. The Government brought suit alleging that this acquisition violated § 7 of the Clayton Act. The District Court found no violation on the ground, inter alia, that the Government's evidence -- consisting principally of past production statistics showing that, within certain geographic markets, the coal industry was concentrated among a small number of large producers, that this concentration was increasing, and that the acquisition here would materially enlarge the acquiring company's market share and thereby contribute to the concentration trend -- did not support the Government's contention that the acquisition substantially lessened competition in the production and sale of coal in either or both of two specified geographic markets. This conclusion was primarily based on a determination that United Electric's coal reserves were so low that its potential to compete with other producers in the future was far weaker than the aggregate production statistics relied on by the Government might otherwise have indicated, virtually all of United Electric's proved reserves being either depleted or already committed by long-term contracts with large customers, so that its power to affect the price of coal was severely limited and steadily diminishing.

Held:

1. While the Government's statistical showing might have been sufficient to support a finding of "undue concentration" in the absence of other considerations, the District Court was justified in finding that other pertinent factors affecting the coal industry and appellees' business mandated a conclusion that no substantial lessening of competition occurred or was threatened by the acquisition. Ample evidence showed that United Electric does not have sufficient reserves, which are a key factor in measuring

Page 415 U. S. 487

a coal producer's market strength, to make it a significant competitive force. Thus, in terms of probable future ability to compete, rather than in terms of past production on which the Government relied, the court was warranted in concluding that the merger did not violate § 7 of the Act. Pp. 415 U. S. 494-504.

2. The District Court was justified in considering post-acquisition evidence relating to changes in the patterns and structure of the coal industry and in United Electric's reserve situation, since (unlike evidence showing only that no lessening of competition has yet occurred) the demonstration of weak coal resources necessarily implied that United Electric was not merely disinclined, but unable, to compete effectively for future contracts, such evidence going directly to the question whether future lessening of competition was probable. Pp. 415 U. S. 504-506.

3. United Electric's weak reserves position, rather than establishing a "failing company" defense by showing that the company would have gone out of business but for the merger, went to the heart of the Government's statistical prima facie case and substantiated the District Court's conclusion that United Electric, even if it remained in the market, did not have sufficient reserves to compete effectively for long-term contracts, and therefore appellees' failure to meet the prerequisites of a failing company defense did not detract from the validity of the District Court's analysis. Pp. 415 U. S. 506-508.

4. Under the "clearly erroneous" standard of Fed.Rule Civ.Proc. 52(a), which governs as fully on direct appeal to this Court as on review by a court of appeals, the District Court's findings and conclusions are supported by the evidence, and are not clearly erroneous. P. 415 U. S. 508.

5. The District Court found new strip reserves unavailable, and the mere possibility that United Electric could some day acquire expertise to mine deep reserves does not depreciate the validity of the conclusion that United Electric, at the time of trial, did not have the power to compete effectively for long-term contracts, nor does it give the production statistics relied on by the Government more significance than the District Court ascribed to them. Pp. 415 U. S. 508-510.

341 F.Supp. 534, affirmed.

STEWART, J., delivered the opinion of the Court, in which BURGER, C.J., and BLACKMUN, POWELL, and REHNQUIST, JJ., joined. DOUGLAS,

Page 415 U. S. 488

J., filed a dissenting opinion in which BRENNAN, WHITE, and MARSHALL, JJ., joined, post, p. 415 U. S. 511.



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