Brown Shoe Company, Inc. v. United States – Oral Argument – December 06, 1961 (Part 1)

Media for Brown Shoe Company, Inc. v. United States

Audio Transcription for Oral Argument – December 06, 1961 (Part 2) in Brown Shoe Company, Inc. v. United States

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Earl Warren:

— Brown Shoe Company Incorporated, Appellant, versus United States.

Mr. Dean.

Arthur H. Dean:

May it please the Court.

This is an appeal by the Brown Shoe Company, the appellant from a judgment of the Eastern District Court in Missouri rendered by the late Judge Webber in December 1959.

Charles E. Whittaker:

(Inaudible)

Arthur H. Dean:

He passed away Mr. Judge — Justice Whitaker just a week or so ago.

Charles E. Whittaker:

(Inaudible)

Arthur H. Dean:

Yes.

He died very suddenly just about a week or 10 days ago.

The Brown Shoe Company which is — I will describe — whose business I will describe in just a moment, acquired by merger the G.R. Kinney Company.

Felix Frankfurter:

I want all — as you know, I want all.

Arthur H. Dean:

The judgment of the lower court was that the acquisition by Brown of Kinney violated Section 7 of the Clayton Act as was amended in 1950.

Section 7, as the Court is well aware provides that if as a result of any acquisition and any line of commerce, in any section of the country or the effect maybe to substantially lessen competition depends — the acquisition is in violation of the statute.

We believe that the District Court was in error in regard to the lines of commerce, it selected.

The sections of the country it concluded existed in shoe retailing and it’s appraisal of the effect of the acquisition upon the lessening of competition.

I would like first to describe to the Court the operations of the two firms and the type of business in which each of them were engaged, the results on competition as set forth in the evidence and then go to the — what the District Court held.

Some of you who — many years ago who read funny papers may recall Buster Brown and his dog Tige.

This was for many years, the trademark of the Brown Shoe Company, although the company itself has founded under the name of Brown in 1878.

The — most of the evidence, most of the — of the statistical evidence in the record is for the fiscal year ending October 31, 1955.

In that year, the Brown Shoe Company produced some 25,600,000 pairs of shoes.

The national production was 642,507,000 so that Brown had roughly 4% of the national production in pairs of shoes.

For that period, it was the fourth largest manufacturer in the United States in leather shoes.

As the Court will see as I go on I am going to draw some of distinction between leather shoes and rubber soled upper — where the uppers are made of canvass which is also a very fast growing part of the shoe business.

The Kinney Company, the company that was acquired by Brown in this period ending in 1955 produced 2.9 million pairs out of the 642 odd million pairs.

In other words, the Kinney Company had four-tenths of 1% of the national production of shoes.

So that together, as far as the production of leather shoe is concerned, after the acquisition, Brown and Kinney produced 4.4% of the national production.

The District Court conceded that as far as the manufacturing, effects on competition of the manufacturing was concerned, it was only slight and I believe that the Government in its brief has conceded that the effect on competition as far as production is concerned is very slight.

Let me turn now to — to go from the production of shoes to the shoe retailer.

Brown has been, for many years, primarily a manufacturer of shoes.

Starting some time in this country before — after the turn of the century, there began to be experienced by local merchants, a competition in various cities of the so-called chain store.

Arthur H. Dean:

So that the big function of the chain store as far as the consumer is concerned is to try it to give a good quality merchandise, not necessarily at least in the merchandising field, but the highest quality, in tremendous volume could cut out the wholesaler, cut out the jobber, could cut out the middleman to try to carry on his — the business at a very low rate of profit per unit of sale and to try to pass these benefits on to the consumer.

Brown had built up its manufacturing business in the medium price field, which I will tell you in dollar terms in just a moment.

They bought the highest grade materials in every respect.

They taught their workman to produce the highest quality shoes in every respect and they advertised their shoes under national brand names in national magazines and they sold and still continue to sell the bulk of their production through some 7000 independent dealers to whom they sell these shoes at wholesale.

Now Brown has endeavored to help all of these 7000 independent dealers to compete with the so-called retail chains by advising them with respect to their inventories, their methods of merchandising, their methods of stocking shoes, their methods of advertising and their methods of pricing.

They have tried to bring to these 7000 independent local retail dealers by advising them how to compete with these retail shoe chains.

Now the most successful of the retail shoe chains are not integrated with any manufacturer.

The three largest and most successful, the Sears Roebuck in its retail store, it also sells shoes by mail order but in in its retail stores, shoes — Sears does not own any manufacturing facilities.

The second largest is Edison Brothers, again, does not own any manufacturing facilities.

J.C. Penney then there are very large — the largest outlet west to the Mississippi is in the Famous Bar and store in St. Louis, again, it does not own manufacturing facilities.

Then there are great outlets in New York, in Macy’s and Marshall, Chicago, Marshall Field and other leading department stores, but the most successful of the chain stores selling at retail are not themselves integrated with the manufacturer.

Brown found that it could not sell its manufactured shoes where it used only the best quality materials and tried to have only the best quality workmanship because the chains wanted to sell their own brand of shoes and they weren’t interested in the national brands and they also wanted to sell shoes at a price so that the — these big retail chains buy their shoes made up to their own specifications.

They select the materials, select the workmanship and buy these shoes to sell at a price.

Now in order to help some of these 7 odd thousand independent dealers to whom Brown sold in an effort to help these independent merchants compete better with these retail chains, Brown set up the so-called, “Brown franchise plan.”

Now, each of the people operating on this Brown franchise plan are completely independent dealers.

They have their own capital.

They select their own store.

They hire their own employees.

They buy their own stock.

They handle their own merchandiser.

They run these stores entirely for their own account, for their own profit and loss account.

What Brown does is to send out experts in order to help these people in the display of shoes in the window, in the layout of the store.

They teach these independent retailers that in order to compete with the retail chains that you’ve got to render service and that you have to lay in a complete stock in-depth of each style of shoe and you have to be able to sell the customer in each size and in each width.

One of the ways that some of the chains are able to cut down on their operating expenses is that they don’t stock 12 months out of a year all shoes.

They buy these shoes from these manufacturers to meet their specifications and some of the chains only stocked shoes in the most popular sizes or they may stock them only in two widths whereas Brown tries to teach its dealers that the way to compete is to have a stock of each style in-depth, in each size and in its width and to pay attention to the fitting and the comfort —

Felix Frankfurter:

Mr. Dean, may I ask —

Arthur H. Dean:

— of the (Voice Overlap).

Felix Frankfurter:

May I ask whether the manufacturers, it supply the chains — have that as an exclusive market although they compete with Brown as to — in other market?

Arthur H. Dean:

These — there are some 11,000 manufacturers of shoes in the United States Mr. Justice Frankfurter.

And some of these people on contract supply shoes to these retail chain stores according to their specifications.

Arthur H. Dean:

These — most of these retail chain stores sell this out, as I come to you in a minute and give you the dollar prices, selling what’s called the popular price field.

Most of the independent retailers to whom Brown sells, sell in a price above the popular price field and what’s called the medium price fields.

There’s about — at various community here, there’s about 10% to 15% of Brown’s business which has not been profitable for it where it make shoes to specifications.

And I think that to that where they make shoes to specifications, those shoes come at competition on a manufacturing level where the shoes are sold to these retail chains.

It is our contention as I shall try to develop that the shoes — that Brown manufactures and sells to these independent dealers in this medium price range are not in competition with the shoes in the popular price range which is ranging almost entirely in which Kinney, the company that Brown acquired sold.

Earl Warren:

Mr. Dean, what — approximately what is the price differential between the — these chains and the Brown’s outlets?

Arthur H. Dean:

Well, in the popular price range in — which is the — which is the price range that most of the retail shoes sell in, the popular price range for men’s is $8.99 retail and down.

For women’s —

Earl Warren:

In what — or in the chains or with Brown?

Arthur H. Dean:

That — no, I’m getting you the popular price, Brown —

Earl Warren:

Yes, (Inaudible) —

Arthur H. Dean:

— the independent dealers to whom Brown sells sell in the medium price range which I will give you —

Earl Warren:

Oh yes.

Arthur H. Dean:

— in a minute.

If I may, I’ll give them to you —

Earl Warren:

Yes.

Arthur H. Dean:

— in terms of men’s, women’s, and children’s popular price and then, men’s, women’s, children’s medium price.

And the popular price range for men’s is $8.99 and down, in women’s, it’s $5.99 and down, in children’s, it’s $3.99 and down and the medium price range which is range that Brown sells the bulk of its shoes, the men’s shoes are $8.95 and above, roughly to $14.95.

The women’s are $5.99 and above or $7.95 and above and the children’s are $5.45 and above.

I shall describe later the — we have some testimony on the record where we took the medi — the medium prices of the shoes sold in the Brown independent dealers and those sold in the Kinney popular price and will show you that in a large number of these cities, the prices of the — these independent dealers to whom Brown had sold are anywhere from 150% to 200% higher than the medium prices in Kinney and by medium prices is you take the gross sales and divide half in the lower half and the other in the upper half.

I might just say Mr. Justice Frankfurter that the number — the evidence is somewhat varying in the record as to the actual number of shoe manufacturers in the United States, the United States shoe manufacturing company which is you know leases shoe (Inaudible), testified that it had about a thousand customers on its account.

According to the census figures, these — although we I think these figures are inaccurate there has been some decrease in the total number of shoe manufacturers.

Now, in addition to selling, if I may go back to describe the Brown’s retailing again, in addition to selling to this — about 85% of its shoes that it manufactures are sold at wholesale to these some 7000 dealers, it sells about 20% of this 85%, these independent dealers on the franchise plan.

John M. Harlan II:

How many of those are there, (Inaudible)?

Arthur H. Dean:

There’s 635 —

John M. Harlan II:

Franchise?

Arthur H. Dean:

— franchise dealers out about 7000 independent dealers.

Now —

Potter Stewart:

Doesn’t that number fluctuates all the time?

Arthur H. Dean:

Yes, it does sir.

Arthur H. Dean:

Mr. Justice Stewart.

It’s — it’s been up to 650, 625.

I think in 1955, it was about 635 but it fluctuates every week.

Potter Stewart:

And these contracts are cancellable on very short notice, (Voice Overlap) —

Arthur H. Dean:

They’re — they’re cancellable at any times and anybody can leave the Brown franchise plan but almost invariably, the records shows that they — they remained —

Potter Stewart:

Customers.

Arthur H. Dean:

— customer of Brown’s.

There is no requirement that an independent dealer stay on the Brown franchise plan.

There is no — some of them buy as much as 40% of their shoes from others, I think the average is about 25% shoes from others.

What Brown does is to attempt to get these people to concentrate on a single line of shoes, Brown’s in-depth, so that they won’t have — be charging two or three lines and then have to mark it down at the end of the season then suffer loss.

John M. Harlan II:

Are they tied to Brown Shoes?

Arthur H. Dean:

They’re not tied to Brown Shoes in the sense, they agreed that they will concentrate on Brown Shoes but they’re free to leave the Brown Plan at anytime.

John M. Harlan II:

While they’re in the Brown Plan, did they buy from others?

Arthur H. Dean:

Yes.

John M. Harlan II:

(Inaudible)

Arthur H. Dean:

Some of them buy as much as 40%.

I think on the average, they buy about 25 % from the others, other manufacturers.

William J. Brennan, Jr.:

Are these franchise dealers are widespread throughout the country?

Arthur H. Dean:

Yes they are.

Mr. Justice Brennan.

Now, Brown retails it shoes in — in three other ways.

In order to help young men, young men who’d been generally speaking, the assistant managers or managers in other stores who want to start out on their own, Brown through its wholly own subsidiary, the Wohl, it’s W-A — W-O-H-L Shoe Company has the so-called Wohl Plan and there a young man who has from $30,000 can open up a shoe store and Brown will set him those shoes on consignment and he remits after he takes out his salary, the proceeds of those shoes sold after expenses.

That constitutes about 2% of Brown’s wholesale sales.

That’s called the Wohl Plan.

Those shoes are sold at wholesale to this young man starting out in business as independent dealers.

Now, in addition, the Wohl Shoe Company and this is a fairly common thing in the merchandising of shoes in department stores, many department stores find that the merchandising of shoes is a very complicated business and they lease their shoe departments so that they’re not operated by the store itself and Wohl operates 100 departments and some 163 independent department and specialty stores throughout the United States.

The — in these department stores or Wohl generally speaking has no written agreements.

They are cancellable at anytime by the department store owner and the merchandising policy has to conform to the department store.

In these leased departments, Wohl concentrates on women’s shoes and generally in both the medium price line and in lines higher than the medium price line, that is higher than $14.95.

Some of the shoes sold by Wohl in these leased departments grow up as highest $25 — $32.

Arthur H. Dean:

In addition Wohl itself operates some 18 family shoe stores and nine women’s shoe stores.

Brown has one other subsidiary the Regal Shoe Company which both manufactures shoes as plan as equipment Massachusetts and has a retail store mostly on the eastern seaboard.

These two subsidiaries, the Wohl Shoe Company and the Regal Shoe Company, both subsidiary of Brown, together sold about 1.1% of the $37 million combined sales of shoe — of footwear sold at retail in this year 1955 out of $3,464,000,000.

Now let me turn from a moment to Kinney, the company that was acquired.

Kinney was primarily a retailer.

It did some manufacturing, but its manufacturing was not very important.

Kinney was one of the oldest of the so-called integrated manufacturing and retail shoe stores and in 1929 to 1930, it got into great financial difficulties because as I shall develop later, it is quite impossible for a manager of a shoe store, especially a shoe store selling women’s shoes which are — where the styles change very rapidly and where you have to be completely au courant of what perhaps may be the latest style of shoe worn and the latest texture by the most prominent star, apparently manufacturing part of Kinney is trying to force on the retail stores the shoes that they manufacture and they almost went bankrupt in trying to do it.

As a result, Kinney decreased the emphasis on manufacturing and tried to build up generally in family areas and generally in the very low price field lower than this medium field in which the Brown sells and they developed stores in some 315 cities.

Now, Kinney is a family shoe store, by that I mean it caters to all members of the family and pairs it sold in 1955 in children shoes 51%, in women’s shoes 35%, and in men 40%, in other words it has sold in that year about 1.2% of the national retail footwear sales.

As I had just said Wohl and Regal sold about 1.1, sold at retail, Brown and Kinney sold together about 2.3% of the national footwear retail sales.

Now, I want to be clear that the lower court found that these Brown franchise dealers, some 635 out of the 7000 independent dealers, all he found that they used their own capital and — and run these stores for their own profit and loss, nevertheless, in his finding to which we take exception, he included the retail sales of these Brown franchise dealers and these wholesale sales on this Wohl Plan account, he included those as though they were actually retail outlets of Brown.

Now, from a competitive standpoint, they are not.

One of the great advantages of companies like Edison Brothers, one of the most successful of women’s retail chains is that they separate their stores into three classes.

But if they find that sales are depressed in one area because of economic conditions, they can move shoes from say Philadelphia to Washington or Washington to Boston or Boston to Chicago.

You cannot do that with these independent dealers.

Each of these independent dealers buy themselves as he pleases with his own capital at his own profit and loss.

So we believe and I think the economic evidence supports us that the retail sales of these independent dealers should not be regarded as retail sales to Brown.

They also think that to do so, completely distorts the economic evidence because otherwise the wholesale sale of Brown to these independent dealers is included and then the retail sales are included so — and then the factory sales will be included twice.

These sales, combined sales of Wohl and Regal would be $78 million out of 3.5 billion.

As I said, Brown started primarily as a manufacturer, it sold to these independent retailers in this medium price range which the men’s were $8.95 to $14.95, women’s $7.95 to $14.95 and children’s $5.45 to $7.95 and they tried it every way to help these sales to independent dealers.

Now, there is no difference in the terms on which Brown’s sales are made to these 7000 independent dealers and those on the franchise.

Those on the franchise get no better credit terms.

They got no greater discounts.

They get no greater payrolls than any independent dealer buying from Brown.

There is at one time, Brown tried to organize a group life insurance for some of these franchise dealers.

And I think about 400 of the 635 still have it, although there is no evidence in the record because of the vast extension of group life to whether its — practically any organization has it today that there’s any benefit in having it and then in the Wohl Plan, these — the insurance features of the Wohl Plan were cancelled because they couldn’t prove any economic benefit to dealer, either from the group life or the fire insurance.

Brown is, as a retailer, through its Wohl subsidiary, sells 80% of women’s shoes, and sells men’s shoes through its Regal subsidiary.

The Regal subsidiary has never been profitable.

In contrast to the Brown independent dealers, selling these nationally advertised branded shoes, so when the customer comes in, he having had a pair, being satisfied with them, he asks for that pair of shoes which he’s had before and which he knows by name.

In the Kinney outlets, they do not have any national advertising.

Arthur H. Dean:

They do not sell national brands.

In contrast to the — to the Wohl’s operations in leased departments where there are charge accounts, where there is delivery, where there’s a liberal plan of return.

In the Kinney retail outlets, it’s entirely cash and carry.

There is little service.

The shoes are carried generally only in the popular sizes and then only in two widths.

They’re the popular or low priced family shoes.

For the men shoes, I say again, they’re $8.99 and down, for the women’s $5.99 and down and children’s $3.99 and down.

80% of the shoes sold in the Kinney retail stores are made by independent manufacturers.

Starting about, shortly after the end of World War II I’m sure the Court is aware, there was a great trend from the cities where many of the shoe store outlets were located to in the suburbs and about this same time with the passage of the 40-hour week law banks and a great many business establishments closed their offices on Saturdays.

Prior to that time there was a very common occurrence or families, the wife and the children to come in and have lunch with the husband on Saturday and do the shopping in the downtown city areas on a Saturday.

With this great access to the suburbs with this 40-hour a week, the husband no longer in many instances comes in to town on a Saturday.

As a result, there has grown up in the United States several types of shopping centers.

Some of these shopping centers are very vast, they’re very large.

They have free parking.

You can get practically anything from medical service or dental service or optical service or clothes to shoes.

Others are — are neighbor — neighbor parking centers within three or four minutes driving.

These centers have revolutionized the merchandising of shoes.

The shoe store that Brown had near the stock exchange that used to do several hundred thousand dollars worth the business per annum.

With the stock exchange and banks and offices closed, they were doing practically nothing.

So that Kinney went — decided to try to go out and get locations in these suburban shopping centers.

They also have built what’s called free standing stores.

There is one, a Kinney store, Northeast of Washington in Rockville, Maryland where they build these stores right out on the highways, but no buildings on either side as parking lot and where you can — put your shoes out on the racks and the customer selects the shoes and the clerk just fits them and wraps them up.

So Kinney started in on this — trying to get these outlets.

In order to get these outlets, you have to contract for them several years ahead because the insurance companies make the loans to the buildings and they want a lease signed at that time.

Kinney didn’t have the necessary capital because of some restrictions in the step financing.

The common stock was owned by a relatively small group who wanted no more common sold and Brown, which did not previously had any outlets in this lower price field and which was becoming concerned about whether there could be a re-urbanization of the urban centers, felt that these retail outlets, especially on these suburban centers offered a possibility of going in to this field.

Now let me be clear Brown did not think that it was going to sell any of the shoes that it manufactured to Kinney.

Now, the reason for that is very clear.

Once you have trained your work to do — use the best possible workmanship as the evidence shows Brown does and once you have graduated, a workman to hire quality workmanship, smaller stickers.

They get paid more as they go up in the quality of their work and the wages go up, it is almost impossible to teach a workman whom you’ve trained for several years to do the best quality of workmanship, to do medium quality of workmanship and also it means that he lowers his pay so that in a few times that Brown and its like business carriers has tried to take orders for the manufacturing of a lower price shoe, not with the brand name.

Arthur H. Dean:

It — have they have not been profitable, they have had difficulty with their workmen and Brown now knows that it is utterly possible for it to manufacture in its factories a kind of shoe which Kinney can have manufactured.

Now there is an almost constant entry into the shoe manufacturing business.

You can lease your equipment.

You can get contracts from this retail chains who don’t have manufacturing facilities of their own.

There are many communities which will build you or give you a factory, tax free for some period of time.

There is a great ease of entry into the shoe manufacturing business and therefore, Kinney wants to be free in its retailer, that’s to be able to buy where — were it leases, whatever styles it wants and at whatever prices economic conditions might make necessary at the time.

So that there is no possibility I believe on an economic standpoint, any feasible economic standpoint of Brown being able to increase its sales of manufactured shoes to Kinney.

That was not the intent of the merger.

It’s economic — not the economic purpose of the merger and I think the economic evidence will clearly show that that cannot come about.

Now, there had been some small sales of Brown to Kinney, but on the other hand, the sales of Kinney from outside people have increased.

There wasn’t a single witness who testified that he believed that he — a single manufacturer who testified that he believed that he would be displaced as a supplier of Kinney by Brown, not a single one.

There isn’t — there isn’t one word of evidence in the entire record from anyone indicating any possibility that the present suppliers of Kinney or the suppliers of Kinney in the future will be displaced by Brown.

Felix Frankfurter:

Mr. Dean, may I interrupt you again?

Arthur H. Dean:

Yes — yes please Mr. Justice Frankfurter.

Felix Frankfurter:

You indicated a minute ago when you challenged the finding, that leads me to ask whether when you do not say challenge it — when you do not indicate that what you are telling us is contradicted by findings which you object to or which you take exception to, are we to assume what you’ve said also is reflected in the findings?

Arthur H. Dean:

Yes.

As far as the — there is a — which I think the Government would admit that we — we say that the Court, there — there are several figures that the Court uses and I think there’s a typographical error in the Court’s opinion because the evidence is quite clear that Brown manufactured 4% and the Kinney manufactured four-tenths of 1%.

Felix Frankfurter:

I didn’t mean as to this last statement of yours, but generally as I follow you —

Arthur H. Dean:

Yes.

Felix Frankfurter:

— am I to infer —

Arthur H. Dean:

Well, let me —

Felix Frankfurter:

What in their rate is supported by findings except when you specially say it isn’t?

Arthur H. Dean:

Yes that is correct.

Felix Frankfurter:

Alright.

Arthur H. Dean:

Let me come to that specific point the exception that we take to the findings.

It is our contention that at retail shoes are retailed in different communities.

I think you would readily agree that a woman or a person living in Falls Church would not normally go to Hyattsville to purchase their shoes.

I mean they normally go to some place that’s within five or ten minutes or certainly 20 minutes driving time from where they live.

The Court took some 141 cities.

There isn’t anything in the evidence to indicate why he took those 41 cities — 141 cities.

Arthur H. Dean:

He took cities of over 10,000 and the immediately contiguous area.

He — it isn’t clear from his opinion whether each of the 141 cities and the immediately contiguous area is a section of the country within the meaning of Section 7 or whether the 141 cities and the immediately contiguous area in the aggregate is the section of the conflict.

There is no — that’s not clear from the judgment of the District Court.

His —

Earl Warren:

Was the — were they concerned that a city like Los Angeles for instance was one of those 141?

Los Angeles plus all of its metropolitan area or Chicago, or New York, would they each be just one city?

Arthur H. Dean:

Yes.

We — we contend Mr. Chief Justice, we introduced evidence from the census that what the census calls the standard metropolitan area —

Earl Warren:

Yes.

Arthur H. Dean:

— which is derived by statistics from place that has common — people commonly go to market without regard to political bounds and the Government contended that you should take only the political boundaries of a particular place without regard to where that particular city do trade from the county or the surrounding area.

The Court apparently didn’t take either one.

The Court said, he took cities, these 141 cities and this immediately contiguous area, but he didn’t say what he meant by the immediately contiguous area.

As far his finding is concerned, you’re quite correct for the City of Los Angeles and he said that, “Wherever there was a Kinney retail outlet or a — anybody operating on the Brown franchise plan or the Wohl Plan in the City of New York, they were in competition with each other.

Thus a store in Staten Island, its 11 miles by ferry and subway from a store in the Bronx would be in competition with each other because they’d be within the same city.”

We maintain that the entire evidence is to the contrary.

We had Professor Joe Dean.

I wish I could claim him as a relative but I can’t, of Columbia who testified as to the economic significance.

His — none of his testimony is mentioned.

We had a Mr. Apple, who was a well-recognized authority on marketing often used by the United States Government who testified that there were various areas in the City of St. Louis where Kinney itself didn’t have a retail outlet.

He said that he had to divide these areas up for those within five minutes driving time or 20 minutes driving time where the larger shopping centers and that something at one end of the City of St. Louis as far as retail was concerned would not be in competition with another.

The Court disregarded all of that testimony and held that every retail outlet was in competition with every other retail outlet.

He disregarded style, price, quality or type of merchandise and he simply divided all shoes into three classes, men’s shoes women’s shoes and children’s shoes.

He lumped apparently in the children’s shoes, infant’s shoes which Brown manufactured and Kinney did not.

Young miss’ shoes and boy’s shoe, although obviously a growing boy couldn’t wear a growing girl’s shoes.

He lumped in to this — there’s half a dozen categories in boy’s shoes, youth shoes, growing girl’s shoes, miss’ shoes and the shoe trade that are well-recognized.

He threw those all apparently in the children’s shoe.

He completely disregarded all of the economic testimony with respect to the fact that people rarely go out of the price range.

He — we also and we believe the economic evidence supports us in this that in determining your line of commerce that you have to determine it realistically on the basis of the purpose for which a person is going to buy a shoe at the time he purchases it.

He disregarded that because he said a person could one day buy a shoe as a dress shoe and several years later after it was worn out it might be used for gardening, but we submit that on the evidence and from a standpoint of determining what is proper competition that you have to determine the use as between the two types of shoes as of the time of purchase and not what you’re going to do with it when you wear it out.

He therefore disregarded all of the — of the different classes of shoes which are very common and well-standardized and well-understood in shoe retailing and which are fundamental part of shoe retailing.

Felix Frankfurter:

Mr. Dean, I do not want to interrupt or divert the order of your argument in your mind because you thought a lot about this, but even now if it’s appropriate or sometimes would you be good enough to state how many findings in number — how many findings of fact the Court below may and which of those findings you take exceptions to?

I ought to have that mind —

Arthur H. Dean:

Yes sir.

Felix Frankfurter:

— because I do not.

Arthur H. Dean:

Yes sir.

Yes, I’d be very glad to give that to you.

If I may go back just a minute more on these prices in these retail areas, this is covered in our main brief at page 88 and to 90.

Testimony was introduced with respect to some 58 cities and the merchandising of these shoes of retail was broken down in age and sex categories that is men’s —

Earl Warren:

Mr. Dean, when you say cities, you mean one of these 141 that the Judge —

Arthur H. Dean:

No sir, we took —

Earl Warren:

(Inaudible)

Arthur H. Dean:

Our expert took —

Earl Warren:

(Inaudible) make another definition of it.

Arthur H. Dean:

Our expert took 58 cities which he regarded as representative.

Earl Warren:

Yes.

Arthur H. Dean:

And we took again this standard metropolitan area of the census and we broke them —

Tom C. Clark:

(Inaudible) — what was their average population, (Inaudible) population, 1958, is that?

Arthur H. Dean:

They raised — Mr. Justice Clark in — from medium sized cities up to fairly large cities.

I can give you the list of the cities if you’d like.

They were regarded by this merchandising expert as fairly representative cities where you’d find the representative competition in these — between these various categories.

Tom C. Clark:

Now, you said that the Judge took the 141 as those over 10,000 —

Arthur H. Dean:

The judge —

Tom C. Clark:

— so I thought perhaps in 1958 (Inaudible) —

Arthur H. Dean:

Yes, Judge Weber took a 141, each city of over 10,000 and the immediately contiguous or surrounding area.

Felix Frankfurter:

And you’ve said he took those out of the blue.

Arthur H. Dean:

Yes sir.

Other than this qualification of 10,000 —

Felix Frankfurter:

Yes, but I mean apart from that (Voice Overlap) —

Arthur H. Dean:

— and above yes — yes.

Well let me say he took these 141 cities where he thought there was competition in that there was a Kinney retail outlet and any independent dealer operating under the Brown franchise plan or city where Wohl was operating a leased department store.

Felix Frankfurter:

And did I also understand you to say that these — as to these 141, the issue wasn’t either focused or even directed at the client, is that right?

Arthur H. Dean:

That is right.

I think I can give you in the transcript of the record in volume 14 at page 7317 there is an alphabetical listing of the overlapping areas.

They start out with Altoona.

Felix Frankfurter:

What’s the page Mr. Dean again?

Arthur H. Dean:

7317 in volume 14 of the transcript of the record.

Felix Frankfurter:

Alright.

Arthur H. Dean:

You’ll see that those cities go from such cities as Altoona, Pennsylvania, Decatur, Illinois, Glens Falls, New York, Little Rock, Arkansas, Meridian, Mississippi, Muncie, Indiana, Pottsville, Pennsylvania, South Bend, Indiana, Tulsa, Oklahoma, Williamsport, Pennsylvania and Fort Worth, Texas.

Wherever there was an overlap, I understand you to say the judge found that that’s perceived through competitions.

Yes, he said that — he said that — to be precise, he said that they sold in varying percentages but he said these percentages are or could become substantial and he said, “If you take –” — he said anything in effect over — the 2% is more than 1% and therefore, he said anything that adds to that which you have is or could be substantial.

Now, I don’t think anybody would’ve disagreed that 2% is more than 1% but I think the issue before the Court is, doesn’t meet the test of substantiality in Section 7.

To give you the precise figures Mr. Justice Frankfurter on the number of manufacturing firms in the transcript page 1637, this is according to the census.

In 1947, they were 1077.

In 1954, they were 970 and in 1958, there were 872, but there has been an increase of well over — from 506,000,000 pairs in 1947 to 643,000,000 pairs in 1955.

From 1939 through 1956, the production share of the largest four has been constant.

It’s been 23.2%, that’s in a table in our main brief at page 50.

Now, the share of the next largest (Inaudible) above the four to the largest 45 have declined, but the shares of the smaller manufacturers above these eight to — up to the largest 50 have increased by 5.8%.

Now the Court seemed to feel — the lower court seemed to feel that there was an inexorable trend towards mergers or inexorable trend towards manufacturers acquiring retail outlets, but the evidence is quite contrary.

Furthermore, if you would take into consideration the growth in canvass-upper rubber soled shoes which has increased from 24 million pairs in 1947 to 125 million pairs in 1961, the four largest shares would be way down.

Now, there’d been various shifts within these groups but within the first four, their aggregate has been about 23.2 and Brown has changed from 3.86 to 3.99.

Now, there has been a great — on this question of ease of entry there were two companies that entered the shoe manufacturing business for the first time in 1940, the Sudbury Company which has become the ninth largest.

They started in 1940 and today they’re ninth largest and the Georgia which started in 1940 and is today the 25th largest.

Now, there is no economy or manufacturer in these — in these large factories.

Some of the companies including Brown set up factories of 20,000 a day and they found that they had to go back to more medium sized establishments that they were more efficient and that again is something that makes free of entry.

You can lease your machinery and there are no patents or technological barriers and there really isn’t a competitive production challenge.

There’s also been an enormous increase in shoe imports.

Some — from 1954 of 6 million they’ve gone in 1960 to 121 million in pairs, from $10 million to 115 millions of dollars.

And this question of the — that seemed to concern the court so much below that the independent retailer would not be able to compete with the retail outlets owned by manufacturers, our brief shows on that table 23, that — that type of distribution is only 7% in dollars and 5% in pairs.

Now, there are some 70,000 outlets — shoe outlets in retail in the United States, some 70,000.

You’ll find through the testimony the figure 22,000 shoe stores that’s because in the census, they only include for statistical purposes a shoe store something which has over 50% of its sales in shoes.

Arthur H. Dean:

As I said earlier, the big retailers of Sears with $104 million, Edison Brothers with 87, and Penney with 85 and Montgomery (Inaudible) at 41, are retail chains but they don’t have manufacturing facilities and the department stores again which don’t have manufacturing facilities sell 11% and these independent stores, the independent retailers still sell about 49% of the shoes sold in the United States at retail so that no single shoe retailer has any large share of the market.

Felix Frankfurter:

I take it that you feel with the suggestions of the fee, finding of the Court that it isn’t merely a question of percentage control of manufacturing but that the big fellows in the large mass of manufacturers set the pace and it was psychologically rather than merely quantitatively.

Arthur H. Dean:

Well, actually I think the evidence is Mr. Judge Frankfurter that these big retail stores who don’t have manufacturing facilities at least set the pace in style.

The big people in the shoe retailing are Sears and Edison Brothers and Penney and Western Mississippi River, Famous Bar in St. Louis and Macy’s, Marshall Field or Jordan Marsh, people like that, they’re the one’s who really set the pace.

Now, Bro — Brown has been a — Brown has been a middle of the road, honest material, honest workmanship, good quality for the money shoe manufacturer.

It is not trying to cheapen its shoe to go on the low price field and it hasn’t tried to go on the high price field.

It’s trying to give an honest product for an honest dollar.

And it has strived to help the vast bulk of the independent retailers who buy from it at wholesale to continue to sell this type of shoe to the American public in competition with these chain stores who can buy from any manufacturer at a price or any style or by a certain number so that I think it’s — as far as the styling is concerned and as far as the vast amount of the merchandising it is concerned, I think it is these chain retail stores without manufacturing connections who probably set the style.

Felix Frankfurter:

Are the manufacturing competitive of Brown as they all — is there output or named output by Brown?

Arthur H. Dean:

Many of them are.

International as manufactures under brands.

Some of their famous brands are Florsheim.

There’s Nettleton and Nunn Bush and various others who sell — Endicott-Johnson sells under its own name.

General Shoe Company sells under — their trademark is the Jarman Shoe.

Felix Frankfurter:

What way if any did the District Court give to the momentum of good will that comes from a brand name or from what — have you indicated Brown has a goodwill?

Arthur H. Dean:

Yes, sir.

Felix Frankfurter:

Did I (Inaudible)

Arthur H. Dean:

Yes sir.

The District Court did not refer to that at all in his opinion.

Felix Frankfurter:

Do you think that’s relevant?

Arthur H. Dean:

Yes, I do Your Honor.

Potter Stewart:

Was Brown a retailer before the acquisition of Regal and Wohl?

Arthur H. Dean:

Many years ago it was Mr. Justice Stewart and then it gave up their retail store is un — as unprofitable.

They bought Wohl — this Wohl on the leased department and shoe stores and this wholesale, Wohl Plan account and then they later bought Regal.

Regal — Wohl is primarily women’s shoes.

Regal is —

Potter Stewart:

Primarily men’s shoes.

Arthur H. Dean:

— men’s shoes.

Yes sir.

Potter Stewart:

But before the acquisition of Regal and Wohl with the exception of this unsuccessful experience many years ago, Brown was not a seller or retailer but I suppose did have the Brown franchise plan, did it?

Arthur H. Dean:

Yes.

It had sell — sold to these independent retailers on the Brown franchise plan but it had no retail outlets of its own.

It was — it was I think this competition in this shoe retailing has changed enormously by the advent of the chain retail shoe stores, by the movement to the suburbs and the population growth and by the 40-hour week and the development of these suburban shopping centers and the — or relative decrease and importance of the downtown shopping areas.

Potter Stewart:

But doesn’t the — doesn’t the record show that chain retail shoe stores are not a new — are not a new phenomenon, they go back before the —

Arthur H. Dean:

No.

They — they were — they started before World War II but (Voice Overlap) —

Potter Stewart:

Regal itself for instance, I — Regal itself goes back to the 1930’s at least.

Arthur H. Dean:

Yes.

They — this — the chain retail stores started well before World War II but they came into prominence in the earliest 1930’s because with the decrease in the economic income and the fact that they were selling shoes, perhaps of lower quality, but nevertheless selling shoes at the vast reduction in price meant that the sales of the chain stores went up and they — for the quality that they sold were rendering a great service to the consumer and taking a far or less percentage of — of the consumer’s dollar in merchandising methods.

William J. Brennan, Jr.:

Mr. Dean, have you suggested yet what were the economic motivations for Brown’s acquisition of Kinney?

Arthur H. Dean:

Yes sir.

We were — when we were a — a manufacturer in this medium price field with 85% of our sales at wholesale from our manufactures to these independent retailers.

We were doing our level best to encourage our independent retailers to modernize their stores, to change their locations but since we didn’t control them, they had their own capital, we couldn’t control what they did.

Many of these independent shoe dealers were men of middle age or sometimes older.

We tried to encourage some of them to go out and take leases in these suburban shopping centers but that meant before the insurance company made the overall loan, they had to sign up several years in advance, many of them were reluctant to do it.

We were concerned just to what the future of shoe retailing might bring.

We —

William J. Brennan, Jr.:

Well in that sense then, was acquisition to hedge against possible loss of the markets to —

Arthur H. Dean:

Yes, yes.

William J. Brennan, Jr.:

— the independent (Voice Overlap) —

Arthur H. Dean:

But — but not with the — not with the idea that we thought we can downgrade our own manufacturing facilities with the idea of selling our manufacturing products of these suburban outlets.

We — we did feel that it was a — an appropriate and a proper thing for us to do take cognizance of the changes in the merchandising of shoes that were — that was taking place and that this was something which we felt we should study and work with and we have advanced this capital to the Kinney people and they have, I think developed some 118 of these suburban outlets or this free standing store.

It’s a type of thing which without any reference to try to lessen competition, I would think that any management cognizant of his fiduciary relations to its stockholders would study and would hope to be able to have it workout and in a manner not contrary to the Section 7 and I can’t possibly see how there’s any tendency of monopoly here.

I mean it’s 4% manufacturing for Brown and four-tenths of 1% for Kinney and the retail level approximately 1.3 plus 1%.

So we — we feel that — that if you examine this from an economic standpoint and look at it realistically from the manner in which shoes are marketed that it is conclusive that there — it can’t be competition.

And in these studies that we put in on this question of medium — medium prices or as you take the prices, divide them up in a half, those selling in the lower range and those in the upper range and we go in the great detail on that in our brief of the — in almost every instance, the medium price levels at retail of the retail outlets, the independent dealers or Wohl are 150% to 200% of the Kinney prices at retail.

Potter Stewart:

Before the — before this merger, did Brown sell to Kinney?

Arthur H. Dean:

No.

Potter Stewart:

And it does now?

Arthur H. Dean:

Yes.

Arthur H. Dean:

I think it has sold some of the — Kinney sells a large number of children’s shoes and I think that Brown is a lower price range than the Buster Brown children’s shoe of Brown is the Robin Hood shoes and I believe that Brown has sold some of the Robin Hood brand kiddie — Robin Hood brand Brown shoes to Kinney.

They may have been a few other sales but they have not been — I think my — if my memories serves me correctly, since 1955 sales had gone up about a billion two from Brown to Kinney but at the same time, the sales of Kinney from outside purchasers have increased much more.

William J. Brennan, Jr.:

Did I understand that the composition meet at — by which I mean the material to go to make up the product that Kinney sells quite different from the material which ought to make up the product that Brown sells.

Arthur H. Dean:

Yes, Mr. Justice Brennan.

The — the Brown in almost every instance buys the highest grade leather.

They buy the highest grade lines, highest grade soles, highest grade heels.

In every instance, there — they buy the top quality.

There are practically no common suppliers.

Kinney tries to render a very good value for the money in this lower pocket or price field.

But they don’t — where Brown would buy first grade, they would buy third or fourth grade or where Brown would buy a very high quality synthetic rubber sole they would buy a much lower quality.

They’re very few.

They buy very little at the same manufacturers and even where they buy from the same manufacturers they do not buy the same quality.

Mr. Justice — Judge Webber found also that one of the reasons why they’d be a listing of competition would be because there would be added advantages in buying more materials, but that’s not — the evidence shows that that’s not true.

There’d be absolutely no advantage in the merger from buying these additional materials.

Potter Stewart:

All this — or most of what you’ve said that is an attack on the — on the District Court’s finding of the — what was the line of commerce, isn’t it?

All of which of — most of what you’ve told us so far adds up to an attack on the District Court’s finding of what was the line of commerce?

Arthur H. Dean:

Yes it does, Mr. Justice Stewart.

We reclaimed that you can’t — the shoes are not sold in the line of commerce men’s shoes, women’s shoes and children’s shoes as such.

You’ve got to — we — we think you’ve got to examine the — in each city, we think you got to examine.

There’s absolutely no evidence as to how shoes were sold in these 141 cities.

The only place in St. Louis where he completely, we believe, misread the testimony and Kinney didn’t have an outlet in St. Louis, but there’s absolutely no evidence whatsoever with respect to this 141 cities that he took as to how shoes are merchandized in those cities.

Potter Stewart:

Well if you’re right, then am I correct in saying that the logical conclusion of your position is that in the retail shoe business there can never be a violation of Section 7?

Arthur H. Dean:

No sir.

No I wouldn’t — I wouldn’t say that.

I would say that if you were — if you were in the same line of business or in the same price range or you’re competing with each other in the price range, there possibly could be a violation.

But we were — these — these studies of medium prices, these studies on overlaps showed that in practically every category that there has been no overlap.

William J. Brennan, Jr.:

Well if I may rephrase Mr. Justice Stewart’s question then you would say there never could be a violation of Section 7 unless at least they were within the same price range.

Arthur H. Dean:

Yes, yes Your Honor.

Felix Frankfurter:

What you’re saying in effect is that this is no different from your point of view then if Brown had decided not to go also in the lingerie business.

Arthur H. Dean:

That is precisely correct Mr. Justice Frankfurter.

Felix Frankfurter:

Now, that turns on — I should think, (a) what the findings of the court were, (b) the justifications of those findings from the point of view of our necessarily limited review, would you agree to that?

Arthur H. Dean:

Yes.

Felix Frankfurter:

As that point of view, what do you say?

Arthur H. Dean:

Well, if I may, I would like to reserve and then look up the answer to your question on these findings and then close.

Thank you.

John M. Harlan II:

Before you sit down, I have a question —

Arthur H. Dean:

Yes.

John M. Harlan II:

— for you Mr. Dean.

The District Court erred in finding this, the question (Inaudible) in terms of the decree it said — he said in his opinion, he said he can’t find any and the judgment itself (Inaudible).

Arthur H. Dean:

Well, there is that possibility, yes Mr. Justice Harlan.

John M. Harlan II:

Well, I thought (Inaudible) answer to it that medium (Inaudible).

Arthur H. Dean:

The — there is the final judgment in addition to the judgment of —

John M. Harlan II:

(Inaudible)

Arthur H. Dean:

Well, I hadn’t considered that but may I call your attention to page 79 of volume 1 of the transcript of the record where we made a motion because of the wording which you just read, we made a motion on behalf of Brown Shoe, to stay execution of the final judgment, and we supported it by an affidavit.

And on the December the 28th, Judge Webber ordered that our motion — that the defendant’s motion, that’s the Government’s motion — I beg your pardon, that our motion be stayed.

The final judgment was entered on December — and the final judgment entered on the December the 8th was stayed until the disposition of appeal to the Supreme Court provided that the defendant prosecutes its appeal with due diligence.

John M. Harlan II:

Well there maybe another (Inaudible)

William J. Brennan, Jr.:

Well Mr. Dean but is — but there’s an outright order of the — or an order of outright divestiture.

I thought the reservation was in respect with nothing except details of the plan of the divestiture, isn’t it, the reservation from more than that?

Arthur H. Dean:

At subdivision 5 on page 78 —

William J. Brennan, Jr.:

The construction or carrying out of this final judgment.

Arthur H. Dean:

Yes.

I think — I believe that is correct Mr. Justice Brennan.

I think it’s further ordered to judge in decree that jurisdiction is retained for the purpose of enabling the parties to apply to the Court for such further orders and directions as maybe necessary for the enforcement of compliance and for punishment of violations.

William J. Brennan, Jr.:

Or the construction or carrying out of the final judgment which in paragraph 4 is an order — a decree of divestiture.

Tom C. Clark:

That’s the issue — maybe different wordings but that’s the issue formed, it’s an antitrust proceeding?

Arthur H. Dean:

Yes and may I call your attention —

Tom C. Clark:

That that enables the Court to dismiss —

John M. Harlan II:

(Inaudible) — my troubles is that, (Inaudible)

Arthur H. Dean:

Well in — if am I may call your attention Mr. Justice Harlan to the final judgment at page 77 where he — in paragraph 1, he ordered in decree that the acquisition from Brown — by Brown of Kinney was in violation and he ordered Brown to relinquish and dispose of the stock.

John M. Harlan II:

My hypothesis is simply this, a practical one, assuming that the (Inaudible) loss of the case and it goes back, (Inaudible)?

Arthur H. Dean:

Yes.

John M. Harlan II:

Then that question (Inaudible).

Arthur H. Dean:

Well, may I reserve and ask you on that in my remaining time —

Felix Frankfurter:

Mr. Dean, isn’t the short answer, it doesn’t have to be.

Isn’t that the short answer?

I should think if — on the subject to correct you by my Brother or others, but I think if we had no more then paragraph 1 would be properly here.

Earl Warren:

Mr. Solicitor General.

Archibald Cox:

Mr. Chief Justice —

Felix Frankfurter:

Didn’t you like (Inaudible) of these, they’re very often in a minute?

Archibald Cox:

My reaction was that in this equity appeal it didn’t have to be a final judgment and that I am told although I haven’t checked cases myself that there are some cases Justice Harlan, the Hartley Paramount case and others which have come to the Court in substantially this state.

John M. Harlan II:

Well, I hope you’re right.

Archibald Cox:

We’ll verify that during the noon recess.

Tom C. Clark:

We had the (Inaudible) here.

Archibald Cox:

I think —

Tom C. Clark:

(Inaudible)

Archibald Cox:

I think it’s very common but I think the answer is this is an equity appeal, interlocutory decrees — interlocutory injunctions would be appealable, and that takes care of the problem.

Felix Frankfurter:

You can tell me I’m wrong but wouldn’t — if we had only paragraph 1, would be properly (Inaudible).

Archibald Cox:

That would be our position.

In this case if it please the Court, the Brown Shoe Company, a third or fourth depending of the measure, largest shoe manufacturer in the country and the major factor in the retail markets because of — on their controlled outlets has bought up the nation’s largest independent chain of the retail shoe stores.

For many years, the shoe industry was characterized by small manufacturers and by small independent retailers and by a very great number of each, so that one had a condition approaching very closely to the economist’s classical free market.

In recent years, as the District Court found, a trend toward concentration set in, so it is now a danger at both the wholesale or manufacturer sales level and also at retail level that the former classical free market will give way to a condition of oligopoly such as we associate with autos, rubber, some electrical products and the like.

The trend toward domination by the large companies encompasses three developments.

First, the big manufactures are beginning to get more factories at a larger share of the factories.

The large chains are beginning to dominate retail and growing and the big manufactures are now acquiring in increasing numbers, the big chains of retail stores.

The process had not gone so far up to the time of this merger that the statistics showing the trends towards concentration are very startling in combination contrast to the auto industry or steel or the like, but the facts found by the District Court make it plan that the trend is all to evident.

In practical terms therefore, we think that the basic issue before the Court in this case is whether the essential character of the shoe industry, as it had been, will be preserved or the dominant firms like Brown will be allowed to lead it through mergers down the road to domination by biggies.

In legal terms, the question arises under Section 7 of the Clayton Act.

It prohibits one business firm from acquiring the stock or assets of another when the effect in any line of commerce, in any section of the country maybe substantially to lessen competition. So here the ultimate question of course is whether under the circumstances of this industry, it may substantially lessen competition in any line of commerce, in any section of the country for the third or fourth largest manufacturer and the largest important chain of retail stores to be combined.

We think that Brown’s acquisition of Kinney’s assets violates Section 7 for three reasons.

Archibald Cox:

First, the vertical combination of Brown’s manufacturing facilities with Kinney’s outlets deprives other manufacturers of a fair opportunity to compete for Kinney’s purchasers.

This aspect to the merger in principal that is as to the kind of thing leaving the quantitative question aside is no different of course between — from the DuPont-General Motors case where you have a supplier and the outlets being combined and therefore creating a tendency to foreclose other suppliers from selling in those companies.

Potter Stewart:

Now, while you’re right on this aspect of your argument, let me ask you two questions.

I — I’m right at remembering, am I not, that Kinney also is a manufacturer?

Archibald Cox:

Kinney also is a manufacturer and indeed a substantial manufacturer as I shall point out in a moment.

Potter Stewart:

And then secondly, a different question.

Mr. Dean told us as I understood him that no witness during this extensive trial testified — no manufacturer testified that he had any fear that he would be displaced as a supplier of Kinney —

Archibald Cox:

I think what Mr. Dean —

Potter Stewart:

— by the act — but its acquisition by Brown.

Archibald Cox:

I think what Mr. Dean said was that no manufacturer testified that he had been displaced by Brown’s acquisition of Kinney.

Potter Stewart:

I understood him to say what I just —

Archibald Cox:

Because the reason I say that, it is perfectly plain that a number of manufacturers testified that they feared that this would displace them and referred the past instances in which the acquisition of a retail chain by a manufacturing company had displaced their sales.

So that in terms of their expectations, it seems to me there’s no question, but that there is such testimony from a three-four or half of dozen.

I couldn’t —

Potter Stewart:

And there is as you tell us —

Archibald Cox:

But I don’t think anyone said it had happened.

Potter Stewart:

— also a testimony — that it hasn’t happened yet?

Archibald Cox:

It hasn’t happen yet but remember this —

Potter Stewart:

Two or three years, is that it?

Archibald Cox:

Two or three years but two or three years in which the case is on trial.

Potter Stewart:

It is on litigation.

Archibald Cox:

And the —

Felix Frankfurter:

Is there a specific finding on this subject?

Archibald Cox:

There’s a specific finding that that would be likely to happen, yes sir, by the District Judge and he based that finding like most of his other finding upon the testimony of live witnesses that he saw as well as heard.

Felix Frankfurter:

Mr. Solicitor —

Archibald Cox:

This is unusual if I might just say one word more.

This unusual antitrust case in that respectably at least in my limited experience that a very large part of the testimony is from live witnesses, especially with respect to these retail markets.

Retailers came in and told what the competitive situation was in their town so that it’s peculiarly a case in — at least in respect to subsidiary findings for applying the rule with respect of finality of the District Court’s findings.

Now, excuse me Justice Brennan.

William J. Brennan, Jr.:

So when in relation to the merger where this proceeding begun?

Archibald Cox:

This proceeding was begun before the merger was actually put through.

It’s begun late in 1955 if my memory is right and the merger was put through in 1956.

We applied for a temporary injunction.

It was denied on condition that the books and assets be kept separate and not physically intermingled so that the divestiture would be possible.

Now, I was outlining the three grounds on which we contend that this violates Section 7.

The first was the vertical combination of the manufacturer with the outlet.

We do not contend that the combination of Kinney’s manufacturing facilities with Brown’s manufacturing facilities standing alone substantially lessens competition.

We think its part of the picture of concentration, but we don’t specifically rely on that because the District Court didn’t find for us in that respect.

Our second —

Felix Frankfurter:

If you asked them — the Government asked them to find for you?

Archibald Cox:

We did.

We didn’t press it too hard that it was — but it was part of our case.

You see Kinney is the 12th largest manufacturer.

It’s four or five times —

Felix Frankfurter:

(Voice Overlap) —

Archibald Cox:

— as big as the average manufacturer.

Felix Frankfurter:

I was going to ask why — that puzzled me a little bit.

Is Brown — is one of the — is the third biggest of these —

Archibald Cox:

Brown is third or fourth, it was fourth by most measures.

Felix Frankfurter:

Third — fourth, one of the leaders?

Archibald Cox:

Yes — oh, one of the — yes sir.

Felix Frankfurter:

Right.

Kinney is substantial, but wasn’t there a finding that that —

Archibald Cox:

Well, the district —

Felix Frankfurter:

That marriage was illicit?

Archibald Cox:

The District Judge was apparently more impressed and I think rightly by the effects of the vertical combination, perhaps this thing I’d normally speculate.

Perhaps, his thinking was this, that the problem in one sense will be that putting two manufacturers together would not affect the market, the structure of the market nearly as much as foreclosing a large part of the area in which you could sell, which would of course for a short time intensify the competition among the remaining manufacturers until some of them were forced out of business.

Felix Frankfurter:

The reason that, I think it’s — it shouldn’t be or it ought to bear on what is called a tendency.

Archibald Cox:

Its’ assert — and I think there’s no question in my mind that the District Judge took it into account with respect — oh, I meant the trend in the market, you meant the tendency under the statute.

Felix Frankfurter:

Yes.

Archibald Cox:

But I think it remains a relevant fact Your Honor and so we accept the finding.

Tom C. Clark:

Is a finding against you or you’re just (Inaudible)?

Archibald Cox:

He said that it had but slight effect.

I don’t quite know — I wouldn’t say that was against us but it doesn’t help us very much.

Potter Stewart:

Slightly means it was not substantial I suppose.[Laughter]

Archibald Cox:

I guess so, I guess so.

Our second —

Potter Stewart:

Well, let’s just again — but I’m sorry to keep you holding up but I’m not (Voice Overlap) —

Archibald Cox:

I’m (Voice Overlap) all I aim to do is to outline —

Potter Stewart:

Yes.

Archibald Cox:

— the points then I’m going to develop each of these three findings in some length.

Potter Stewart:

I understand your argument.

It’s true is it not with the respect to this — to the manufacturing merger, the merger — the merger of the manufacturers that after this was all over Brown still manufactured — what was it, 4.4% of the shoes in the country or (Voice Overlap) —

Archibald Cox:

The total became 4.4%.

Potter Stewart:

4.4. (Voice Overlap) —

Archibald Cox:

Brown was getting a somewhat larger shares of that (Voice Overlap) —

Potter Stewart:

It had been 4% then became 4.4% as among what, 700 manufacturers?

Archibald Cox:

The number had dropped to 900 and some.

Potter Stewart:

Dropped to 900 —

Archibald Cox:

Yes.

Felix Frankfurter:

In the time —

Archibald Cox:

The number of manufacturers in this industry for all Mr. Dean’s ease of entry, from 1947 to 1954 had dropped 10% and from 1954 to 1958 dropped another 10%, not at the lower figure but at the higher of total of 20% in 11 years.

Potter Stewart:

But there was still —

Archibald Cox:

And there was nobody — the ease of entry is purely theoretical.

No one could name anyone who entered except back in the 1940s.

Potter Stewart:

There was still somewhere between 900 to 1000 manufactures in that?

Archibald Cox:

Yes sir.

Felix Frankfurter:

That’s the point.

I was thinking 5% instead of 4%, 5 from (Inaudible) on a nationwide scale, 5% to 5.5%.

Archibald Cox:

This depends a little on the exact —

Felix Frankfurter:

That’s the (Inaudible) —

Archibald Cox:

— universe you — you select.

It depends whether you include the slippers.

It depends whether your sales or pairs but it ranges from 4.5% to 5%.

Felix Frankfurter:

I’m merely suggesting that figures are important at this domain.

Archibald Cox:

Yes.

But I’d rather had — well, I didn’t tend to dispute that.

My point was that it — one must be careful before concluding that there’s an inconsistency in being sure that he’s using comparable measures and there’s a quite number of cases where there’s a — a superficial inconsistency explainable on that ground.

Felix Frankfurter:

All I’m suggesting, it’s very important for the District Court to have been careful.

Archibald Cox:

We think it was.

Felix Frankfurter:

Yes.

Archibald Cox:

There’s — there is one erroneous figure but —

William J. Brennan, Jr.:

It wasn’t (Inaudible), it was careful.

Archibald Cox:

Oh.

Our second point of attack on the merger in showing that it violates Section 7 is that we think that the horizontal merger of Brown’s and Kinney’s retail outlets will lessen competition between them in men’s, women’s and children’s shoes in about 140 existing retail trade areas and prospectively in additional retail trade areas especially in the new suburban areas.

Under the first point — under the first point, it seems to me that the only real question, so perhaps I can focus the argument a little, is whether the tendency is substantial, whether the figures are big enough to meet the test of substantial.

Under this head, I would think there were two main points to keep in mind.

One is the question whether Brown’s franchise dealers should be counted as we think as Brown’s outlets in determining whether the merger may lessen retail competition between Brown and Kinney and I’ll explain the reasons we think they should be counted in a moment.

And second, there’s a technical question whether the 138 cities in their environment, having a population in excess to 10,000 in which competition will be substantially lessen, constitute either singly or collectively a section of the country within the meaning of the statute.

Our third argument is in substance that even if we should not prevail on either of the first two or both standing alone that they are sufficient together to find a violation of Section 7.

In other words, we think that the merger of the fourth largest manufacturer, with a largest retail chain plus the combination of their retail outlet will so increase the relative size of the enterprise as to give it a decisive advantage over small competitor, thus concentrating undue economic power in violating Section 7.

Under this head I think, again the only serious question although others are raised is the question of substantiality.

Each of these three central propositions is incorporated in the ultimate findings and conclusions of the District Court.

Each of those ultimate findings and conclusions rest upon subsidiary area findings effect and there we think in turn are supported by the evidence.

As I said earlier, the evidence comes chiefly from live witnesses and is therefore of a character which — on which the District Court’s finding are entitled to decisive weight unless clearly erroneous.

Now, I tend to develop my argument under the three main heads, and to deal with the question line of commerce section of the country when I come to it under each of those three main heads because then we talk about it not in the abstract but were denied to the purpose or function of the concept in the development of the law and the decision of this case.

Before I come to developing those three propositions however, it seemed appropriate to me since this was the first major case to come before the Court under Section 7 of the Clayton Act to say something about the meaning of that Section and its legislative history so that there maybe a legal background against which to appraise these quite complicated and detailed facts.

It its original form as enacted in 1914, Section 7 of the Clayton Act, you’ll recall, prohibited corporation from acquiring a whole or any part of the stock or other share capital of two or more corporations where the effect of such acquisition maybe to substantially lessen competition between such corporations, then it went on with other provisions not relevant here.

The legislative history of the original Section 7 makes it quite plain that Congress thought — sought even then to halt the trend toward concentration by preventing mergers that might substantially lessen competition, even though the degree of market control resulting did not reach such a stage that there would be a violation of the Sherman Act.

The aim as it was stated at the time was to check restraints of competition in their incipiency.

Archibald Cox:

As matters developed, Section 7 had three short comings.

First, it did not reach corporate mergers like this one which were accomplished through the acquisition of assets.

Second, since Section 7 prohibited one corporation from acquiring stock to the second corporation where the effect of such acquisition maybe to substantially lessen competition between such corporations, it was widely but erroneously assumed that Section 7 did not apply to vertical combinations, but only apply it to a combination between competitors.

Third, this in terms very strict prohibitions against stock acquisition where the effect of such acquisition might be to lessen competition between the competer — competitors between the acquiring and acquired corporations was so strict that there was a tendency to read into it limitations similar to those applied in interpreting the Sherman Act, notions of market control or unreasonable restraints or restraints in consistent with the public interest.

World War II set off a new wave of corporate mergers.

Economists, I think I should say are still debating their true impact, but it’s quite plan that they gave the Federal Trade Commission and the Congress very grave concern.

That concern led directly to the amendment of Section 7 in an effort to halt economic concentration and to preserve the opportunities of small businessmen.

The effort came to a climax when Section 7 was amended.

More particularly, the amendments read against the committee reports and the legislative debate had two main general purposes.

First, many American industries had even then have been transformed by the emergence of a handful of dominant firms.

In those industries, the markets no longer were free at least in the sense of the classical economist.

They were dominant — there was — they characterized by price leadership by large dominant firms and either by an absence of opportunities by small — for small businessmen or by a small businessman who operated under the shelter of the umbrella of the large firms as long as they kept their proper place in the hierarchy.

In other industries, notably in textiles, apparel, and some branches of food and the like, the older classical condition, the ideal of small business continued to prevail.

Now, Section 7 quite clearly was intended to do what Congress could to preserve the latter condition in those industries where it still existed.

Thus the Senate Committee said then I think that it’s worth imposing a quotation upon the Court, the type of problem to which the bill was addressed was described by the Federal Trade Commission in these words.

“Where several large enterprises are extending their power by successive small acquisitions, accumulative effect of their purchases maybe to convert an industry from one of intense competition about many enterprises to one in which three or four large concerns produced the entire supply.

This latter pattern, which economists called oligopoly, is likely to be characterized by avoidance of price competition and by respect on the part of each concern for the vested interest of its rival.

In district remember, is what the Committee said was the type of problem to which the bill was directed.

And I may say, it seems to us to be the very type of small acquisition that has taken place in this industry, in this case.

Second, it should be emphasized that Congress was not motivated solely by considerations of economic efficiency.

It was moved by a social philosophy.

It was distressed that the small businesses and small industries were being forced under, were being wiped out by mergers, that the little fellow no longer had the opportunity he had once had in America.

Judge Pope stated the point very effectively in the Crown Zellerbach case in the Ninth Circuit a few months ago, “As the legislation was under consideration by Congress, it was duly appreciated that decentralized and deconcentrated markets are often uneconomic and provide higher cost and prices.

All this it — it, meaning Congress laid aside in its concern over the Curse of Bigness and the concentration of power, the nation’s market which Congress thought advantaged the big man and disadvantaged the little one.

To achieve these two broad purposes partly economic and partly social, Congress made three changes in Section 7 which corrected the three inadequacies or omissions that I pointed out earlier.

In the first place Section 7 was explicitly extended to cover acquisition of assets.

Second, it was made applicable to vertical combinations by eliminating the requirement that the acquisition be shown to substantially lessen competition between the acquired and the acquiring firms.

Instead, Section 7 now pro — now prohibits acquisitions whereas I said before in any line of commerce, at any section of the country, the effect of such acquisition maybe to substantially lessen competition.

It doesn’t say between whom, just competition in the market.

The effect of the latter change as Congress fully realized was to eliminate any possibility that the Sherman Act rule of reasoning or notions of market control or market dominance would apply under Section 7 that the aim was to eliminate any chance if that would happen.

Archibald Cox:

Here again, the Senate Committee report and the House Committee report make this indisputably clear, “by eliminating the provisions of the existing section, which would appear to read situations of little economic significance, it is the purpose of this legislation to ensure a broader construction of the more fundamental provisions that are retained that has been given in the past.”

The intent here as in other parts of the Clayton Act is to cope with monopolistic tendencies in their incipiency and well before they have attained such effects as would justify a Sherman Act proceeding.

Potter Stewart:

Now to which specific one of the three Amendments was that language addressed?

Archibald Cox:

It was certainly addressed — I think it was addressed to two changes.

It was addressed to the dropping of the words in any community and focusing in on any section of the country which I perhaps improperly slid over because it wasn’t part of my main theme.

It was also quite clearly addressed to the elimination of the requirement that to be — or rather I should say to the pro — to the proscription of all mergers which would substantially lessen competition between the acquired and the acquiring firm but as you see, would prohibit practically any merger.

And Congress, it wasn’t really — the Courts to get over that had begun to read qualifications in it and it’s quite clear that the aim was to get rid of those qualifications by setting up not quite so strict a test but one which was not as strict as the test of the Sherman Act.

Potter Stewart:

Just — so you mean —

Archibald Cox:

You find this over —

Potter Stewart:

The elimination of community was a –not a tightening but a loosening of the statute.

Archibald Cox:

Yes.

Well, it was — the aim was to loosen somewhat in these directions or the aim to tighten it – tighten in others.

I take again on the point that I’m trying to concentrate on, it was stated in the House report as well and also frequently on the floor that the result of the changes was to frame a bill which reaches far beyond the Sherman Act.

It wouldn’t do it I suppose in the sense in words alone because the words that proscribe any merger that eliminated any competition between the two firms would proscribe all mergers but that had been watered down by reading things into it and the Court — that Congress that was concerned about backtracking it, if I may put it that way on the watering down.

Felix Frankfurter:

You puzzled me by saying it didn’t do it in words.

Archibald Cox:

Well, it — it didn’t use the words backtrack on watering down.

Felix Frankfurter:

No, no, but —

Archibald Cox:

Well, all — I changed the words and changed the words —

Felix Frankfurter:

The word — the word must accomplish your tightening.

Archibald Cox:

Well, they do, so quite clearly.

Felix Frankfurter:

As — as Justice Stewart has just pointed out to – prior to change from — in any community, from any section, it’d be certainly tightened.

Archibald Cox:

I didn’t mean to suggest that it was tightening geographically.

I meant to suggest —

Felix Frankfurter:

Alright.

Archibald Cox:

— that it was tightening in terms of the degree of the fact on the structure of the market or the quantity of competition.

Potter Stewart:

Well, the Third Amendment wasn’t tightening either because the words used to read in such a way that as you’ve just said, they would literally forbid any — if you’ve read literally, they would forbid any merger, any conceivable merger, wouldn’t it?

Archibald Cox:

It was tightening when you took the judicial.

In the words of the original statute —

Potter Stewart:

The words (Voice Overlap) —

Archibald Cox:

— as judicially interpreted.

Potter Stewart:

Right.

Archibald Cox:

Again —

Potter Stewart:

But the words were made much less restrictive, were they not?

Archibald Cox:

Less — yes.

Potter Stewart:

The statutory mergers.

Archibald Cox:

Yes, on the face of them, they were less restrictive provided you had competition between the acquired and acquiring company.

Potter Stewart:

Yes.

Felix Frankfurter:

Well how – how does — please explain in a word, how does lessening — liberalizing the language tightening the gloss, I don’t understand that.

[Attempt to Laughter]

Archibald Cox:

Because it relieved the occasion which had produced the gloss.

Congress had gone manifestly in the words, the Court thought, manifestly too far.

Felix Frankfurter:

But it would lead to new liberalizing gloss.

If you liberalize — if you liberalize the basis of construction, you liberalize the basis for interpreting what the words are.

Archibald Cox:

Thus far — thus far Your Honor, it hasn’t.

The Courts — short of this Court could have considered it reading these change in the light of the previous judicial interpretation of Section 7 and the Committee reports and the natural meaning of words of the amended statutes have precluded that it does lay down a stricter test one falling far short of the — one far more strict than that which would be imposed under the Sherman Act.

Now, there’s another but I’ll proceed to another point which I think bears on this so far as the exact words go Mr. Justice Frankfurter.

There is — there are two farther points that the legislative history makes clear and the first of them at least bears directly on this.

It wasn’t chance that Congress used the words where the effect may be to substantially lessen competition.

Section 3 of course had long prohibited, tying clauses and requirements contract where the effect in the same words except that the infinitive split where the effect maybe to substantially lessen competition and a clause had a very — just before the 1950 Amendment had been written on those words in the Standard Service Station case at 337 U.S. where the Court specifically refused to embark on the kind of broad economic inquiry that would be pertinent under the rule of reason under the Sherman Act referring to the Chicago Board of Trade case, and said that the sole question was whether the qualifying clause of Section 3 and it held that the qualifying clause of Section 3 is satisfied by proof that competition has been foreclosed in a substantial share of the line of commerce effectively.

And so here, it seems plain to us that when Congress used to very words that had — had that clause put upon them in Section 3, only a year or two before.

And when Congress stated that Section 7, the new language of Section 7 was intended to be given an interpretation similar to those which the courts would apply in interpreting the same language in other sections of the Clayton Act that it must have meant to interpret the attitude or gloss that had been written on those words in the Standard Stations case, and that essentially is the meaning that we claim that should have here.

The one further point in the legislative history, it does show with unusual specificity I think the kinds of mergers which would have the unwanted effect upon the market.

The Committee listed three, I won’t read the passage, but which are particularly applicable to this case.

First, it spoke of combinations which establish relationships between buyers and sellers, which deprived the rivals of a fair opportunity to compete and of course, that is a reference to the kind of vertical integration that we have in the present case.

Second, it spoke of eliminating activity which had previously been a substantial factor in competition.

We think that eliminating Kinney as an independent concern in the retail markets eliminates as we shall show what was a substantial factor in competition.

And third, Congress made it very clear that it was concerned about increases in the size of an enterprise, making the acquisition to such a point that its advantage over its competitors threatens to become decisive and that is exactly what the District Court found in virtually those words was happening as a result of this merger.

I turn first then to the effect of the merger of Brown and Kinney, judged vertically its effect in the manufacturers’ market where we submit that the result of combining the third or fourth largest manufacturer with the largest independent retail chain will be to substantially lessen competition in the manufacturers nationwide markets for men’s, women’s and children’s shoes.

It’s important to remember —

Potter Stewart:

You used men’s, women’s and children’s shoes as three lines of commerce, is that right?

Archibald Cox:

Yes.

That’s what the Distinct Court found and that’s the way we refer to it, and I shall specifically deal with that.

As I mentioned a moment ago, this is an industry in which four firms or manufacturers have already become dominant.

Brown is ranked third or fourth of the — whether you measure it by its assets, its net sales or its total production.

In 1956 — 1955, Brown had 37 factories and it ranked fourth in production by volume and third by sales.

The big four had a quarter roughly of the national production in volume and 30% in sales.

Potter Stewart:

Well, the big four had a quarter of the total national production?

Archibald Cox:

In volume, 24.6%.

Potter Stewart:

And Brown had —

Archibald Cox:

And Brown had —

Potter Stewart:

— four percent.

Archibald Cox:

Brown’s percentage was about 4%.

Potter Stewart:

Four percent.

Archibald Cox:

Yes.

Potter Stewart:

So the big — and the big two must have been very big?

Archibald Cox:

No — well, the big two, they came down, the Endicott-Johnson and the International — they’re bigger than Brown.

Potter Stewart:

(Voice Overlap) — together a 20% of it?

Archibald Cox:

Oh, no, no.

Potter Stewart:

Then I misunderstood you Mr. Solicitor.

Archibald Cox:

Because the third and fourth were much closer than that.

Potter Stewart:

Which Brown is third or fourth?

Archibald Cox:

Yes sir.

In pairage, Brown was in fourth, so that you had three bigger.

The figures are in the record.

They ranged up to 4% or 4 plus percent, 6%, 7% and 10% or something like in figures in my mind.

Brown’s production, I should emphasize was two and a half times that of the fifth ranking firm.

In 1955, Brown was five times and in 1956 six times the size of the 11th ranking firm, this pairs on its relative position in the industry and the effect of giving in any added preference in the market.

In 19 —

William J. Brennan, Jr.:

This is now only of production, manufacturing?

Archibald Cox:

This is manufacturing —

William J. Brennan, Jr.:

Are you stopped —

Archibald Cox:

— measured by pairs.

William J. Brennan, Jr.:

You stopped at 11 and Kinney was 12?

Archibald Cox:

Well, I — Kinney was 12.

I was going on.

Brown in 1956, Brown’s production was equal to the total production of the ten firms ranking 11 through 20.

One last figure in 1955 or 1956, Brown was 48 times the size of the average manufacturer in the industry.

Potter Stewart:

So, this argument in which you’re making the point that Brown was very big also makes the point that Kinney was quite small, is that it?

Archibald Cox:

In comparison to Brown was small in manufacturing, I’m speaking only of manufacturing.

Potter Stewart:

Yes, Solicitor, I understand it.

Archibald Cox:

It was — on the other hand, Kinney you see was four times the average, so Kinney was small compared to Brown.

Kinney was — is big too strong a word in relation to the average, four times in any event, so that it was hardly unimportant.

Brown did not achieve this position simply by manufacturing and selling more shoes.

The list of Brown’s acquisitions is important in measuring the trend in the industry.

Brown in 1946 acquired entry in Footkind, in 1948, Milius, in 1950, Spalsbury-Steis, in 1952, Bourbeuse, 1953, Monogram, O’Donnell, and Kaut, Lauman and Winter, in 1954, Regal and then in 1955-1956, it wanted to and did acquire Kinney.

So this has been a matter of successive —

What year was Regal — Regal was 1954?

Archibald Cox:

Regal was 1954.

William J. Brennan, Jr.:

And it’s that whole list of retailers?

Is that —

Archibald Cox:

No, no.

These are other manufacturers.

William J. Brennan, Jr.:

Other manufacturers.

Archibald Cox:

I’m speaking exclusively of manufacturing involved —

Tom C. Clark:

The Regal retail —

Archibald Cox:

Retail, well — but I’m talking — speaking of Regal’s manufacturing facilities.

Regal had very considerable manufacturing facilities.

Tom C. Clark:

He got — then they acquired the retail of Regal?

Archibald Cox:

They acquired both.

This was just — I didn’t intend to mislead.

Archibald Cox:

It’s just a selective process because I was concentrating on the effect in the manufacturer’s market.

Tom C. Clark:

Well, I used to buy Regal across the department —

Archibald Cox:

(Inaudible) College.

Tom C. Clark:

— (Voice Overlap) back in the 1930s.

Archibald Cox:

In 1950 — I turn now to the retailer.

In 1951, Brown begun to move directly under retailing by the purchase of the Wohl Shoe Company which Brown’s president described as the first really big acquisition by one of the leading shoe manufacturers and he went on to point out that this brought together one of the largest manufacturers with the largest operator of leased departments in the country.

Wohl was a very considerable retail outlet.

It leased shoe departments and department stores.

There were 250 outlets in 1951, 379 in 1955, 457 in 1958.

These are after Brown’s acquisition an increase of 80% in seven or eight years.

Potter Stewart:

This is Wohl.

Archibald Cox:

This is Wohl.

Potter Stewart:

Yes, and this is only the department store outlet.

Archibald Cox:

This is department store outlet.

Potter Stewart:

Well, that’s all Wohl does, isn’t it?

(Voice Overlap) —

Archibald Cox:

Well no.

Well, Wohl is also a wholesaler.

Potter Stewart:

Yes, but (Voice Overlap) —

Archibald Cox:

One of the few wholesalers in the —

Potter Stewart:

At retail, that is the way it will — operates —

Archibald Cox:

That’s — that’s correct.

Potter Stewart:

— in departments.

Archibald Cox:

Except possibly one or two stores.

Potter Stewart:

Yes, yes, (Voice Overlap) —

William J. Brennan, Jr.:

I thought it was —

Archibald Cox:

It’s essentially an operator of leased outlet.

William J. Brennan, Jr.:

Well, I thought Mr. Dean told us that also sets young fellows up in business, do you have —

Archibald Cox:

Well, this is for the wholesale division.

It — it sets them up if I may say with strings attached to buying their shoes through Wohl.

Charles E. Whittaker:

(Inaudible)

Archibald Cox:

That’s correct.

Charles E. Whittaker:

It gets (Inaudible)

Archibald Cox:

It gets an increasing percentage of them from Brown.

It does not — it does not get all it shoes by any means all it shoes from Brown.

The figures show that Wohl’s purchases in 19 — let me give you the figures, 1950 and 1957.

Wohl purchased from Brown in 1950 that was the year before the acquisition, two million-eight, in dollars.

In 1957, it purchased just over 12 million in dollars.

That’s a 320% increase in Brown sales to Wohl following the acquisition.

Earl Warren:

We’ll recess now.