The opinion of the court was delivered by: TROUTMAN
This is a private antitrust case brought under Section 7 of the Clayton Act, 15 U.S.C. § 18, and Sections 1 and 2 of the Sherman Act, 15 U.S.C. §§ 1 and 2.
The plaintiff, Joseph Ciccone & Sons, Inc. (Ciccone) is a vertically integrated road paving contractor and blacktop producer with its principle place of business in Bath, Northampton County, Pennsylvania. Ciccone is a producer of blacktop and a consumer of aggregate.
The corporate defendants in this case are various related companies all controlled by the individual defendant, Donald B. Stabler. Eastern Industries, Inc. (Eastern), one of Stabler's entities, is the principal corporate defendant and the main target of plaintiff's allegations. Eastern is headquartered in Wescosville, Lehigh County, Pennsylvania, and it is principally a vertically integrated producer of blacktop and aggregate, as well as a road paving contractor. Eastern is a direct competitor of Ciccone in its blacktop and road paving businesses and it is also a supplier of aggregate to Ciccone.
Eastern operates aggregate producing quarries in a four-county area at Oley and Kutztown (Berks County), Ormrod and Whitehall (Lehigh County), Nazareth (Northampton County) and Kunkletown (Monroe County). Eastern operates blacktop plants at Kutztown and Douglasville (Berks County), Ormrod and Wescosville (Lehigh County) and Bethlehem (Northampton County).
Stabler Companies, Inc. is a holding company with no independent operations. Stabler Construction Company is a subsidiary of Stabler Companies, Inc. Stabler Construction has no permanent business location or significant activity in the area in which Eastern and the plaintiff operate.
Plaintiff filed its complaint on August 7, 1981, together with a motion for temporary restraining order and motion for preliminary injunction. A four-day hearing on plaintiff's motion for temporary restraining order was held on September 30, and October 1, 2, and 5, 1981. At the conclusion of the temporary restraining order hearing, plaintiff withdrew its motion for temporary restraining and its motion for preliminary injunction. Thereafter, the parties proceeded through discovery and the case was tried to the Court, sitting without a jury, over eight trial days from April 7 to April 19, 1982.
The substance of plaintiff's claim is that defendants have violated Section 7 of the Clayton Act, 15 U.S.C. § 18, by making certain acquisitions which either have or will tend to substantially lessen competition in the aggregate and blacktop markets. As noted before, plaintiff also alleges certain violations of the Sherman Act which shall be considered, infra.
Section 7 of the Clayton Act prohibits a corporation from acquiring the stock or assets of another corporation where the effect of such an acquisition may be substantially to lessen competition in any line of commerce in any section of the country.
15 U.S.C. § 18. Thus, the section declares unlawful only those acquisitions which have a specified adverse effect on competition. The law requires a showing of a tendency to substantially lessen competition or to create a monopoly in any section of the country. 15 U.S.C. § 18.
In the present case, Ciccone challenges three "acquisitions" made by Eastern between 1977 and 1981.
The first acquisition was the purchase of the "Trumbower" quarry in Nazareth, Pennsylvania, in 1977.
The second challenged "acquisition" was the 1980 signing of a "Lease Royalty Agreement" between Eastern and Coplay Cement.
Finally, Ciccone challenges the 1981 purchase by Eastern of the "Bethlehem Blacktop Plant" located in the City of Bethlehem, Pennsylvania. This purchase was made after the acceptance by Bethlehem Steel Corp. of sealed competitive bids. Eastern was the high bidder and Ciccone was the second highest bidder.
Although there are numerous issues and affirmative defenses raised by the parties, the primary and controlling issue in this case is whether the plaintiff has carried its burden of proof in establishing that the challenged acquisitions have or will tend to have a substantial adverse effect on competition in "any section of the country". For the reasons stated hereinafter, we conclude that it has not.
As noted above, the Clayton Act does not condemn all corporate mergers and acquisitions, but only those, the effect of which "may be substantially to lessen competition or to tend to create a monopoly". 15 U.S.C. § 18. In adopting Section 7, Congress did not adopt any particular test for measuring the probable effect of an acquisition; rather it indicated that the acquisition should be considered in the context of the particular industry involved. United States v. Brown Shoe Co., 370 U.S. 294, 321, 8 L. Ed. 2d 510, 82 S. Ct. 1502 (1962). What may be accurate or appropriate in the banking industry, for instance, may be totally different in the context of the aggregate and blacktop business.
As the Court noted in United States v. Philadelphia National Bank, 374 U.S. 321, 362, 10 L. Ed. 2d 915, 83 S. Ct. 1715 (1963);
The ultimate question under § 7 [is] whether the effect of the merger "may be substantially to lessen competition" in the relevant market. Clearly this is not the kind of question which is susceptible of a ready and precise answer in most cases.
Any evaluation of probable competitive effect can only be made within the context of a relevant market. The delineation of the relevant geographic market is frequently the key issue. In Tampa Electric Co. v. Nashville Coal Co., 365 U.S. 320, 329, 5 L. Ed. 2d 580, 81 S. Ct. 623 (1961), the Supreme Court stated that "the relevant market is the prime factor in relation to which the ultimate question . . . must be decided". Id.
Both the Clayton Act and Sherman Act require a showing of anticompetitive effect on a line of commerce within an "appropriate section of the country". United States v. Brown Shoe Co., 370 U.S. ...