384 U.S. 270, 86 S. Ct. 1478 (1966)
In March 1960, the United States filed suit against Von's Grocery Company and Shopping Bag Food Stores alleging that Von's acquisition of its competitor violated section 7 of the Clayton Act.1 Three days after the complaint was filed, the district court denied the government's request for a temporary restraining order, allowing Von's to complete the takeover of Shopping Bag's capital stock and assets, which included thirty-six grocery stores in the Los Angeles area.2 The district court later conducted a trial and entered judgment for the defendants after finding no reasonable probability that the merger would substantially lessen competition or tend to create a monopoly.3
Von's and Shopping Bag were both rapidly expanding retail grocery chains in the Los Angeles metropolitan area.4 Between 1948 and 1958, Von's increased its stores from fourteen to twenty-seven while its sales quadrupled, and Shopping Bag grew from fifteen to thirty-four stores with sales multiplying sevenfold.5 In 1958, Von's ranked third and Shopping Bag ranked sixth in retail grocery sales in the area, and after the merger their combined annual sales reached nearly one hundred seventy-two million dollars, representing 7.5 percent of the total two and one-half billion dollars in annual retail grocery sales in Los Angeles.
During the 1950s and early 1960s, the Los Angeles retail grocery market experienced significant consolidation.6 The number of single-store grocery operators fell from 5,365 in 1950 to 3,818 in 1961 and further to 3,590 by 1963, while the number of chains with two or more stores rose from ninety-six in 1953 to one hundred fifty in 1962.7 Numerous acquisitions occurred, with nine of the top twenty chains acquiring one hundred twenty-six stores from smaller competitors between 1949 and 1958, and additional mergers continuing after 1960.8
The government appealed the district court's judgment directly to the Supreme Court pursuant to the Expediting Act.9 The Supreme Court granted review to determine whether the district court had erred in concluding that the government failed to prove a violation of section 7 of the Clayton Act.10
Whether the District Court properly concluded on the facts before it that the Government had failed to prove a violation of § 7?11
Section 7 of the Clayton Act, as amended by the Celler-Kefauver Act, prohibits any corporation from acquiring the assets of another where the effect may be substantially to lessen competition or to tend to create a monopoly in any line of commerce in any section of the country.12 Congress intended the amendment to arrest trends toward concentration in their incipiency by preserving competition among many small businesses rather than allowing markets to be dominated by a few large companies.13
No. The facts show a steady decline in the number of single-store grocery operators in Los Angeles from 5,365 in 1950 to 3,590 in 1963, accompanied by a rise in the number of chains and numerous acquisitions by larger firms of smaller competitors.14 Von's and Shopping Bag, already the third and sixth largest chains with rapidly growing sales and store counts, merged to create the second largest chain controlling 7.5 percent of the market sales.15 This merger occurred amid an ongoing trend of consolidation that Congress sought to halt under section 7, making it likely to substantially lessen competition in the future by further concentrating the market.16
The district court erred in concluding that the government failed to prove a violation of section 7; the merger violated the statute, and the judgment must be reversed with directions to order divestiture.17
Related opinions on this issue
Justice White joined the Court's opinion but wrote separately to clarify its limited scope.18 He noted that before the merger the largest firm had 8 percent of sales, Von's had 4.7 percent and Shopping Bag had 4.2 percent.19 The top eight firms held 40.9 percent before the merger and 44 percent afterward.20
Von's and Shopping Bag were both among the eight largest companies and substantial competitors that had grown since 1948.21 In his view any merger between leaders or a leader and a lesser company is vulnerable under section 7 where the eight leading firms hold over 40 percent of the market and a trend toward fewer sellers continues, absent special proof to the contrary.22
Joined by Justice Harlan
Justice Stewart dissented on the ground that the Court had adopted a per se rule based solely on the decline in the number of competitors without examining the economic context or actual competitive effects of the merger.23 He pointed out that market shares of the top firms had declined or remained stable between 1948 and 1958.24 The number of chains increased substantially from 96 to 150 during the period, vigorous competition and easy entry existed, and the merger had significant market-extension aspects with minimal foreclosure of sales.25
Stewart concluded that the record showed no reasonable probability that the merger would substantially lessen competition and would have affirmed the district court.26