APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF DELAWARE.
Adams, Rosenn and Hunter, Circuit Judges. Seitz, Chief Judge, Van Dusen, Aldisert, Adams, Gibbons, Rosenn, Hunter, Weis and Garth, Circuit Judges. Rosenn, Circuit Judge, concurring. Chief Judge Seitz joins in this concurring opinion.
In 1973, Congress enacted § 13(b) of the Federal Trade Commission Act, 15 U.S.C. § 53(b).*fn1 The statute gives the Federal Trade Commission power to seek preliminary injunctions in the district court, pending the outcome of administrative cease and desist proceedings, in certain cases where there is reason to believe that a law, the enforcement of which has been delegated to the Commission, is being violated or is about to be violated. The district court in the present case enjoined appellants Airco, Inc. and British Oxygen Company, Ltd., from engaging in a variety of activities, including disposing of any of Airco's assets (except in the ordinary course of business) without prior approval of the Commission.
We vacate that portion of the injunction from which Airco has appealed, as it applies to Airco, and remand the matter to the district court for further proceedings.*fn2
On February 26, 1974, the Federal Trade Commission (FTC) simultaneously commenced administrative proceedings and applied for a temporary restraining order and preliminary injunction against British Oxygen Company, Ltd., and three of its subsidiaries (BOC) and against Airco. In substance the administrative complaint and application for injunction charged Airco with violation of § 5 of the Federal Trade Commission Act, 15 U.S.C. § 45,*fn3 and BOC with violations both of § 5 of the Federal Trade Commission Act and of § 7 of the Clayton Act, 15 U.S.C. § 18.*fn4 The asserted violations arose from BOC's acquisition, through public tender offer, of 35% of Airco's common stock. In the Commission's view, the acquisition was likely to lessen actual competition in the inhalation anesthetic equipment and inhalation therapy equipment markets and likely to lessen potential competition in the industrial gas market and in the medical pipeline market. Evidence of the asserted violations appeared in the July 25, 1975 agreement between BOC and Airco. The parties agreed to exchange any confidential information, including technical data and know-how, necessary to evaluate the desirability of the proposed tender offer. As a result of this exchange of business data, Airco in a December 10, 1973 memorandum consented to BOC's proposed tender offer and to BOC's representation on the Airco board.
The Commission's § 5 complaint against Airco was based on Airco's cooperation and facilitation of an allegedly illegal stock acquisition by BOC.
BOC is a large international corporation, the second largest world producer of industrial gas, an 8% holder of the domestic inhalation anesthetic equipment market and a significant European manufacturer and distributor of therapy equipment and medical pipeline systems. In two of these fields, inhalation therapy and inhalation anesthetic equipment, BOC or a subsidiary is an actual competitor of Airco. In the other markets, the Commission characterized BOC as a potential entrant. BOC is allegedly one of the few corporations with sufficient financial resources to enter the United States industrial gas or medical pipeline markets despite significant domestic concentration and high entry barriers.
Appellant Airco is a highly diversified corporation. It is the second largest domestic industrial gas producer with a 17% market share, and therefore, a potential competitor of any BOC venture in the United States industrial gas market. Prior to the tender offer, Airco was the largest domestic producer in inhalation anesthetic equipment with a 35% market share and the second largest producer of inhalation therapy equipment with an 11% market share. Since BOC, through subsidiaries, had already entered into these domestic markets, Airco and BOC were direct competitors. Airco, in turn, had a 50% share of the domestic medical pipeline market, making it the leading firm in that market. BOC, with substantial European sales was a potential entrant in the medical pipeline market.
Despite the fact that Airco engaged in lines of commerce identical to those of BOC, Airco alleges, and the FTC does not disagree, that only a portion of its assets are devoted to these endeavors. Sixty-four percent of Airco's assets are devoted to lines of commerce which are not competitive, either actually or potentially, with those of BOC.*fn5
On the basis of a probable anti-trust violation, the district court, after a hearing, issued a preliminary injunction under § 13(b) on March 8, 1974.*fn6 BOC and Airco were ordered to maintain Airco as a separate entity, to refrain from confidential communications, to refrain from influencing Airco's independent judgment, and in all ways to hold separate the two companies.
For purposes of this appeal, our focus is directed solely on the application to Airco of Paragraph B of the injunction,*fn7 ...