Ford Motor Co. v. United States

*579Mr. Justice Stewart,

concurring in the result.

The spark plug industry as it stood prior to Ford's acquisition of Autolite was hardly characterized by vigorous competition. For 25 years, the industry had consisted of AC, owned by and supplying original equipment (OE) plugs to General Motors; Champion, independent and supplying Ford; Autolite, independent and supplying Chrysler; and a number of small producers who had no OE sales and only a minuscule share of the aftermarket.1 The habit among mechanics of installing replacement plugs carrying the same brand as the automobile’s original plugs, reinforced by the unwillingness of service stations to stock more than two or three brands,2 made possible the “OE tie,” which rendered any large-scale entry into the aftermarket virtually impossible without first obtaining a large OE customer. Moreover, price competition was minimal, both in the OE market (where any reduction in the six-cent price would immediately be matched by rivals), and in the aftermarket (where spark plugs accounted for such a small percentage of the normal tuneup charge that price differentials did not have a significant impact upon consumer choice).

The District Court found that the acquisition of Auto-lite’s spark plug assets by Ford further lessened competition in the industry in two ways: it foreclosed Ford as a potential purchaser of spark plugs from independent producers, and it eliminated what the District Court found to have been Ford’s “moderating effect” upon Champion’s pricing policies in the aftermarket. These *580findings standing alone might provide a basis for concluding that the acquisition violated § 7, but, as The Chief Justice demonstrates in his dissenting opinion, post, at 591-592, the remedy ordered will not restore the pre-acquisition market forces upon which the District Court focused. For, under the court’s injunctions, Ford will be neither a potential market entrant, nor a potential purchaser of half its OE requirements from producers other than Autolite, for a substantial period of time after the divestiture takes place.

In my judgment, both the finding of a § 7 violation and the remedy ordered may be better rationalized in terms of probable future trends in the spark plug market, visible at the time of the acquisition. The District Court observed that “a court cannot shut its eyes to contemporary or predictable factors conducive to change in the competitive structure.” 286 F. Supp. 407, 442. This was a proper inquiry because we have held that § 7 “requires not merely an appraisal of the immediate impact of the merger upon competition, but a prediction of its impact upon competitive conditions in the future.” United States v. Philadelphia National Bank, 374 U. S. 321, 362.3

*581The District Court found that the growth of service-centers operated by mass merchandisers carrying private label brands might eventually loosen the OE tie and the tight oligopoly in the spark plug market that it had fostered. Had Ford entered the market through internal expansion, either Champion or Autolite would have been left without an OE entry, but would nevertheless have owned an established brand name with an existing distribution system, together with a large production capacity. Even the threat of being so stranded, not to mention its realization, would have given both Champion and Autolite an incentive to compete as suppliers to private label sellers, as these sellers began to represent a significant share of the market, and to undermine the OE tie. Ford’s acquisition of Autolite did more than foreclose it as a potential OE customer, or eliminate its “moderating effect” upon Champion’s pricing policies: it eliminated one of the only two independent producers with a sufficient share of the aftermarket to give it a chance to compete effectively without an OE tie. Thus, the acquisition had the probable effect of indefinitely postponing the day when existing market forces could produce a measurable deconcentration in the market.

While the District Court did not justify the divestiture in precisely these terms, I think its prediction of future trends in the spark plug industry is an adequate basis to support the remedy ordered. The Chief Justice’s opinion, post, at 591-592, is correct in its assertion that the ancillary injunctions are anticompetitive in the short run, and that the District Court took extraordinary measures to mother the divested producer for the next decade. But I cannot say that these injunctions are not reasonably calculated to establish the new Autolite producer as a viable firm and thus to restore the pre-acquisition market structure, insofar as it is now possible to do so. A divestiture decree *582without ancillary injunctions would not automatically restore the status quo ante, as The Chief Justice’s opinion seems to assume. The Electric Autolite Company, from which Ford acquired the assets in question here, will not be recreated by the divestiture, and it is reasonable to assume that a new owner of the Autolite trade name and the New Fostoria plant will require a period of time to become as effective a competitor as was Electric Autolite prior to the acquisition.

Though the economics of the market are such that the divestiture cannot be assured of success, it does at least have a chance of bringing increased competition to the spark plug industry. And while divestiture remedies in § 7 cases have not enjoyed spectacular success in the past, remedies short of divestiture have been uniformly unsuccessful in meeting the goals of the Act. See Elzinga, The Antimerger Law: Pyrrhic Victories, 12 J. Law & Econ. 43 (1969).

Both Champion and Autolite supplied OE plugs to American Motors, which in 1961 had roughly 5% of the domestic automobile market.

According to a 1966 survey, only 11% of all metropolitan area service stations stocked any brand of spark plug other than Champion, AC, or Autolite, and only 30% stocked all three of the leading brands.

Ford argues that the acquisition allowed Autolite to compete more effectively against the two larger brands, Champion and AC. Since this argument is addressed to the effect of the acquisition upon competition, the Court obviously provides no answer to the argument when it quotes Philadelphia National Bank for the proposition that arguments unrelated to the merger’s effect upon competition are irrelevant in a § 7 case. But Ford’s arguments that Autolite was a more effective competitor after the acquisition rests principally on the fact that Autolite’s market share increased after 1961 while Champion’s decreased. This development, however, can be attributed for the most part to the fact that Autolite now provides OE plugs to Ford, rather than to the smaller Chrysler. Autolite’s increased market share, therefore, is more likely attributable to the OE tie than to any increase in its competitive vigor.