Potter Stewart

“ Affiliated with cooperatives that give the smallest store the buying strength of its largest competitor, new stores have taken full advantage of the remarkable ease of entry into the market. And, most important of all, the record simply cries out that the numerical decline in the number of single-store owners is the result of transcending social and technological changes that positively preclude the inference that competition has suffered because of the attrition of competitors.
Section 7 was never intended by Congress for use by the Court as a charter to roll back the supermarket revolution. ”

“ Whatever the wisdom or logic of the Court's assumed arithmetic proportion between the number of single-store concerns and the level of competition within the meaning of § 7 as applied to horizontal mergers, it is simply not possible to make the further assumption that the mere occurrence of market-extension mergers is adequate to prove a tendency of the local market toward decreased competition. ”

“ The birth of dynamic new competitive forces-discount food houses and food departments in department stores, bantams and superettes, deli-liquor stores and drive-in dairies-promises unremitting competition in the future. In the more than four years following the merger, the District Court found not a shred of evidence that competition had been in any way impaired by the merger. Industry witnesses testified overwhelmingly to the same effect. By any realistic criterion, retail food competition in Los Angeles is today more intense than ever. ”

“ It is only among single-store operators that the decline in the unit number of competitors, so heavily relied upon by the Court, has taken place. Yet the tables reproduced in the Appendix show not a trace of merger activity involving the acquisition of single-store operators. And the number of chains in the area has in fact shown a substantial net increase during the period, in spite of the fact that some of the chains have been absorbed by larger firms. How then can the Court rely on these acquisitions as evidence of a tendency toward market concentration in the area? ”

“ In a sense, the defendants are being punished for the sin of aggressive competition. [27] The Court is inaccurate in its suggestions, ante, pp. 277-278, that the merger makes these firms more 'powerful' than they were before, and that Shopping Bag was itself a 'powerful' competitor at the time of the merger. There is simply no evidence in the record, and the Court makes no attempt to demonstrate, that the increment in market share obtained by the combined stores can be equated with an increase in the market power of the combined firm. ”

“ Numerous other factors attest to the pugnacious level of grocery competition in Los Angeles, all of them silently ignored by the Court in its emphasis solely on the declining number of single-store competitors in the market. Three thousand five hundred and ninety single-store firms is a lot of grocery stores. ”

“ With regard to the 'plight' of the small businessman, the record is unequivocal that his competitive position is strong and secure in the Los Angeles retail grocery industry. The most aggressive competitors against the larger retail chains are frequently the operators of single stores. ”

“ The large number of separate competitors and the frequent price battles between them belie any suggestion that price competition in the area is even remotely threatened by a descent to the sort of consciously interdependent pricing that is characteristic of a market turning the corner toward oligopoly. ”

“ Shopping Bag operated 36 stores in Los Angeles at the time of the merger; it commenced operation as a partnership in a small grocery store in 1930. So far as the record reveals, the competitive behavior of these firms was impeccable throughout their expansion, which took place solely by internal growth. In discussing the success of comparable firms vis-a -vis the Sherman Act, Judge Learned Hand stated, ' (T) he Act does not mean to condemn the resultant of those very forces which it is its prime object to foster: finis opus coronat. ”

“ Shopping Bag's net income as a percentage of total sales declined from 1.6% in 1957 to 0.9% in 1959, and its net profit as a percentage of total assets declined from 6.6% to 3.2%. During the same period, the net income of Von's increased from 2.1% to 2.3%, and its net profits declined from 12.7% to 10.8%.↑ One single-store operator, located adjacent to one supermarket and within a mile of two others, testified, 'I have often been asked if I could compete successfully against this sort of competition. ”

“ I believe that even the most superficial analysis of the record makes plain the fallacy of the Court's syllogism that competition is necessarily reduced when the bare number of competitors has declined. ”

“ See, e.g., Kaysen & Turner, Antitrust Policy 133-136 (1959) (horizontal merger with direct competitor is prima facie unlawful where acquiring company accounts for 20% or more of the market, or where merging companies together constitute 20% or more of the market; acquisitions producing less than 20% market control unlawful only where special circumstances are present, such as serious barriers to entry or substantial influence on prices by the acquired company) ”

“ Moreover, it is clear that there are no substantial barriers to market entry. The record contains references to numerous highly successful instances of entry with modest initial investments. Many of the stores opened by new entrants were obtained through the disposition of unwanted outlets by chains; frequently the new competitors were themselves chainstore executives who had resigned to enter the market on their own. Enhancing free access to the market is the absence of any such restrictive factors as patented technology, trade secrets, or substantial product differentiation. ”

“ In that case, in the interest of practical judicial administration, the Court proposed a simplified test of merger illegality: ' (W) e think that a merger which produces a firm controlling an undue percentage share of the relevant market, and results in a significant increase in the concentration of firms in that market is so inherently likely to lessen competition substantially that it must be enjoined in the absence of evidence clearly showing that the merger is not likely to have such anticompetitive effects.' United States v. ”

“ Bok, Section 7 of the Clayton Act and the Merging of Law and Economics, 74 Harv.L.Rev. 226, 308-329 (1960) (no merger by the dominant firm in an industry if its market share is increased by more than 2-3%; no merger by other large firms in the industry where the combined market shares of the two-to-eight largest firms after the merger are increased by 7-8% or more over the shares that existed at any time during the preceding 5-10 years; no merger where acquired firm has 5% market share or more) . ”

“ However, the Court today in a gratuitous dictum, ante, p. 277, undercuts even that principle by confining it to cases in which competitors are obliged to merge to save themselves from destruction by a larger and more powerful competitor.↑ Mr. Hayden, the president and principal stockholder of Shopping Bag, was advanced in years and was concerned over the absence of a strong management staff that could take over his responsibilities.↑ Von's was a considerably more successful competitor than Shopping Bag. ”

“ The entire decrease was suffered by stores with annual gross sales of less than $50,000. During the same period, the number of stores in all higher sales brackets increased. The Commission noted that the census figures, from which its data were taken, included an undetermined number of grocery firms liquidating after 1948 that merely closed their grocery operations and continued their remaining lines of business, such as nongrocery retailing, food wholesaling, food manufacturing, etc. ”

“ The concept of reasonable probability conveyed by these words is a necessary element in any statute which seeks to arrest restraints of trade in their incipiency and before they develop into full-fledged restraints violative of the Sherman Act.' S.Rep. ”