affirmative defenses which are raised by motions for summary judgment. Here see 2A, Moore's Federal Practice, Section 8.28.
Hence, we conclude that defendant raised the defense on motion for summary judgment. Having thus given the plaintiff adequate notice thereof, defendant will be permitted to file amended answers so that the matter may be fully treated on hearing seeking a permanent injunction. Opportunity for necessary discovery, if required, will be provided.
As to the questions involving RSE, defendants' motion for summary judgment will be granted to all of the plaintiff's claims grounded in Section 7 of the Clayton Act which arise out of the Stabler acquisition of the RSE, Harrisburg facility.
Section 7 of the Clayton Act prohibits mergers which produce "a firm controlling and undue percentage 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." See United States v. Philadelphia National Bank, 374 U.S. 321, 363, 83 S. Ct. 1715, 1741, 10 L. Ed. 2d 915 (1963).
There the Court stated that the challenged merger which resulted in control of at least thirty percent of the commercial banking business in the geographic market and increased concentration by more than thirty-three percent was presumptively unlawful. Other cases have gone even farther. See United States v. Pabst Brewing Co., 384 U.S. 546, 86 S. Ct. 1665, 16 L. Ed. 2d 765 (1966) and United States v. Von's Grocery, 384 U.S. 270, 86 S. Ct. 1478, 16 L. Ed. 2d 555 (1966), both holding that Section 7 was violated by mergers of companies with less resulting market power than existed in the Philadelphia National Bank case. Interesting here, you might compare United States v. General Dynamics Corp., 415 U.S. 486, 94 S. Ct. 1186, 39 L. Ed. 2d 530 (1966) permitting a horizontal merger in a highly concentrated industry upon an examination of the particular market, its structure, history and probable future.
There are two types of horizontal mergers which are typically challenged. First, the purchase of a competitor existing within the defined geographic market. See Von's Grocery, already cited. Second, an expansion, through merger, of an existing company into a geographic area in which the company had not previously competed, a so-called geographic market extension. See United States v. Marine Bancorporation, 418 U.S. 602, 94 S. Ct. 2856, 41 L. Ed. 2d 978 (1974). It may well be that the preferred method of entry into a geographic market is through a de novo or "foothold acquisition" rather than merger with an on-going, successful enterprise. See the Marine Bancorporation just cited and compare Philadelphia National Bank, 374 U.S. at 374, 83 S. Ct. at 1747, holding that corporate growth by internal expansion is socially preferable to growth by acquisition.
In the case before us, the defendants' so-called "merger" with RSE is arguably the type of transaction which Von's Grocery considered. Clearly, Section 7 reaches a variety of transactions generically referred to as mergers, consolidations and acquisitions of assets. However described, they are proscribed where appropriate. And here we call attention to United States v. Philadelphia National Bank, once again. The statute prohibits, under specified circumstances, the purchase of another's market power. Here, however, no such transaction occurred regarding the defendants' purchase of RSE. The parties do not dispute that defendants purchased RSE in Harrisburg from a secured creditor, that at the time of the acquisition RSE was not in business, had no on-going business and no market power. Stabler purchased RSE's productive capacity, i.e. its machinery. It did not purchase any of its good will or, importantly, any of its market share, since RSE had none. Accordingly, the RSE purchase appears to be nothing more than the acquisition of what might be loosely described as second-hand machinery. The complained-of transaction is more closely analogous to an internal company expansion rather than a merger, i.e., the purchase of market power.
However, to the extent that the RSE acquisition is construed as violative of Section 2 of the Sherman Act, defendants' motion will be denied. Testimony adduced at the hearing upon plaintiff's request for a temporary restraining order, when viewed in the light most favorable to the plaintiff, demonstrates that RSE plant was purchased for use as a "back-up" facility; this, notwithstanding the fact that the defendant currently had excess plant capacity. Under such circumstances, purchase of available excess plant facilities can or may be viewed as an attempt to "exclude competition." See United States v. E. I. duPont, 351 U.S. 377, 391, 76 S. Ct. 994, 1005, 100 L. Ed. 1264 (1956). Again, this result is reached on the basis of incomplete testimony offered in support of application for a temporary restraining order, which testimony was never ultimately completed, and is by no means determinative of the results on application for a permanent injunction upon the completion of the taking of all testimony and the submission of all evidence.
That brings us to the Coplay transaction where plaintiff's complaint attacks defendants' exclusive right to remove dolomite stone from the Coplay cement quarry. Dolomite stone, a necessary and dominant ingredient in aggregate production is found in geological formations adjacent to cement rocks. Hence, Coplay Cement Company is a major source of dolomite rock in the general market area. Defendants' contention that their exclusive right to acquire Coplay's dolomite rock cannot violate strictures imposed by Section 7 of the Clayton Act, we think, misses the mark. Testimony adduced at the hearing on application for a temporary restraining order shows that defendants knew that Coplay could enter the aggregate business within one year. Hence, their acquisition by an exclusive lease of a potential market entrant can, again on the basis of the admittedly scant record before us at this early stage of the proceeding, be viewed as possibly violative of Section 2 of the Sherman Act. This is true since potential market entrants can affect market behavior even while waiting in the wings.
Finally, that brings us to the application for divestiture by a private party. That is, whether a private party may seek divestiture under Section 16 of the Clayton Act which provides in relevant part that:
"Any person, firm, corporation or association shall be entitled to sue for and have injunctive relief, in any court in the United States having jurisdiction over the parties, against threatened loss or damage by a violation of the antitrust laws." (15 U.S.C. 26)
At issue in the instant case is the interpretation of the term "injunctive relief."
In its prayer for relief, the plaintiff requests divestiture of some of the defendants' recently acquired facilities. Defendants rely upon the Ninth Circuit case of I.T.T. v. G.T.E., heretofore cited, which held that divestiture is not an available remedy to private antitrust plaintiffs. Shortly after that case was decided, the Third Circuit had the opportunity to confront the same issue. It held that the availability of divestiture, as a remedy to a private plaintiff, must be made on a "case-by-case" basis. Whatever that means. See NBO Industries Treadway Co., Inc. v. Brunswick Corp., 523 F.2d 262, 278-79 and n. 17 (3d Cir. 1975), reversed on other grounds at 429 U.S. 477, 97 S. Ct. 690, 50 L. Ed. 2d 701. Therefore, once again, we cannot at this early stage conclude, as a matter of law, under the Third Circuit case just cited, that divestiture is an unavailable remedy and never appropriate on application of a private party. Here see Julius Nasso Concrete Corp. v. DIC Concrete Corp., 467 F. Supp. 1016, pages 1024 & 1025 (S.D.N.Y.1979).
Hence, upon the limited and incomplete record before us, we shall deny the defendants' motion for summary judgment and an appropriate order will issue. That order will also grant the defendants' motion for summary judgment as to plaintiff's Section 7 Clayton Act claims arising out of defendants' acquisition of the RSE facility. It will further provide that the defendant may amend its answer, raising the affirmative defense of the failing company doctrine with respect to the acquisition of the Bethlehem Plant.
© 1992-2004 VersusLaw Inc.