Hold Separate Orders in Horizontal Acquisitions--Judicial Refuge Behind a Remedial Façade: FTC v. Weyerhaeuser

St. John's Law Review Volume 57, Fall 1982, Number 1 Article 6 Hold Separate Orders in Horizontal Acquisitions-Judicial Refuge Behind a Remedial Façade: FTC v. Weyerhaeuser Kevin J. Lyons Follow this and additional works at: https://scholarship.law.stjohns.edu/lawreview Recommended Citation Lyons, Kevin J. (1982) "Hold Separate Orders in Horizontal Acquisitions--Judicial Refuge Behind a Remedial Façade: FTC v. Weyerhaeuser," St. John's Law Review: Vol. 57 : No. 1 , Article 6. Available at: https://scholarship.law.stjohns.edu/lawreview/vol57/iss1/6 This Comment is brought to you for free and open access by the Journals at St. John's Law Scholarship Repository. It has been accepted for inclusion in St. John's Law Review by an authorized editor of St. John's Law Scholarship Repository. For more information, please contact . COMMENT HOLD SEPARATE ORDERS IN HORIZONTAL ACQUISITIONS-JUDICIAL REFUGE BEHIND A REMEDIAL FACADE: FTC v. WEYERHAEUSER CO. Section 7 of the Clayton Act 1 protects the public from a noncompetitive marketplace by proscribing mergers that may substantially lessen competition or tend to create a monopoly.2 To foster I Clayton Act § 7, 15 U.S.C. § 18 (1976 & Supp. IV 1980). Section 7 provides in pertinent part: No person engaged in commerce or in any activity affecting commerce shall acquire, directly or indirectly, the whole or any part of the stock or other share capital and no person subject to the jurisdiction of the Federal Trade Commission shall acquire the whole or any part of the assets of another person engaged also in commerce or in any activity affecting commerce, where in any line of commerce or in any activity affecting commerce in any section of the country, the effect of such acquisition may be substantially to lessen competition, or tend to create a monopoly. 15 U.S.C. § 18 (Supp. IV 1980). 2 See, e.g., Ford Motor Co. v. United States, 405 U.S. 562, 565-69 (1972); United States v. Pabst Brewing Co., 384 U.S. 546, 552 (1966). Section 7 provides a statutory vehicle for directly attacking mergers that significantly may decrease competition or tend to create a monopoly. See 15 U.S.C. § 18 (Supp. IV 1980); S. REP. No. 1775, 81st Cong., 2d Sess. 4-5 (1950); H.R. REP. No. 1191, 81st Cong., 1st Sess. 8 (1949). To alleviate the uncertainty regarding the scope of the Clayton Act's proscriptions, see id.; Note, Section 7 of the Clayton Act: A Legislative History, 52 COLUM. L. REV. 766, 768-69 (1952), Congress enacted the Cellar-Kefauver Amendment, ch. 1184, 64 Stat. 1125 (1950) (codified as amended at 15 U.S.C. §§ 18, 21 (1976 & Supp. IV 1980)). This provision expanded the reach of section 7 to cover the acquisition of corporate assets, Note, supra, at 770; see Bok, Section 7 of the Clayton Act and the Merging of Law and Economics, 74 HARv. L. REV. 226, 234-35 (1960), and made it quite clear that the proscriptions of the Clayton Act were intended to apply to horizontal, vertical and conglomerate acquisitions, see FTC v. Procter & Gamble Co., 386 U.S. 568, 577 (1967). Unlike the Sherman Act, ch. 647, 26 Stat. 209 (1890) (codified as amended at 15 U.S.C. §§ 1-7 (1976 & Supp. IV 1980)), which is designed to abrogate extant anticompetitive practices, the Clayton Act is preventive in nature. See, e.g., United States v. Griffith, 334 U.S. 100, 107 (1948). Hence, the Clayton Act is intended to eliminate "monopolistic tendencies in their incipiency, before they attain Sherman Act proportions." In re Scott Paper Co., 57 F.T.C. 1415, 1441 (1960); accord Crown Zellerbach Corp. v. FTC, 296 F.2d 800, 822 (9th Cir. 1961), cert. denied, 370 U.S. 937 (1962). See generally L. SULLIVAN, HANDBOOK OF THE LAW 19821 HOLD SEPARATE ORDERS this goal, Congress enacted section 13(b) of the Federal Trade Commission Act,' which provides that a court may enjoin a proposed merger "[u]pon a proper showing that, weighing the equities and considering the Commission's likelihood of ultimate success, such action would be in the public interest."'4 Numerous issues have arisen regarding the operation of this section. For example, it has been unclear whether the statutory command to balance the equities applies only to public considerations, or whether it reaches private equities as well.' In addition, although the issuance of a OF ANTITRUST 602-03 (1977). A court considering the legality of a transaction, therefore, focuses upon whether the contemplated acquisition may substantially lessen competition. See Crown Zellerbach Corp., 296 F.2d at 822. 3 Trans-Alaska Pipeline Authorization Act of 1973, Pub. L. No. 93-153, § 408(f), 87 Stat. 576 (presently codified at 15 U.S.C. § 53(b) (1976)). Section 13(b) provides in pertinent part: Whenever the Commission has reason to believe(1) that any person, partnership, or corporation is violating, or is about to violate, any provision of law enforced by the Federal Trade Commission ... the Commission by any of its attorneys designated by it for such purpose may bring suit in a district court of the United States to enjoin any such act or practice. Upon a proper showing that, weighing the equities and considering the Commission's likelihood of ultimate success, such action would be in the public interest, and after notice to the defendant, a temporary restraining order or a preliminary injunction may be granted .... 15 U.S.C. § 536 (1976). ' Id. Section 13(b) was enacted to provide the FTC with a viable method of enforcing section 7 of the Clayton Act. See Halverson, The Federal Trade Commission's Injunctive Powers Under the Alaska Pipeline Amendments: An Analysis, 69 Nw. U.L. Ray. 872, 872 n.1 (1975). This legislation was considered necessary because the competitive policies embodied in section 7 frequently had been frustrated by the FTC's inability to prevent mergers or to accomplish effective divestiture. See Hearings on S. 15 Before the Antitrust Subcomm. of the House Comm. on the Judiciary,84th Cong., 2d Sess. 29 (1956); Elzinga, The Antimerger Law: Pyrrhic Victories?, 12 J.L. & ECON. 43, 53 (1969); see also NATIONAL COMMISSION FOR THE REvmw OF ANTITRUST LAWS AND PRocEDURES, REPORT TO THE PRESIDEM AND ATrORNEY GENERAL (1979), reprinted in 80 F.R.D. 509, 609-12 (1979). Compare FTC v. National Tea Co., 603 F.2d 694, 697 (8th Cir. 1979) (in deciding whether to grant a preliminary injunction, the court may consider acquiring-firm's promise to divest itself within 6 months in the event the merger is held in violation of section 7) with FTC v. Lancaster Colony Corp., 434 F. Supp. 1088, 1096-97 (S.D.N.Y. 1977) (injunctions are more effective than divestiture in enforcing section 7). 9 Many courts regard the threat to the economy as well as the public interest in enforcement of the antitrust laws as the only considerations in determining whether to issue a section 13(b) injunction. E.g., FTC v. Lancaster Colony Corp., 434 F. Supp. 1088, 1096 (S.D.N.Y. 1977). In FTC v. Food Town Stores, Inc., 539 F.2d 1339 (4th Cir. 1976), for example, the court (...truncated)