White Consolidated Industries, Inc. v. Whirlpool Corp.

781 F.2d 1224
CourtCourt of Appeals for the Sixth Circuit
DecidedJanuary 29, 1986
DocketNo. 85-3622
StatusPublished
Cited by2 cases

This text of 781 F.2d 1224 (White Consolidated Industries, Inc. v. Whirlpool Corp.) is published on Counsel Stack Legal Research, covering Court of Appeals for the Sixth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
White Consolidated Industries, Inc. v. Whirlpool Corp., 781 F.2d 1224 (6th Cir. 1986).

Opinion

KEITH, Circuit Judge.

The plaintiffs, White Consolidated Industries, Inc. and Magic Chef, Inc., appeal from a district court order, 619 F.Supp. 1022, vacating a preliminary injunction which enjoined defendant Whirlpool Corporation from purchasing the KitchenAid Division of defendant Dart & Kraft Corporation. We affirm the judgment below for the following reasons,

FACTS

The parties in this anti-trust action are competitors in the household appliance market. Plaintiffs White Consolidated Industries, Inc. and Magic Chef, Inc. manufacture and distribute major household appliances nationwide as does the defendant Whirlpool Corporation. Defendant Dart & Kraft is a diversified food and consumer products company which acquired defendant Hobart Corporation as a subsidiary in 1981. Hobart Corporation primarily manufactures kitchen equipment through its KitchenAid Division which is known in particular for producing top-of-the-line dishwashers. The defendant Emerson Electric Company, mainly noted for its broad range of electrical and electronic products, manufactures and distributes nationally a line of garbage disposers and dishwashers.

In February 1985, plaintiffs filed suit in the United States District Court for the Northern District of Ohio alleging that Whirlpool’s proposed acquisition of Kitchen-Aid violated Section 7 of the Clayton Act, 15 U.S.C. § 18 and Sections 1 and 2 of the Sherman Act, 15 U.S.C. §§ 1 and 1px solid var(--green-border)">2. Plaintiffs sought to preliminarily and permanently enjoin defendant Whirlpool from acquiring the KitchenAid Division from defendants Dart & Kraft and Hobart Corporation. Under the proposed acquisition agreement, Whirlpool would purchase from Dart & Kraft all of Hobart’s KitchenAid stock, including the manufacturing assets of the dishwasher facility held by a Hobart subsidiary. Upon acquiring KitchenAid, Whirlpool proposed tendering a “curative divestiture” designed to defuse the anti-competitive effects of the transaction. The curative divestiture entailed Whirlpool selling KitchenAid manufacturing assets to defendant Emerson. After this partial dives[1226]*1226titure, Whirlpool would keep the Kitchen-Aid brand name and garbage disposer manufacturing assets and Emerson would agree to supply Whirlpool’s quota of the KitchenAid Model KD21 dishwashers, compactors and service parts for a guaranteed twenty percent net profit. Aside from providing Whirlpool’s inventory, Emerson would be allowed to market a differentiated Model KD21 only through its own “In Sink Erator” brand name and distribution network.

After three months of discovery, the district court conducted a five week long hearing to determine whether a preliminary injunction against the deal should issue. On June 28, 1985, the district court entered an order and lengthy memorandum opinion granting plaintiffs’ motion for a prelimi--nary injunction. See White Consolidated Industries, Inc. v. Whirlpool Corporation, 612 F.Supp. 1009 (N.D.Ohio 1985). The district court determined that, despite the “curative divestiture” provisions of the proposed acquisition, the small number of top appliance manufacturers would garner even larger shares of the dishwasher market after the acquisition, id. at 1020-21, and that the combination of Whirlpool and KitchenAid in an already highly concentrated market would substantially reduce competition. Id. at 1030. Specifically, the trial court expressed concern that the curative divestiture provisions of the agreement failed to accord Emerson sufficient latitude in marketing the Model 21 dishwasher for it to freely compete against other dishwasher distributors. Id. at 1029. Moreover, the divestiture provisions failed to eradicate agreement restrictions on Emerson’s ability to private label and distribute the Model 21, factors which in the district court’s view, precluded Emerson from independently competing with Whirlpool and replacing KitchenAid in the market. Id.

Prior to finding that this evidence established a prima facie illegal transaction, the court noted:

For this divestiture to be curative, Emerson would have to be free to manufacture, distribute and market the Model 21 under any name not confusingly similar to KitchenAid’s. In addition, Emerson would have to be free to distribute the Model 21 through any means it chose. Finally, Emerson would have to be free to private label the Model 21. The court finds that these restrictions are sufficiently inhibitive of Emerson’s ability to compete in the market that Emerson will not act as a post-transaction check on Whirlpool and will not in any way make up for the loss of KitchenAid.

612 F.Supp. at 1029. The district court thereupon concluded the defendants had failed to overcome the plaintiffs’ prima fa-cie case showing that the transaction would substantially reduce competition by affording Whirlpool an increasing ability to control Emerson, restrict dishwasher output and raise prices. Id. at 1029-30. The preliminary injunction thereafter issued.

The defendants immediately amended the agreement to incorporate the curative measures suggested in the district court opinion and moved to vacate the injunction. In considering defendants’ motion to vacate the preliminary injunction, the court determined that the amendments allowed post-transaction Emerson to (1) manufacture, distribute and market the Model 21 dishwasher under any name not similar to KitchenAid’s; (2) distribute the Model 21 through any system Emerson chose; and (3) issue the Model 21 under private label. Appendix A at 1229. With these changes, the court determined that Emerson gained complete control from Whirlpool over its own dishwasher production and distribution as well as the ability to replace Kitchen-Aid as a willing and viable competitor in the dishwasher market. Appendix A at 1231. The court concluded the amendments eliminated the anti-competitive effects of Whirlpool’s proposed acquisition and ordered the preliminary injunction vacated:

Given the amended supply contract, the Court finds that KitchenAid’s manufactured units market share should be attributed to Emerson, and that a statistical analysis would not lead to the conclusion that the proposed transaction is at [1227]*1227all likely to substantially lessen competition in the dishwasher market. In addition, the Court finds that the amended supply contract gives Emerson the independence to be viable in the dishwasher market and that Emerson, with others, will be able to act as a check on the market leaders.
Accordingly, the Court finds that the plaintiffs have not demonstrated a substantial likelihood of success of proving an antitrust violation, have not shown that the transaction would cause irreparable injury, and have not shown that the transaction would be detrimental to the public interest. Accordingly, the preliminary injunction shall be vacated.

Appendix A at 1233.

DISCUSSION

Our review of the district court order vacating the preliminary injunction is limited to determining whether the trial court abused its discretion. Christian Schmidt Brewing v. G. Heilman Brewing, 753 F.2d 1354, 1356 (6th Cir.1985).

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781 F.2d 1224, Counsel Stack Legal Research, https://law.counselstack.com/opinion/white-consolidated-industries-inc-v-whirlpool-corp-ca6-1986.