Section 7 of the Clayton Act: An Overview of Judicial Responses to Recent Federal Enforcement Efforts

Boston College Law Review Volume 20 Issue 3 Number 3 Article 2 3-1-1979 Section 7 of the Clayton Act: An Overview of Judicial Responses to Recent Federal Enforcement Efforts Paul M. Laurenza Follow this and additional works at: http://lawdigitalcommons.bc.edu/bclr Part of the Antitrust and Trade Regulation Commons Recommended Citation Paul M. Laurenza, Section 7 of the Clayton Act: An Overview of Judicial Responses to Recent Federal Enforcement Efforts, 20 B.C.L. Rev. 485 (1979), http://lawdigitalcommons.bc.edu/bclr/vol20/iss3/2 This Article is brought to you for free and open access by the Law Journals at Digital Commons @ Boston College Law School. It has been accepted for inclusion in Boston College Law Review by an authorized editor of Digital Commons @ Boston College Law School. For more information, please contact . SECTION 7 OF THE CLAYTON ACT: AN OVERVIEW OF JUDICIAL RESPONSES TO RECENT FEDERAL ENFORCEMENT EFFORTS PAUL NI. LAURENZA * In the past several years, the federal antimerger statute, section 7 of the Clayton Act,' has undergone a significant judicial reassessment. Generally, the section 7 decisions of the Burger Court and the lower courts reflect a markedly more tolerant judicial attitude toward corporate mergers than was evident. during the merger conscious years' of the Warren Court..`' This shift in Copyright C) 1979 by Boston College Law School * Member. District of Columbia Bar. ' 15 U.S.C. 18 (1976). In pertinent part § 7 provides: No corporation engaged in commerce shall acquire, directly or indirectly. the whole or any part of the stock or other share capital and HO corporation subject to the jurisdiction of the Federal Trade Commission shall acquire the whole or any part 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. Commenting on the first 7 decisions of the Burger Court. one author noted: The new majority is proceeding on a case-by-case basis that. tends to defy generally-applicable rules, that makes substantive presumptions in favor of the validity of the challenged merger, and that imposes procedural burdens in a manner that favors defendants' success. Moreover, the new majority ... has raised the threshold of illegality perceptibly above that which was the legacy of the Warren Court. Fox, AntitrUsl„Alergers, awl the Supreme Court: The Politics of Section 7 of the Claytou Act, 26 NI ERCER L. REV. 389, 390-91 (1975) (footnote omitted). 3 For a discussion of the "merger wave" of the 1060 . s. see P. STEINER, MERGERS 1-29 (1975). A telling statistic in this regard is that the Warren Court's twelve substantive opinions in government § 7 cases all favored the plaintiff. See Citizen Publishing Co. v. United States, 394 U.S. 131 (1969): United States v. Third Nat'l Bank. 390 U.S. 171 (1968); FTC v. Proctor & Gamble Co., 386 U.S. 568 (1967): United States v. Pabst Brewing Co., 384 U.S. 546 (1 966); United States v. Von's Grocery Co., 384 U.S. 270 (1966); FTC y. Consolidated Foods Corp., 380 U.S. 592 (1965); United States v. Continental Can Co., 378 U.S. 441 (1964); United States v. Peep-Olin Chem. Co., 378 U.S. 158 (1964); United States v. Aluminum Co. of America. 377 U.S. 271 (1964); United States v. El Paso Natural Gas Co.. 376 U.S. 651 (1964); United States v. Philadelphia Nat'l Bank, 374 U.S. 321 (1963); Brown Shoe Co. v. United States, 370 U.S. 291 (1962). In contrast, the present Court has decided four merger cases on their tillbSUI/ICIVe merits since 1974, all in Favor of the defendants. See United States v. American Bldg. Maintenance Indus.. 422 U.S. 271 ( 1975): United States v. Citizens & Southern Nat'l Bank, 422 U.S. 86 (1975): United States v. Marine Bancorporation, Inc., 418 U.S. 602 (1974); United States v. General Dynamics Corp., 415 U.S. 486 (1974). Also. in United States v. Connecticut Nail Bank, 418 U.S. 656, 666-73 (1974). although the Court remanded for it proper delineation of relevant markets, the Court's opinion clearly rejected several of the government's key legal contentions. 485 48fi BOSTON COLLEGE LAW REVIEW [Vol. 20:485 judicial perspective in turn has forced the federal antitrust enforcement agencies'' to reconsider the advisability of challenging certain kinds of mergers not. long ago regarded as clearly susceptible to the proscriptions of section 7." Most significant_ among recent section 7 cases are those decisions dealing with the sufficiency of market Share and concentration analysis as a measure of a merger's probable competitive effect in the relevant. market, and with application of the potential competition doctrine. This article reviews recent judicial development in these two areas and attempts 10 assess their implications for section 7 enforcement. I. MARKET SHARE AND CONCENTRATION ANALYSIS In analyzing challenged horizontal mergers, the courts traditionally have relied heavily, if' not solely, on the government's market share and concentration data to determine the legality of the merger.' Other quantitative cvi- Although the term "government - in the enforcement context usually denotes the justice Department, the term is applied throughout this article to both the Justice Department and the Federal Trade Commission. The Justice Department and the Federal Trade Commission have concurrent authority to enforce 7—the justice Department in the courts, 15 U.S.C. 25 (1970), and the FIG through administrative proceedings, IS U.S.C. 21(a) (1970). The Sherman Act, IS U.S.C. §§ 1-7 (1970), which also is applicable to mergers in certain instances, see, e.g., United States v. First Nall Bank & Trust Co., 370 U.S. (165 (1901) (Lexingion Bank), is enforceable by the Justice Department. 15 U.S.C, § 4 (197(i). Section 5 of' the Federal Trade Commission Act, 15 U.S.C. 45 (1970), which may constitute an independent basis for merger challenge, but see FTC v. Atlantic Richfield Co., 549 F.2d 289 (4th Cir. 1977) (discussed in text at notes 100-24 infra), is enforceable by the FTC. The Justice Department maintains Merger Guidelines which set forth generalized criteria the Department will ordinarily apply in reviewing mergers. See I TRADE REC. REP. (CC I'!) ¶ 4510. The FTC has issued merger guidelines with respect to a few selected industries. See, e.g., id. ¶ 4520 (vertical mergers in cement industry). See., e.g.. Testimony of 1i. Pertschuk, Chairman, Federal Trade Commissi(ni, in Hellthigs on Conglomerate Mergers 13("We the Sulumum. on Aniiirusi awl Monopoly of the Senate judiciary Comm., 951h (;ongress. 2d Sess. 148 (1978); Remarks of Daniel C. Schwartz, Deputy Director, Federal Trade Commission, "The FTC's Role in the Present Competitive Environment, - at 21-22, Lewis and Clark Law School Third Annual Antitrust Symposium (Feb. 24, 1978); Interview with John FL Shenefield, Assistant Attorney General. 834 ANT.... RusT & TRADE RE (...truncated)