United States v. M.P.M., Inc.

397 F. Supp. 78, 1975 U.S. Dist. LEXIS 12652
CourtDistrict Court, D. Colorado
DecidedApril 25, 1975
DocketCiv. A. C-3917
StatusPublished
Cited by9 cases

This text of 397 F. Supp. 78 (United States v. M.P.M., Inc.) is published on Counsel Stack Legal Research, covering District Court, D. Colorado primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
United States v. M.P.M., Inc., 397 F. Supp. 78, 1975 U.S. Dist. LEXIS 12652 (D. Colo. 1975).

Opinion

MEMORANDUM OPINION AND ORDER

FINESILVER, District Judge.

The Government commenced this action pursuant to 15 U.S.C.A. § 25 (1948) [Clayton Act], challenging the acquisition by defendant M.P.M., Inc., [MPM] of two formerly independent ready-mix concrete firms, Mobile Conerete, Inc. [Mobile] and Pre-Mix Concrete, Inc. [Pre-Mix], and the subsequent corporate merger of the firms as violative of Section 7 of the Clayton Act, 15 U.S.C.A. § 18 (1950). The Government seeks divestiture of the acquisition and merger and injunctive relief to prevent defendants from acquiring similar companies in the future.

The several pivotal issues in this litigation are: (1) Do the facts of this case satisfy the “engaged in commerce” jurisdictional requirement? (2) Is ready-mix concrete a “line of commerce” within the meaning of the Clayton Act? (3) What geographical area comprises the appropriate “section of the country” for purposes of this action? (4) Was Mobile a “failing company” in the sense which will avoid the strictures of the Clayton Act? (5) Did the acquisition and/or the merger complained of result in a substantial lessening of competition or tend to create a monopoly? Finally, (6) Are certain equitable and constitutional defenses available to defendants under the facts peculiar to this case which defeat plaintiff’s attempt to apply the Clayton Act to them?

In this opinion, we consider in detail each of the contentions of the litigants. 1 For the reasons articulated below, we find in favor of the defendants. The parties have been previously notified of this result in our Preliminary Order of January 27, 1975.

I. BACKGROUND

For an overview of this case, we recite the following uncontroverted facts and chronology of events.

During the pertinent times, Mobile was engaged in the production and sale of ready-mix concrete in the Denver metropolitan area. 2

*83 For approximately 15 years prior to June 1, 1967, Mobile was principally owned by Eobert Anderson. 3

On June 1, 1967, Mobile was purchased by Meade, Boothby, and Fulen-wider (Meade at 272-74). Meade became the majority (57%) stockholder and active company manager. Boothby and Fulenwider each held 21%% of the stock (Meade at 272-74 & 315-16; Boothby at 717-18).

Prior to June 12, 1970, defendant Pre-Mix was engaged in the production and sale of ready-mix concrete in the Denver metropolitan area (P/T 1 at 4). During this period it was owned by M. E. Moore, MEMCO Corp., and Texas Industries, Inc. (P/T 1 at 9).

On May 29, 1970, defendant MPM was incorporated under the laws of the state of Colorado. It functioned as a holding company with Meade and Booth-by as the sole stockholders (Meade at 306-07),.

Thereafter, on June 12, 1970, MPM acquired all of the outstanding common stock of both Mobile and Pre-Mix (P/T 1 at 4) and' commenced joint operation of the two companies.

Pursuant to Colorado statutory law, on November 12, 1971, Pre-Mix, Mobile and Mobile Concrete of Colorado Springs, Colorado (an off-shoot of Mobile, Meade at 276-78) merged under the name of Pre-Mix.

Plaintiff filed the present action in 1972, claiming a violation of § 7 of the Clayton Act. The Government contends that the violation consisted of the acquisition by MPM of all of the outstanding common stock of two formerly independent ready-mix companies and the merger of Mobile and Pre-Mix. These activities, the Government alleges, substantially lessened competition or tended to cause a monopoly in the ready-mix concrete industry within the Denver metropolitan area (designated to include four counties: Denver, Adams, Arapahoe, and Jefferson).

Market sales figures for the Denver metropolitan area ready-mix concrete industry demonstrate that for the year 1969 Pre-Mix was the third largest producer and seller of ready-mix in this area with a market share of 16.5% (Appendix I). 4 Mobile was the fourth largest producer and seller with a 14.8 % share of the market during the same period (Appendix I). In 1970—the year in which MPM acquired the stock of the two companies and began operation of them on a joint basis—the combined sales of Mobile and Pre-Mix aggregated 31.6% of the ready-mix concrete market in the four-county area, making this corporate combination the largest single producer and seller of ready-mix concrete in metropolitan Denver (Appendix I).

II. “ENGAGED IN COMMERCE” REQUIREMENT

Federal courts have jurisdiction to “prevent and restrain violations” of the Clayton Act. 15 U.S.C.A. § 25 (1948). Activity constituting a “violation” of the Act is defined in 15 U.S.C.A. § 18 (1950). This statute, inter alia, provides;

No corporation engaged in commerce shall acquire, directly or indirectly, the whole or any part of the stock or other share capital and no corporation subject to the jurisdiction of the Federal Trade Commission shall acquire the whole or any part *84 of the assets of another corporation engaged also in commerce, 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.

For pur purposes, the term “commerce” means “trade or commerce among the several States . . . .” 15 U.S.C.A. § 12 (1914). For a violation of the Clayton Act to occur, both the acquiring and the acquired companies in a merger case must be engaged in interstate commerce.

There is no question in this case but that all sales of ready-mix concrete by both Mobile and Pre-Mix were and continue to be solely intrastate—they sell no product outside of the state of Colorado.

The Government contends, however, that the interstate commerce jurisdictional requirement is met because both companies purchase substantial amounts of cement necessary for the production of ready-mix concrete from out-of-state suppliers. Data from the year 1969 is relied on in support of this allegation (GX 22).

Defendants counter with two arguments. First, they maintain that since early 1970 (two years prior to the April 11, 1972, filing of this action) Mobile and Pre-Mix obtained all but 4% of their cement requirements from suppliers located within Colorado. This amount, they argue, is de minimis and therefore insufficient basis upon which to posit jurisdiction in the present action. Second, they contend that even if such amount is not considered di minimis, jurisdiction cannot attach because production and sale of ready-mix concrete is purely a local business activity, and Sherman Act cases are inapposite in a § 7 Clayton Act suit—i. e., even if defendants do purchase essential ingredients from foreign suppliers and are thus within the flow of commerce, such fact is of no avail to a plaintiff in a Clayton Act prosecution.

Serious questions are thus raised as to our power to entertain this suit.

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Bluebook (online)
397 F. Supp. 78, 1975 U.S. Dist. LEXIS 12652, Counsel Stack Legal Research, https://law.counselstack.com/opinion/united-states-v-mpm-inc-cod-1975.