Beach Blonde
New member
The case that I found to write my report on was California versus American Stores Co. In a case argued January 16, 1990 before the Supreme Court of the United States of America, a decision was ruled on April 30, 1990, American Stores Co. tried to gain an advantage in the state marketplace by buying up remaining stock of the nuraber one chain the state of California. Shortly after respondent American Stores Co., the fourth largest supermarket chain in California, acquired all of the outstanding stock of the largest chain, the State filed suit in the District Court alleging, inter alia, that the merger constituted an anticompetitive acquisition violative of § 7 of the Clayton Act and would harm consumers throughout the State. It was decided by the court to grant the State a preliminary injunction requiring American to operate the acquired stores separately from the ones already in business until the outcome of the suit had been found. Although agreeing that the State had proved a likelihood of success on the merits and the probability of irreparable harm, the Court of Appeals decided against the injunction on the ground that the relief granted exceeded the District Court's authority to rule in such a manner according to § 16 of the Act to order "injunctive relief." The court relied on an previous decision in which the court had concluded on the basis of its reading of excerpts from subcommittee hearings that § 16's draftsmen did not intend to authorize the remedies of "dissolution" or "divestiture" in private litigants' actions. Thus, held the court, the "indirect divestiture" effected by the preliminary injunction was impermissible.
The following was obtained directly from the website with url http://www.stolaf.edu/people/becker/antitrust/summaries/495us271.html
Divestiture is a form of "injunctive relief" authorized by § 16. Pp. 278-296.
(a) The plain text of § 16 -- which entitles "[a]ny person . . . to . . . have injunctive relief . . . against threatened loss or damage . . . when and under the same conditions and principles as injunctive relief against threatened conduct that will cause loss or damage is granted by courts of equity" -- authorizes divestiture decrees to remedy § 7 violations. On its face, the simple grant of authority to "have injunctive relief" would seem to encompass that remedy just as plainly as the comparable language in § 15 of the Act, which authorizes the district courts to "prevent and restrain violations" in antitrust actions brought by the United States, and under which divestiture is the preferred remedy for illegal mergers. Moreover, § 16 states no restrictions or exceptions to the forms of injunctive relief a private plaintiff may seek or a court may order, but, rather, evidences Congress' intent that traditional equitable principles govern the grant of such relief. The section's "threatened loss or damage" phrase does not negate the court's power to order divestiture. Assuming, as did the lower courts, that the merger in question violated the antitrust laws, and that the conduct of the merged enterprise threatens economic harm to consumers, such relief would prohibit that conduct from causing that harm. Nor does the section's "threatened conduct that will cause loss or damage" phrase limit the court's power to the granting of relief against anticompetitive "conduct," as opposed to "structural relief," or to the issuance of prohibitory, rather than mandatory, injunctions. That phrase is simply a part of the general reference to the standarRAB that should be applied in fashioning injunctive relief. Section 16, construed to authorize a private divestitutre remedy, fits well in a statutory scheme that favors private enforcement, subjects mergers to searching scrutiny, and regarRAB divestiture as the remedy best suited to redress the ills of an anticompetitive merger. Pp. 278-285.
(b) The legislative history does not require that _ 16 be construed narrowly. American's reliance on the subcommittee hearing excerpts cited by the Court of Appeals and on Graves v. Carabria Steel Co., 298 F. 761 -- each of which contains statements indicating that private suits for dissolution do not lie under § 16 - - is misplaced. At the time of the Act's framing, dissolution was a vague and ill-defined concept that encompassed the drastic remedy of corporate termination as well as divestiture. Thus, the fact that Congress may have excluded the more severe sanction does not imply that the equitable formulation of § 16 cannot permit divestiture. Since the inferences that American draws simply are not confirmed by anything else in the legislative history or contemporaneous judicial interpretation, § 16 must be taken at its word when it endorses the "conditions and principles" governing injunctive relief in equity courts. There being nothing in the section that restricts courts' equitable jurisdiction, the provision should be construed generously and flexibly to enable a chancellor to impose the most effective, usual, and straightforward remedy to rescind an unlawful stock purchase. Pp. 285-295.
(c) Simply because a district court has the power to order divestiture in appropriate § 16 cases does not mean that it should do so in every situation in which the Government would be entitled to such relief under § 15. A private litigant must establish standing by proving "threatened loss or damage" to his own interests, and his suit may be barred by equitable defenses such as laches or "unclean hanRAB." Pp. 295-296.
872 F. 2d 837, reversed and remanded.
Stevens, J., delivered the opinion for a unanimous Court. Kennedy, J., filed a concurring opinion, post, p. 296.
The logic I’m sure that American Stores was using when making this merger was that its greatest competitor was selling its stock. So American Stores saw an opportunity to buy up outstanding stock from the nuraber one selling chain in the state of California and be able to control sales and other aspects of the acquired store chain. American Stores would enjoy not only their own profit, but profit from the stores they acquired as well. By doing this, they could obtain a larger share in the market of supermarket sales. This would allow them to sell more and be able to set prices at more of their own desired choices. This merger would also strengthen their hold on the marketplace. The nuraber one and nuraber four supermarket chains in the state of California would together be an even greater force. This would cause more shoppers to shop with American Stores and would lessen the strength of its competitors.
By performing this merger, American stores greatly attempted to strengthen their economies of scale. The acquisition allowed them to have more products and more availability to its customers. The economies of scope of American Stores could also be strengthened because the ideas and products offered by the acquired chain could be used to benefit American Stores and give them more ideas and more of a product variety. From what we have learned in class, it is a very reasonable idea for American Stores to try to acquire an edge in their marketplace. We have learned about mergers recently and this seems to be a typical attempt to become a more dominant force in the supermarket marketplace by American Stores. We have not yet covered the Clayton Act thoroughly in class, but from what I have read, the acquisition performed by American Stores does not seem to be illegal, although it is a bit of an ethics question, it is not illegal, so to rule against the merger I feel would be wrong.
One of the main difficulties was that the merger hinged upon being legal according to the Clayton Act. The outstanding element in quantifying the case was deciding whether or not the case should be ruled illegal, or if it should be merited as a sound case by the Supreme Court. There was a very thin line in deciding this case because of the danger of American Stores becoming a monopoly. If this occurred the consumer would suffer because American Stores would be put in a position that would allow them to set prices more to their liking and would allow them to reduce the competition to the point that American Stores would generate the most business and would therefore put much of its competition on the verge of instability and maybe to the point that they would be forced out of business.
The merger of American Stores and the other chain to me doesn’t really supply any threat to customers in the state of California. Although, if the merger have given American Stores monopoly power, then the consumer would be hurt because of the ability of American Stores to drive up prices and also control the market. As we have learned, the smaller the amount of competition the more the consumer is forced to pay a price set by the leader in the particular industry. The greater the amount of competition the more the consumer is likely to get a better price, because the competing firms have to entice the consumer however they can to increase their business and directly increase their potential for profit.
I don’t believe there will be any negative effects from this case. The only thing that I think will come a s a result of this case is that people will become a lot more aware of business practices within the industry. Although this was found to be a legal merger, it is still a question of ethics. I feel that ethics is just as important in the industry as the law. After this case I’m sure many mergers and acquisitions will be viewed with more scrutiny and the Supreme Court will be cautious in their rulings and their determination of the legality of different mergers and acquisitions made by competing firms within the same industry. The name of the game is profit, and as long as the legal ramifications are sound then no one can truly judge the actions of another firm. It is an ideal of mine though that ethics would prevail in the decisions made by a firm.
The following was obtained directly from the website with url http://www.stolaf.edu/people/becker/antitrust/summaries/495us271.html
Divestiture is a form of "injunctive relief" authorized by § 16. Pp. 278-296.
(a) The plain text of § 16 -- which entitles "[a]ny person . . . to . . . have injunctive relief . . . against threatened loss or damage . . . when and under the same conditions and principles as injunctive relief against threatened conduct that will cause loss or damage is granted by courts of equity" -- authorizes divestiture decrees to remedy § 7 violations. On its face, the simple grant of authority to "have injunctive relief" would seem to encompass that remedy just as plainly as the comparable language in § 15 of the Act, which authorizes the district courts to "prevent and restrain violations" in antitrust actions brought by the United States, and under which divestiture is the preferred remedy for illegal mergers. Moreover, § 16 states no restrictions or exceptions to the forms of injunctive relief a private plaintiff may seek or a court may order, but, rather, evidences Congress' intent that traditional equitable principles govern the grant of such relief. The section's "threatened loss or damage" phrase does not negate the court's power to order divestiture. Assuming, as did the lower courts, that the merger in question violated the antitrust laws, and that the conduct of the merged enterprise threatens economic harm to consumers, such relief would prohibit that conduct from causing that harm. Nor does the section's "threatened conduct that will cause loss or damage" phrase limit the court's power to the granting of relief against anticompetitive "conduct," as opposed to "structural relief," or to the issuance of prohibitory, rather than mandatory, injunctions. That phrase is simply a part of the general reference to the standarRAB that should be applied in fashioning injunctive relief. Section 16, construed to authorize a private divestitutre remedy, fits well in a statutory scheme that favors private enforcement, subjects mergers to searching scrutiny, and regarRAB divestiture as the remedy best suited to redress the ills of an anticompetitive merger. Pp. 278-285.
(b) The legislative history does not require that _ 16 be construed narrowly. American's reliance on the subcommittee hearing excerpts cited by the Court of Appeals and on Graves v. Carabria Steel Co., 298 F. 761 -- each of which contains statements indicating that private suits for dissolution do not lie under § 16 - - is misplaced. At the time of the Act's framing, dissolution was a vague and ill-defined concept that encompassed the drastic remedy of corporate termination as well as divestiture. Thus, the fact that Congress may have excluded the more severe sanction does not imply that the equitable formulation of § 16 cannot permit divestiture. Since the inferences that American draws simply are not confirmed by anything else in the legislative history or contemporaneous judicial interpretation, § 16 must be taken at its word when it endorses the "conditions and principles" governing injunctive relief in equity courts. There being nothing in the section that restricts courts' equitable jurisdiction, the provision should be construed generously and flexibly to enable a chancellor to impose the most effective, usual, and straightforward remedy to rescind an unlawful stock purchase. Pp. 285-295.
(c) Simply because a district court has the power to order divestiture in appropriate § 16 cases does not mean that it should do so in every situation in which the Government would be entitled to such relief under § 15. A private litigant must establish standing by proving "threatened loss or damage" to his own interests, and his suit may be barred by equitable defenses such as laches or "unclean hanRAB." Pp. 295-296.
872 F. 2d 837, reversed and remanded.
Stevens, J., delivered the opinion for a unanimous Court. Kennedy, J., filed a concurring opinion, post, p. 296.
The logic I’m sure that American Stores was using when making this merger was that its greatest competitor was selling its stock. So American Stores saw an opportunity to buy up outstanding stock from the nuraber one selling chain in the state of California and be able to control sales and other aspects of the acquired store chain. American Stores would enjoy not only their own profit, but profit from the stores they acquired as well. By doing this, they could obtain a larger share in the market of supermarket sales. This would allow them to sell more and be able to set prices at more of their own desired choices. This merger would also strengthen their hold on the marketplace. The nuraber one and nuraber four supermarket chains in the state of California would together be an even greater force. This would cause more shoppers to shop with American Stores and would lessen the strength of its competitors.
By performing this merger, American stores greatly attempted to strengthen their economies of scale. The acquisition allowed them to have more products and more availability to its customers. The economies of scope of American Stores could also be strengthened because the ideas and products offered by the acquired chain could be used to benefit American Stores and give them more ideas and more of a product variety. From what we have learned in class, it is a very reasonable idea for American Stores to try to acquire an edge in their marketplace. We have learned about mergers recently and this seems to be a typical attempt to become a more dominant force in the supermarket marketplace by American Stores. We have not yet covered the Clayton Act thoroughly in class, but from what I have read, the acquisition performed by American Stores does not seem to be illegal, although it is a bit of an ethics question, it is not illegal, so to rule against the merger I feel would be wrong.
One of the main difficulties was that the merger hinged upon being legal according to the Clayton Act. The outstanding element in quantifying the case was deciding whether or not the case should be ruled illegal, or if it should be merited as a sound case by the Supreme Court. There was a very thin line in deciding this case because of the danger of American Stores becoming a monopoly. If this occurred the consumer would suffer because American Stores would be put in a position that would allow them to set prices more to their liking and would allow them to reduce the competition to the point that American Stores would generate the most business and would therefore put much of its competition on the verge of instability and maybe to the point that they would be forced out of business.
The merger of American Stores and the other chain to me doesn’t really supply any threat to customers in the state of California. Although, if the merger have given American Stores monopoly power, then the consumer would be hurt because of the ability of American Stores to drive up prices and also control the market. As we have learned, the smaller the amount of competition the more the consumer is forced to pay a price set by the leader in the particular industry. The greater the amount of competition the more the consumer is likely to get a better price, because the competing firms have to entice the consumer however they can to increase their business and directly increase their potential for profit.
I don’t believe there will be any negative effects from this case. The only thing that I think will come a s a result of this case is that people will become a lot more aware of business practices within the industry. Although this was found to be a legal merger, it is still a question of ethics. I feel that ethics is just as important in the industry as the law. After this case I’m sure many mergers and acquisitions will be viewed with more scrutiny and the Supreme Court will be cautious in their rulings and their determination of the legality of different mergers and acquisitions made by competing firms within the same industry. The name of the game is profit, and as long as the legal ramifications are sound then no one can truly judge the actions of another firm. It is an ideal of mine though that ethics would prevail in the decisions made by a firm.