US SUPREME COURT DECISIONS

Section 7 of the Clayton Act forbids one corporation to acquire stock of another corporation (both being engaged in interstate commerce), where the effect of such acquisition may be to substantially lessen competition between them or to restrain such commerce in any section or community, and declares that it shall not apply to corporations purchasing such stock solely for investment and not using the same to bring about the substantial lessening of competition.

Held:

(1) In a suit to enforce an order of the Federal Trade Commission requiring one corporation to divest itself of the stock of another alleged to have been acquired by the former in violation of this section, findings of the Commission that substantial competition existed between the two corporations at the time of such acquisition and that the effect of such acquisition was substantially to lessen such competition and to restrain interstate commerce cannot be accepted if not supported by the evidence. P. 280 U. S. 297. chanrobles.com-red

Page 280 U. S. 292

(2) The section forbids only such stock acquisitions as probably will result in lessening competition to a substantial degree -- i.e., to such a degree as will injuriously affect the public, and is inapplicable where there was no preexisting substantial competition to be affected. P. 280 U. S. 297.

(3) In the present case, it is plain that the products of the two shoe manufacturing companies in question, because of the difference in appearance and workmanship, appealed to the tastes of entirely different classes of consumers; that, while a portion of the product of each company went into the same states, in the main the product of each was in fact sold to a different class of dealers, and found its way into distinctly separate markets, so that, in respect of 95% of the business, there was no competition in fact and no contest, or observed tendency to contest, in the market for the same purchasers, and when this is eliminated, what remains is of such slight consequence as to deprive the finding that there was any substantial competition between the two corporations of any real support in the evidence. Pp. 280 U. S. 296, 280 U. S. 298.

(4) The existence of competition is a fact to be disclosed by observation, rather than by the processes of logic, and the testimony of the officers of the corporation proceeded against that there was no real competition between it and the other in respect of the products in question is to be weighed like other testimony to matters of fact, and, in the absence of contrary testimony or reason for doubting the accuracy of observation or the credibility of the witnesses, should be accepted. P. 280 U. S. 299.

(5) In the case of a corporation with resources so depleted, and the prospect of rehabilitation so remote, that it faces the grave probability of a business failure, with resulting loss to its stockholders and injury to the communities where its plants are operated, the purchase of its capital stock by a competitor (there being no other prospective purchaser), not with a purpose to lessen competition, but to facilitate the accumulated business of the purchaser and with the effect of mitigating seriously injurious consequences otherwise probable, is not in contemplation of law prejudicial to the public and does not substantially lessen competition or restrain commerce within the intent of the Clayton Act. P. 280 U. S. 301.

9 F.2d 518 reversed.

Certiorari, 279 U.S. 832, to review a judgment of the circuit court of appeals affirming on appeal an order of the Federal Trade Commission. chanrobles.com-red

Page 280 U. S. 293