The opinion of the court was delivered by: WILLSON
The complaint in this case was filed by the United States on February 17, 1961. On January 3, 1961, Koppers Company, Inc., acquired the controlling stock interest in Thomas Flexible Coupling Company. The complaint alleges that the acquisition is in violation of Section 7 of the Clayton Act, 15 U.S.C.A. § 18. The preparation and trial to the case has proceeded with dispatch. Counsel for the parties were quick to get to the basic issues through discovery and pretrial, with the result that the case came on for trial at the October, 1961, Non-July term at Erie. Briefs have been filed and considered and counsel have been heard at oral argument.
Upon consideration of all the evidence and the law, this court has come to the conclusion that the merger is in violation of Section 7 of the statute and must be set aside.
The issues in the case concern the flexible coupling industry of the country. There is no dispute as to the definition of a flexible coupling. It is a device which is used to connect rotating shafts, transmit the power from the driving to the driven member, and while so doing, compensate for minor degrees of misalignment. There are various types of flexible couplings such as gear, disc, grid, rubber, jaw and chain, each of which serves the function of connecting rotating shafts, transmitting power from the driving to the driven member, and while so doing, compensating for minor degrees of misalignment, although each may use a different principle to achieve its flexibility.
The defendant, Koppers Company, Inc., hereinafter referred to as Koppers, is a corporation organized and existing under the laws of the State of Delaware with its principal office in Pittsburgh, Pa. Koppers is a highly diversified organization with total sales in 1960 in excess of $ 300 million. It conducts its business through eight operating divisions, one of which is its Metal Products Division. The Metal Products Division is in turn segmented into various departments, one of which is the Coupling Department which manufactures and sells flexible couplings from its plant in Baltimore, Maryland. These couplings are sold and shipped throughout the United States in interstate commerce.
Thomas Flexible Coupling Company, hereinafter referred to as Thomas, is a corporation organized and existing under the laws of the State of Pennsylvania, with its principal office in Warren, Pennsylvania in this district. Thomas flexible couplings are manufactured in Warren and are sold and shipped throughout the United States in interstate commerce.
In speaking of what each of the defendants manufactures and sells, the court, of course, is referring to that period prior to the merger. Thomas manufactures and sells a disc type flexible coupling. Koppers manufactures and sells a gear type flexible coupling which, as it says in its catalogue, is --
'Based on Gustave Fast's famous patented principle, FAST'S couplings automatically compensate for angular, offset, and angular-offset misalignment.'
The formula used by all flexible coupling manufacturers including Koppers and Thomas to determine the size of the coupling to be used is:
H P/R P M X 100 X Service Factor = load requirement.
Because the functions of flexible couplings are difficult to accurately portray, the following proposed finding, as submitted by the defendants, is quoted as the government has agreed that it is an accurate statement;
'Metal flexible couplings manufactured and sold by both Koppers and Thomas are used for the general purposes of transmitting power by joining together rotating shafts. They serve three functions: (1) Couple shafts for mechanical power transmission, transferring the torque of one shaft to the other, directly and with constant velocity. (2) Compensate for all types of mis-alignment between shafts without inducing stresses and loads on the connected equipment and without a tangible loss of power. (3) Compensate for end or axial movement of the coupled shafts, preventing either shaft from exerting a thrust on the other and allowing each to rotate on its normal axial position.'
The principal sales of flexible couplings are made to large commercial users of machinery and original equipment manufacturers. Sales are made by means of salaried sales personnel, by distributors, or by sales representatives operating on commission. Total sales of all types of flexible couplings for each of the years 1958, 1959 and 1960 were as follows: (rounded figures]
1958 $ 23,500,000
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