RESPONDENT: Von's Grocery Company
LOCATION: United States Department of Justice
DOCKET NO.: 303
DECIDED BY: Warren Court (1965-1967)
CITATION: 384 US 270 (1966)
ARGUED: Mar 22, 1966
DECIDED: May 31, 1966
Facts of the case
Media for United States v. Von's Grocery Company
Audio Transcription for Oral Argument - March 22, 1966 in United States v. Von's Grocery Company
Number 303, United States, Appellant, versus Von's Grocery Company et al.
Richard A. Posner:
Mr. Chief Justice, Your Honors.
This case was brought by the government in 1960, under Section 7 of the Clayton Act and it involves a challenge to a merger that year of two major grocery chains in Los Angeles, Von's Grocery Company and Shopping Bag Food Stores.
After a preliminary relief was denied and after extensive discovery proceedings were conducted, the matter came on for trial before Judge Carr in the Southern District of California.
The parties agree that the relevant product market in this case, the line of commerce, was the sale of groceries and related products by grocery stores and supermarkets and that the relevant geographical market, the section of the country, was the Los Angeles Metropolitan Area, consisting of Los Angeles and Orange County's.
So the sole contested issue was whether the effect of the merger maybe substantially to lessen competition or to tend to create a monopoly in the relevant market and on this the judge after the conclusion of the trial and having heard the evidence of both parties, held that the government had not proved that the merger might have this effect and he therefore ordered the complaint dismissed.
We are here on direct appeal under the Expediting Act --
Byron R. White:
And there was no issue of the effect on primary lined up or is it just -- someone with headers?
Richard A. Posner:
On primary line competition?
I don't understand.
Byron R. White:
In the journeys you have -- the effect on any -- on the supplier?
Richard A. Posner:
Oh, on supplier's product to grocery stores, no.
None, just on the -- the only competitive effects have to do with competition in the retail sale of grocery products.
This is an important case in the administration of the merger statute for two reasons.
First, this Court's decision will provide guidance to the enforcement of this law in the nation's largest industry and the industry which has the most direct and immediate concern to every American family.
And second, that we think that this case perhaps more than any previous case before this Court, with possible exception of the Brown Shoe case, tests whether Section 7 is in fact, as its framers intended it to be an effective preventive remedy against anticompetitive practices and effects and before I begin my argument, let me offer a brief summary of the government's legal theory.
We rest our case on four propositions.
First, that Section 7's basic concern is with preventing the emergence of highly concentrated or oligopolistic markets, the kind of markets which breed anticompetitive business behavior.
Second, we think that in light of this prophylactic statutory purpose, a merger that occurs in a market which is still competitive in its behavior but which appears to be turning the corner into a situation of oligopoly it seems to be crystallizing as an oligopolistic market that deserves very close scrutiny under the statute.
And I'll explain that this was precisely the situation in Los Angeles on the eve of the merger where in this large market of 4000 competing concerns, eight had among them almost two-fifths of total sales and this is the level which students of industrial organization had deemed oligopolistic.
And furthermore, and very relevant here, this market share of the major firms had been increasing steadily for a substantial period of time before the merger and as we point out in our reply brief, this trend towards ever increasing concentration has continued steadily and uninterruptedly since the merger.
Now third, where in such a -- such an industrial setting a merger unites two leading sellers in the market, two of the handful major firms which have emerged with significant market shares and in doing so, the merger has contributed substantially to the concentration movement.
We think the statute requires that it'd be forbidden in the absence of a clear contrary showing -- a clear rebuttal to the government's case.
And I'll explain when I get to that point, the kinds of evidence that we think is admissible and relevant in rebutting the government's case.
I'll explain that the merger of Von's and Shopping Bag which united the third and sixth largest firms in this major local market, was the kind of merger which eliminates a -- one of the few market leaders and thereby substantially increases its concentration.
That's the kind of merger that should be forbidden unless the defendants can come back with some -- with a strong showing that the merger -- that the merger is in fact unlikely to have adverse effects.
And then finally, I'll try to show that appellees have not sustained their burden of rebuttal of the government's case.
Let me begin then by describing the relevant market, its history and structure and behavior on the eve of the merger.
Now, the Los Angeles Metropolitan Areas, Los Angeles and Orange County's, constitute a vast retail grocery market where the total sales of grocery stores and supermarkets run about two and a half billion dollars a year, which incidentally is as much as for example, the entire retail shoe industry in the United States.