United States v. Von's Grocery Co.
384 U.S. 270, 1966 U.S. LEXIS 2823, 16 L. Ed. 2d 555 (1966)
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Rule of Law:
Under Section 7 of the Clayton Act, a merger between two significant, successful competitors is unlawful if it occurs within a market already characterized by a clear and continuous trend toward economic concentration.
Facts:
- The relevant market was the retail grocery market in the Los Angeles, California area.
- From 1950 to 1961, the number of single-store grocery owners in Los Angeles decreased from 5,365 to 3,818.
- During this period, there was a notable trend of larger chains absorbing smaller competitors through mergers and acquisitions.
- Von’s Grocery Company was the third-largest retail grocer in the area, and Shopping Bag Food Stores was the sixth-largest.
- Both Von's and Shopping Bag were highly successful, expanding, and aggressive competitors before the merger.
- In 1960, Von's Grocery Company acquired all the stock and assets of Shopping Bag Food Stores.
- The merger created the second-largest grocery chain in Los Angeles, with combined annual sales representing 7.5% of the total market.
- Neither company was failing or in danger of being driven out of business by a more powerful competitor.
Procedural Posture:
- The United States sued Von's Grocery Company in the U.S. District Court, alleging the acquisition of Shopping Bag Food Stores violated Section 7 of the Clayton Act.
- The District Court denied the Government's motion for a temporary restraining order.
- After a trial on the merits, the District Court entered judgment for the defendants (Von's and Shopping Bag), concluding there was not a reasonable probability the merger would substantially lessen competition.
- The United States (as appellant) appealed the District Court's judgment directly to the U.S. Supreme Court, with Von's Grocery Company and Shopping Bag Food Stores as appellees.
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Issue:
Does the merger of two large, successful, and expanding retail grocery chains in a market characterized by a continuous trend toward concentration violate Section 7 of the Clayton Act?
Opinions:
Majority - Mr. Justice Black
Yes. The merger violates Section 7 of the Clayton Act because it contributes to a continuing trend of concentration in the relevant market. The primary purpose of the 1950 Celler-Kefauver Act, which amended Section 7, was to prevent economic concentration by preserving a large number of small competitors and to arrest anti-competitive trends in their incipiency. The facts of this case present the exact threatening trend Congress intended to halt: a steady decline in the number of small, independent grocery store owners coupled with a history of acquisitions by larger chains. The merger of two already powerful and successful companies in such a market accelerates this concentration. The statute does not require an appraisal of the merger's immediate impact on competition but rather a prediction of its future impact; therefore, it is irrelevant whether the market remains competitive post-merger, as the Act is designed to prevent the long-term destruction of competition that such trends foster.
Concurring - Mr. Justice White
Yes. While not every merger in an industry trending towards concentration is illegal, this one is. The specific market structure data supports the government's case. Prior to the merger, the top eight firms controlled over 40% of the market, and both Von's and Shopping Bag were among these leading companies. The merger increased the market share of the top four firms to 28.8% and the top eight to 44%. In a market where the leading firms already have such a significant share, a merger between two of those leaders is vulnerable under Section 7 because it furthers the concentration and eliminates a substantial competitor.
Dissenting - Mr. Justice Stewart
No. The merger does not violate Section 7 of the Clayton Act because the majority improperly protects competitors rather than competition. The Court's decision relies on a simplistic 'counting of heads' and ignores the actual economic context of the Los Angeles grocery market, which is dynamic and vigorously competitive. The decline in the number of single-store owners is a result of profound social and technological changes—namely, the rise of the automobile and the supermarket—not anti-competitive mergers. By invalidating this merger, the Court is attempting to 'roll back the supermarket revolution.' The statute requires a 'reasonable probability' of substantially lessened competition, and the record shows no such probability; instead, it demonstrates ease of market entry, thriving independent operators aided by cooperatives, and intense price competition.
Analysis:
This case represents a high-water mark of the structural era of antitrust enforcement, establishing a strong, near per se rule against horizontal mergers in markets showing a trend toward concentration. The Court's focus on the declining number of competitors, rather than on direct evidence of harm to competition or consumer welfare, significantly lowered the government's burden of proof in merger cases. This decision signaled that protecting small businesses as competitors was a primary goal of antitrust law. This perspective has been largely superseded in modern antitrust analysis, which now primarily focuses on the consumer welfare standard and demonstrable anti-competitive effects, such as price increases or reduced output.
