479 U. S. 104
December 9, 1986
In the 1980s, Monfort of Colorado was the 5th largest beef company. When Monfort heard that the 2nd and 3rd largest beef companies were planning to merge, it filed an antitrust suit. Section 16 of the Clayton act allows a company to get an injunction preventing merger in order to prevent “threatened loss or damage by a violation of the antitrust laws.” Monfort alleged that the merger would result in economic hardship for the company, and cut into its market share.
In a 6-2 ruling, Justice Brennan ruled against Monfort. He first held that a company seeking to take advantage of section 16 must show that the injury they fear is the sort of injury that antitrust laws are designed to prevent. Antitrust law, Brennan stressed, is not intended to limit economic competitiveness, but rather to encourage it, and the fact is that economic competition does produce winners and losers. If a merger happens to harm another company, it is not necessarily an antitrust violation. Antitrust laws seek to eliminate monopolistic and uncompetitive behavior. Brennan showed that section 16 was closely related to section 4, which awarded treble damages only for an actual antitrust violation. Then he examined Monfort’s complaint about the merger. He found that Monfort showed proof that they would suffer market losses, but did not offer proof that the merger would result in an uncompetitive beef market. They had alleged nothing that would entitle them to damages under section 4. Thus, the Court held that Monfort’s section 16 suit must fail.
Stevens dissented, and he was joined by White (Blackmun did not participate). He contended that section 16 should be interpreted in conjunction with section 7 rather than section 4. Section 7 made mergers which tended to concentrate market share illegal. A section 7 violation, Stevens argued, should be considered a threatened damage sufficient to allow a company to raise a section 16 claim. Because the proposed merger between Excel and Spencer Beef did appear to violate section 7, Monfort had a valid section 16 claim.
It’s a tough call, but I think Justice Brennan got the better of the argument. He provided a lot of legislative history to support his claim that section 16 should be read in light of section 4 rather than section 7. And in terms of practical effects, Brennan’s ruling was far better. It would frustrate business enormously if any merger between two reasonably large companies in the same industry could easily be enjoined by a third company afraid of increased competition. As a final note, it was weird but cool to see hyper-liberal Brennan come through for free market capitalism, and even cite a book by Robert Bork in the process.