United States v. Pabst Brewing Co. , 86 S. Ct. 1665 ( 1966 )

Mr. Justice Black

delivered the opinion of the Court.

In 1958 Pabst Brewing Company, the Nation’s tenth largest brewer, acquired the Blatz Brewing Company, the eighteenth largest. In 1959 the Government brought this action charging that the acquisition violated § 7 of the Clayton Act as amended by the Celler-Kefauver Anti-Merger amendment.¹ That section makes it unlawful for one corporation engaged in commerce to acquire the stock or assets of another “where in any line of commerce in any section of the country, the effect of such acquisition may be substantially to lessen competition, or to tend to create a monopoly.” (Emphasis supplied.) The Government’s complaint charged that “The effect of this acquisition may be substantially to lessen competition or to tend to create a monopoly in the production and sale of beer in the United States and in various sections thereof, including the State of Wisconsin and the three state area encompassing Wisconsin, Illinois and Michigan . ...” ² At the close of the Government’s case, the District Court dismissed the case under Rule 41 (b) of the Fed. Rules Civ. Proc., holding that the Government’s proof had not shown that either Wisconsin or the three-state area of Wisconsin, Michigan and Illinois was a “relevant geographic market within which the probable effect of the acquisition of Blatz by Pabst should be tested.” The District Court also ruled that the Government had not shown that “the effect of the acquisition . . . may be substantially to lessen competition or to tend to create a monopoly in the beer industry in the continental United States, the only relevant geographic market.” 233 F. Supp. 475, 481, 488.

I.

We first take up the court’s dismissal based on its conclusion that the Government failed to prove either Wisconsin or the three-state area constituted “a relevant section of the country within the meaning of Section 7.” Apparently the District Court thought that in order to show a violation of § 7 it was essential for the Government to show a “relevant geographic market” in the same way the corpus delicti must be proved to establish a crime. But when the Government brings an action under § 7 it must, according to the language of the statute, prove no more than that there has been a merger between two corporations engaged in commerce and that the effect of the merger may be substantially to lessen competition or tend to create a monopoly in any line of commerce “in any section of the country.” (Emphasis supplied.) The language of this section requires merely that the Government prove the merger may have a substantial anticompetitive effect somewhere in the United States — -“in any section” of the United States. This phrase does not call for the delineation of a “section of the country” by metes and bounds as a surveyor would lay off a plot of ground.³ The Government may introduce evidence which shows that as a result of a merger competition may be substantially lessened throughout the country, or on the other hand it may prove that competition may be substantially lessened only in one or more sections of the country. In either event a violation of § 7 would be proved. Certainly the failure of the Government to prove by an army of expert witnesses what constitutes a relevant “economic” or “geographic” market is not an adequate ground on which to dismiss a § 7 case. Compare United States v. Continental Can Co., 378 U. S. 441, 458. Congress did not seem to be troubled about the exact spot where competition might be lessened; it simply intended to outlaw mergers which threatened competition in any or all parts of the country. Proof of the section of the country where the anticompetitive effect exists is entirely subsidiary to the crucial question in this and every § 7 case which is whether a merger may substantially lessen competition anywhere in the United States.

II.

The Government’s evidence, consisting of documents, statistics, official records, depositions, and affidavits by witnesses, related principally to the competitive position of Pabst and Blatz in the beer industry throughout the Nation, in the three-state area of Wisconsin, Illinois, and Michigan, and in the State of Wisconsin. The record in this case, including admissions by Pabst in its formal answer to the Government’s complaint, the evidence introduced by the Government, the findings of fact and opinion of the District Judge, shows among others the following facts. In 1958, the year of the merger, Pabst was the tenth largest brewer in the Nation and Blatz ranked eighteenth. The merger made Pabst the Nation’s fifth largest brewer with 4.49% of the industry’s total sales. By 1961, three years after the merger, Pabst had increased its share of the beer market to 5.83% and had become the third largest brewer in the country. In the State of Wisconsin, before the merger, Blatz was the leading seller of beer and Pabst ranked fourth. The merger made Pabst the largest seller in the State with 23.95% of all the sales made there. By 1961 Pabst’s share of the market had increased to 27.41%.. This merger took place in an industry marked by a steady trend toward economic concentration. According to theg, District Court the number of breweries operating in the United States declined from 714 in 1934 to 229 in 1961, and the total number of different competitors selling beer has fallen from 206 in 1957 to 162 in 1961. In Wisconsin the number of companies selling beer has declined from 77 in 1955 to 54 in 1961. At the same time the number of competitors in the industry were becoming fewer and fewer, the leading brewers were increasing their shares of sales. Between 1957 and 1961 the Nation’s 10 leading brewers increased their combined shares of sales from 45.06% to 52.60%. In Wisconsin the four leading sellers accounted for 47.74% of the State’s sales in 1957 and by 1961 this share had increased to 58.62%. In the three-state area the evidence showed that in 1957 Blatz was the sixth largest seller with 5.84% of the total sales there and Pabst ranked seventh with 5.48%. As was true in the beer industry throughout the Nation, there was a trend toward concentration in the three-state area. From 1957 to 1961 the number of major brewers selling there dropped from 104 to 86 and during the same period the eight leading sellers increased their combined shares of beer sales from 58.93% to 67.65%.

These facts show a very marked thirty-year decline in the number of brewers and a sharp rise in recent years in the percentage share of the market controlled by the leading brewers. If not stopped, this decline in the number of separate competitors and this rise in the share of the market controlled by the larger beer manufacturers are bound to lead to greater and greater concentration of the beer industry into fewer and fewer hands. The merger of Pabst and Blatz brought together two very large brewers competing against each other in 40 States. In 1957 these two companies had combined sales which accounted for 23.95% of the beer sales in Wisconsin, 11.32% of the sales in the three-state area of Wisconsin, Illinois, and Michigan, and 4.49% of the sales throughout the country. In accord with our prior cases,⁴ we hold that the evidence as to the probable effect of the merger on competition in Wisconsin, in the three-state area, a.nd in the entire country was sufficient to show a violation of § 7 in each and all of these three areas.

We have not overlooked Pabst’s contention that we should not consider the steady trend toward concentration in the beer industry because the Government has not shown that the trend is due to mergers. There is no duty on the Government to make such proof. It would seem fantastic to assume that part of the concentration in the beer industry has not been due to mergers but even if the Government made no such proof, it would not aid Pabst. Congress, in passing § 7 and in amending it with the Celler-Kefauver Anti-Merger amendment, was concerned with arresting concentration in the American economy, whatever its cause, in its incipiency. To put a halt to what it considered to be a “rising tide” of concentration in American business, Congress, with full power to do so, decided “to clamp down with vigor on mergers.” United States v. Von’s Grocery Co., ante, at 276. It passed and amended § 7 on the premise that mergers do tend to accelerate concentration in an industry. Many believe that this assumption of Congress is wrong, and that the disappearance of small businesses with a correlative concentration of business in the hands of a few is bound to occur whether mergers are prohibited or not. But it is not for the courts to review the policy decision of Congress that mergers which may substantially lessen competition are forbidden, which in effect the courts would be doing should they now require proof of the congressional premise that mergers are a major cause of concentration. We hold that a trend toward concentration in an industry, whatever its causes, is a highly relevant factor in deciding how substantial the anticompetitive effect of a merger may be.

Reversed and remanded.

1 38 Stat. 731, as amended, 64 Stat. 1125, 15 U. S. C. §18 (1964 ed.).

2 The complaint charged that the merger violated § 7 of the Clayton Act in the following ways among others:

“(a) Actual and potential competition between Pabst and Blatz in the sale of beer has been eliminated;

“(b) Actual and potential competition generally in the sale of beer may be substantially lessened;

“(c) Blatz has been eliminated as an independent competitive factor in the production and sale of beer;

“(d) The acquisition alleged herein may enhance Pabst’s competitive advantage in the production and sale of beer to the detriment of actual and potential competition;

“(e) Industry-wide concentration in the sale of beer will be increased.”

3 Times-Picayune v. United States, 345 U. S. 594, 611; United States v. du Pont & Co., 351 U. S. 377, 395; United States v. Philadelphia Nat. Bank, 374 U. S. 321, 360, n. 37.

4 See, e. g., United States v. Von’s Grocery Co., ante, p. 270; Brown Shoe Co. v. United States, 370 U. S. 294; United States v. Philadelphia Nat. Bank, 374 U. S. 321; United States v. El Paso Gas Co., 376 U. S. 651; United States v. Alcoa, 377 U. S. 271; United States v. Continental Can Co., 378 U. S. 441; FTC v. Consolidated Foods, 380 U. S. 592.