Summary
The Supreme Court reviewed a civil antitrust action challenging Brown Shoe Company's merger with G. R. Kinney Company under § 7 of the Clayton Act. The Court addressed whether the district court's divestiture decree was sufficiently final for appellate jurisdiction and upheld the decree, concluding that the merger could substantially lessen competition in the shoe manufacturing and retail markets. The opinion discusses the legislative history and purposes of the 1950 amendments to § 7.
Topics
Practice areas
Questions Presented
- Whether the District Court's divestiture judgment was sufficiently final to permit direct appeal under the Expediting Act.
- Whether Brown's acquisition of Kinney violated § 7 of the Clayton Act because it might substantially lessen competition or tend to create a monopoly.
- What product and geographic markets constituted the relevant lines of commerce and sections of the country for evaluating the merger.
- Whether the vertical integration of Brown's manufacturing operations with Kinney's retail outlets might substantially foreclose competing manufacturers.
- Whether the horizontal combination of Brown's and Kinney's retail outlets might substantially lessen competition in local retail shoe markets.
- Whether full divestiture was an appropriate remedy.
Holdings
- A district-court antitrust decree ordering full divestiture is sufficiently final for direct review when the court has disposed of the complaint and the remaining proceedings concern implementation and supervision of the divestiture plan.
- Relevant product markets may include economically significant submarkets, and in this case men's, women's, and children's shoes were separate lines of commerce for evaluating the merger.
- The relevant geographic market must correspond to commercial realities and be economically significant; for the retail aspects of this merger, the relevant markets were cities of more than 10,000 population and their immediate surrounding areas where both Brown and Kinney operated outlets.
- A vertical merger violates § 7 when, considering the relevant market, the parties' market positions, the arrangement's purpose, industry concentration trends, and other economic factors, there is a reasonable probability that the merger may substantially lessen competition.
- A horizontal merger may be unlawful under § 7 if it creates a reasonable probability of substantial competitive harm in any economically significant local market, even if the parties competed directly in only a fraction of the areas in which either operated.
- Full divestiture was an appropriate remedy for the unlawful Brown-Kinney merger.
Key quotations
“Taken as a whole, the legislative history illuminates congressional concern with the protection of competition, not competitors, and its desire to restrain mergers only to the extent that such combinations may tend to lessen competition.” (at 320)
“The "area of effective competition" must be determined by reference to a product market (the "line of commerce") and a geographic market (the "section of the country").” (at 324)
“We cannot avoid the mandate of Congress that tendencies toward concentration in industry are to be curbed in their incipiency, particularly when those tendencies are being accelerated through giant steps striding across a hundred cities at a time.” (at 346)
Factual background
Brown was a major national shoe manufacturer and retailer, while Kinney operated the nation's largest family-style shoe-store chain and also owned shoe-manufacturing plants. The shoe industry showed increasing vertical integration, with manufacturers acquiring retail outlets and then supplying those outlets with increasing percentages of their own products. Brown's acquisition of Kinney would place approximately 1,600 retail outlets under Brown's control and would combine a large manufacturer with a substantial national retail chain. The record showed that the merger could foreclose independent manufacturers from Kinney's outlets and intensify concentration in local retail markets.
Procedural history
The Government filed suit in November 1955, and the District Court denied a preliminary injunction but permitted the merger to proceed while requiring separate operation and accounting. After trial, the District Court held that the merger might substantially lessen competition in the retail sale and distribution of men's, women's, and children's shoes and ordered Brown to divest Kinney. The Supreme Court held the decree sufficiently final for direct review and affirmed.