Full opinion text
FREDERICK van PELT BRYAN, District Judge. This is a civil action by the United States to enjoin the proposed acquisition by defendant Continental Can Company, Inc. (Continental) of defendant Hazel-Atlas Glass Company (Hazel-Atlas) on the ground that such acquisition would violate § 7 of the Clayton Act as amended. The court has jurisdiction over parties and subject matter. The Government had previously attempted to block the acquisition by invoking a consent decree which had been entered against Continental in 1950 in a civil anti-trust suit under §§ 1 and 2 of tile Sherman Act and § 3 of the Clayton Act in the District Court for the Northern District of California. On August 31, 1956 the California court held that the consent decree did not cover the proposed acquisition. The consummation of the acquisition was delayed in the meantime at the Government’s request. The Government then commenced this action. It moved for a preliminary injunction against consummation and sought a temporary restraining order pending the hearing and determination of its motion. The temporary restraining order was denied on September 13, 1956. On that day, Continental took over all of the assets, property, business and good will and assumed all of the liabilities of Hazel-Atlas which since then has been operated as the Hazel-Atlas Division of Continental. The Government withdrew its motion for a preliminary injunction on September 18, 1956 and this action became one for divestiture. After some considerable time, the case was assigned to me for all purposes. Extensive pre-trial proceedings were conducted at which over a thousand pages of transcript were taken. The case then came on for trial. The Government concluded its case after six weeks of trial during which it called some 78 witnesses. Over four thousand pages of testimony were taken. The Government introduced more than twelve hundred exhibits and the defendants more than five hundred. At the conclusion of the Government’s case defendants, pursuant to Rule 41(b), F.R.Civ.P., moved for a dismissal on the ground that upon the law and the facts the Government had shown no right to relief and that they were therefore entitled to final judgment on the merits. The motion was granted in a brief oral decision which stated only the conclusions reached. In view of the importance and complexity of the case a detailed opinion was to follow. Before that opinion could be filed, the Supreme Court decided Brown Shoe Co., Inc. v. United States, 370 U.S. 294, 82 S.Ct. 1502, 8 L.Ed.2d 510 (1962), its first decision dealing at any length with § 7 of the Clayton Act as amended in 1950. The Government then asked leave to submit material dealing with the effect of that case on the case at bar. This application was granted and both .sides submitted briefs on this question. Consideration of the Brown Shoe ease has not changed the conclusions which I reached at the end of the trial. My opinion follows. Defendants’ motion under Rule 41(b) for a dismissal at the close of the Gov•ernment’s case, posed squarely the question of whether on the record, as it then .stood, defendants were entitled to judgment. The motion was made on the ground that “upon the facts and the law the plaintiff has shown no right to relief.” In an action tried to the court without a jury, the court, when such a motion is made at the close of plaintiff’s •case, “as trier of the facts may then determine them and render judgment .against the plaintiff or may decline to render any judgment until the close of •all the evidence.” There is no doubt as to the meaning and applicability of Rule 41(b). The test to be applied in a case tried to the court alone is quite different from that on a motion to dismiss or for a directed verdict in a jury trial. In the latter •case the question is whether or not the plaintiff has made out a prima facie case sufficient to go to the jury and the court must view the evidence in the light most favorable to him. In a trial to the court alone, however, the court is authorized under Rule 41(b), to evaluate and weigh all of the evidence presented by the plaintiff, draw such inferences therefrom as it considers reasonable in the light of the record, and determine at that stage whether plaintiff has sustained the burden of proof necessary to establish its right to relief were the case to end there. If the court undertakes to make such a determination and concludes that the plaintiff has not met this burden, the defendant is entitled to judgment on the merits. In this case, as the trier of the facts, I determined at the conclusion of the Government’s case that it had failed to sustain its burden of showing by a preponderance of the evidence that the acquisition under attack violated Section 7 of the Clayton Act in any respect. I therefore directed that judgment be rendered against the Government. I. Section 7 of the Clayton Act in the Light of the Brown Shoe Case. The Government’s case is grounded solely on Section 7 of the Clayton Act as amended in 1950. There is no claim of violation or threatened violation of any provision of the Sherman Act. There is no charge of restraint of trade, monopolization or attempt to monopolize. This is strictly a Section 7 case. Section 7 as amended forbids the acquisition of the stock or assets of one corporation by another “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.” The Brown Shoe case, decided on June 25, 1962, some twelve years after the 1950 amendment to § 7, is the first definitive interpretation of that section by the Supreme Court since its amendment. The facts in the Brown Shoe case were entirely different from those in the case at bar. The specific holdings of the Court on the facts presented there are therefore not determinative of the problems posed here. Indeed, Brown Shoe recognizes that the facts in each case in all likelihood will differ widely, that the framework of each industry is likely to be unique, and that each case must stand or fall on its own facts viewed within the framework of the industry pattern. However, the discussion in Brown Shoe of the legislative history and background of the 1950 amendment to § 7, the theory of the amended section, the interpretation to be given to it, and the principles and guidelines to be followed in applying it, is controlling. Brown Shoe is the authoritative declaration of the law on the subject as it now stands and the principles and guidelines which it lays down must be applied here. Section 7 proscribes acquisition of either stock or assets where, as a result, competition in any line of commerce in any section of the country may be substantially lessened. It covers all mergers or acquisitions, horizontal, vertical or conglomerate. As Brown Shoe makes plain, however, the section does not prohibit all mergers. While the congressional intent was to arrest restraints of trade and monopolistic tendencies "in their incipiency and well before they have attained such effects as would justify a Sherman Act proceeding,” there is no¡ per se proscription against the acquisition of the stock or assets of one corporation by another. The statute is concerned only with those acquisitions which have demonstrable anti-competitive effects. It is clear, moreover, that the statute was directed neither at the possibility that anti-competitive effects might occur nor at certainty of anti-competitive-effects already covered by the Sherman Act. “[Pjroof of a mere possibility of a prohibited restraint or tendency to monopoly will not establish the statutory requirement * * The statute is concerned with the reasonable-probability of the lessening of competition or tendency toward monopoly as a result of the particular acquisition under scrutiny — a showing that such effects are-reasonably likely to occur. This is what the words “may be” as used in the statute mean. The lessening of competition, moreover, must also be shown to be “substantial”. Acquisitions are proscribed where substantial anti-competitive effects or tendency to monopoly are reasonably probable in any line of commerce in any section of the country. Thus, in order to determine whether there are anti-competitive effects or tendency to monopoly, it is necessary in each case to define-the lines of commerce in which the acquiring and acquired companies were engaged and the sections of the country affeeted. Anti-competitive effects and their substantiality cannot be evaluated in a vacuum. They can only be judged in terms of the particular markets or sub-markets affected — that is to say “within the area of effective competition.” While Section 7 does not use the term “market”, it is clear that “line •of commerce” refers to a product market, and “section of the country” refers to a geographic market in which competition exists and in which the effects of the acquisition may be felt. A relevant product market must be a market which is meaningful in terms of competitive and commercial realities. A relevant geographic market must embrace an economically significant section of the country in terms of competitive effects. Thus, relevant markets are neither economic abstractions nor artificial conceptions. They are rather specific areas where, viewed in the context of the facts of the particular case under consideration, there may be demonstrable anti-competitive effects as the result of the acquisition. The test then is whether the acquisition has demonstrable anti-competitive effects in any relevant product market in any section of the country. Section 7 does not spell out any particular tests or standards for determining the relevant product markets or geographic areas which may be affected by the acquisition. Nor does it supply, either in quantitative or qualitative terms, any tests for determining whether the effects may be “substantially” to lessen competition. “However, sufficient expressions of a consistent point of view may be found in the hearings, committee reports of both the House and Senate and in floor debate to provide those charged with enforcing the Act with a usable frame of reference within which to evaluate any given merger.” Against this background the tests and standards to be used vary depending upon what may be appropriate in the light of a wide variety of factors. These factors include the nature, business and relationships of the acquired and acquiring companies, the markets which they serve, the kind and extent of competition in such markets, the pattern of the industry as a whole and the place of such companies in the industry. Thus, in determining relevant product markets it has been deemed pertinent to examine such factors as the peculiar uses and characteristics of the product; its distinguishing physical characteristics ; whether it is sold to distinct classes of customers; distinct price differentiations; sensitivity to price changes; reasonable interchangeability of use and demand; public or industry recognition of the market as a separate market entity; unique production facilities; and specialized vendors. In determining the geographic market pertinent factors include scale of distribution; locale of actual and potential buyers and of competing sellers; focus of competition; and whether regional markets interlock to form a larger market. None of these factors are conclusive in themselves and all must be “functionally viewed, in the context of [the] particular industry.” Mere mechanical or quantitative application of § 7 should be avoided and each case must be judged in the light of its own peculiar facts. Only within such a setting can the probable anti-competitive effects of a merger be judged. In the light of these considerations the issues on which the Government had the burden of proof here were two-fold. First, it was required to delineate the relevant product markets or sub-markets in which it claimed that competition was adversely affected by the acquisition and the sections of the country affected. Second, it had to establish that in one or more of such markets or sub-markets in any particular section or sections of the country, there was reasonable probability that the effect of the acquisition would be substantially to lessen competition or to tend to create a monopoly. II. The Merging Companies. (1) Continental. Continental Can Company, Inc. is a New York corporation with its principal offices in New York City. It was organized in 1913 by the merger of three companies engaged in the manufacture of metal cans. At that time American Can Company was the dominant factor in the can industry. After its organization Continental went through a period of substantial internal expansion. Beginning in 1923 and for the next twenty years it continued to expand internally and also by acquiring some twenty-four companies in various sections of the country which were also engaged in manufacturing various types of cans, some of which had not been previously manufactured by Continental. It also acquired several companies which did not produce metal cans but made other packaging products. Continental acquired its last can manufacturer in 1944. Since that time it has engaged in a program of diversification aimed at increasing the variety of products which it is able to supply. Its acquisitions have included companies producing can manufacturing and can closing machinery, flexible packaging, plastic containers and other plastic products, paper containers and paperboard, fibre drums, crown caps and vacuum closures, and a miscellany of other products. In 1956 it acquired Hazel-Atlas, Robert Gair Company, Inc., a manufacturer of paperboard and similar products, and White Cap Company, which manufactured vacuum type metal closures. By that time it was and had been for a good many years the second largest metal can manufacturer in the country. It was a formidable competitor of American Can Company which had long been the leader in the industry. When it acquired Hazel-Atlas Continental’s principal business was the manufacture and sale of metal cans and other metal containers to industrial consumers for a wide variety of uses. In 1955 metal cans and other metal containers accounted for between two-thirds and three-quarters of its total dollar sales volume. It also manufactured numerous other products, including fibre drums, flexible packaging materials, plastic products (including plastic containers), paper cups and plates, crown caps, vacuum type metal caps, can closing machinery, and special defense items. By 1955 Continental had 72 plants for the manufacture of its products at various locations throughout the United States. It also had plants in seven foreign countries, including Canada. Forty manufactured metal cans. Approximately 45,000 persons were in its employ. Its net sales and operating revenues and net income for the years 1953, 1954 and 1955, in thousands of dollars, were: Net Sales and Operating Net Revenues Income 1953 ...... $554,436 $15,680 1954 ...... 616,163 20,736 1955 ....... 666,266 24,172 Its total assets as of December 31, 1955 were $381,917,000. Including the Hazel-Atlas, Gair and White Cap acquisitions, for the year 1956 Continental had net sales and operating revenues of $1,010,268,000, and net income of $43,143,000 with total assets as of December 31, 1956 of $633,-706.000. Comparative 1955 combined figures for these four companies prior to acquisition, show net sales and operating revenues of $929,428,000, net income of- $38,-693.000, and total assets as of December 31, 1955 of $568,850,000. (2) Hazel-Atlas. Hazel-Atlas was a West Virginia corporation with its principal office in Wheeling, West Virginia. It was organized prior to 1900 and, as a result of its acquisition by Continental, was dissolved on September 21, 1956. Its principal business was the manufacture and sale of glass containers of various types to industrial consumers and of glass jars for home canning, both largely of the wide mouthed variety. It also manufactured glass tumblers, tableware, kitchenware, glass articles of special design for industrial use, screw type metal closures and closures for home canning glass jars. It appears to have been the third largest glass container manufacturer in the United States. Hazel-Atlas operated plants at thirteen locations in various parts of the country, principally in the western Pennsylvania, West Virginia and eastern Ohio area, and had six warehouses. Its net sales and net income in 1953, 1954 and 1955, in thousands of dollars were: Net Net Sales Income 1953 .........$79,250 $3,112 1954 ........ 79,174 3,629 1955 ......... 79,920 3,393 Its total assets as of December 31, 1955 were $37,884,000. After acquisition by Continental the operations conducted by Hazel-Atlas were continued by the Hazel-Atlas Division of Continental and its operating figures were included in Continental financial statements. It does not appear that there was any substantial change in the volume or character of business done by the Hazel-Atlas Division in the period between its acquisition and the trial. Prior to its acquisition Hazel-Atlas did not manufacture or sell metal cans, plastic or paper containers, vacuum type metal closures, crown caps or any other product manufactured or sold by Continental or its subsidiaries. On the other hand, Continental did not, directly or through subsidiaries, manufacture or sell glass containers or any other glass products, screw type metal closures, or any product manufactured or sold by Hazel-Atlas. It is uncontroverted that the two merging companies manufactured and sold no identical products. III. The Types op Products and the Separate Industries Involved. This case is concerned with three basic types of containers — those made of metal, glass and plastic. They are of a variety of shapes, sizes and end uses. The three types of containers are produced by three recognized separate industries, each with its own structure and pattern, the metal can industry and the plastic container industry in which Continental was engaged, and the glass container industry in which Hazel-Atlas was engaged. In addition to the three types of containers the case also is concerned with three different kinds of metal closures used to close or seal products packed in containers. They are crown caps, vacuum type closures and screw and lug type closures. Continental produced crown caps and vacuum type closures and Hazel-Atlas produced screw and lug type closures. Closures will be discussed separately though there is no separate metal closure industry. (1) Basic types of products. (a) Metal cans. For Census Bureau statistical purposes the metal can is defined “as a single-walled container constructed wholly of tin plate, terne plate, blackplate or waste plate designed for packing products.” Such cans have distinct physical characteristics. They are rigid and unbreakable, but can be dented. Unlike plastic containers, they can be hermetically sealed and are impermeable to gases. They can be heat processed faster and are lighter than glass containers, and are not chemically inert. The basic raw material used in can manufacture is tin-coated steel (tin plate), but some cans are made from uneoated steel (blackplate) or aluminum. Other raw materials include soldering compounds, paints, varnishes, lithographing inks, paper and cartons for packaging. The major factor in determining can prices is the cost of tin plate. Cans are generally sold f. o. b. the manufacturer’s plant. The products packed in metal cans are extremely numerous and varied and in fact cover a substantial segment of American industrial and agricultural production. However, for statistical purposes the Census Bureau has set up thirteen different general categories of metal cans all in terms of end use. The Bureau collects statistics from metal can manufacturers as to the amount of metal each consumes in the manufacture of cans in each of these categories. The thirteen Census Bureau end use categories are fruit and vegetables (including juice); evaporated and condensed milk; other dairy products; meat (including poultry); fish and seafood; coffee; lard and shortening; soft drink; beer; pet food; oil open-top (1 quart and 5 quart); all other food (including soup and baby food cans); and all other nonfood. A number of these categories plainly include a great number and variety of specific end uses for which no accurate further breakdowns are available. Among the principal types of cans are “Packers” cans and “General Line” cans. “Packers” cans are normally used for food products though they are used for many non-food products as well. They are round open-top or sanitary cans. The packer after filling the can puts the top on. “General Line” cans are used both for food and non-food products and have different kinds of fittings and different shapes. There are other types of cans also. All types of cans are manufactured from the same raw materials by the same production processes and with the same equipment. Cans used for one type of product may be used for other types of products also, but they usually have different linings for different products. For example, substantially the same open-top can is used for food, pet food, motor oil and other non-food products. (b) Glass containers. There are two basic types of glass containers, the wide mouth and the narrow neck container. Glass containers have distinct physical characteristics. They are rigid, chemically inert and impermeable to gases; can be hermetically sealed but are readily broken; and, unlike many cans, can be easily resealed after they have been opened. Glass containers are heavier than other types of containers and must be carefully packed for shipment to avoid breakage. Costs of shipment are therefore higher. They take longer to heat process than cans. Many narrow necked glass containers are suitable for re-use by bottlers and are returned by consumers to the bottler for such re-use. Glass containers used for one type of product are often identical with containers used for widely dissimilar products. Thus, the same wide mouthed glass jar is used for peanut butter and silver polish, and the same narrow necked glass bottle is used for vinegar and liquid starch. The basic raw materials used in the manufacture of glass containers are sand, lime and soda ash. Also required are the necessary labeling and coloring materials. Because of the need for careful packing for shipment to customers, corrugated cartons are used to pack the containers. Cost of labor is the major factor in determining glass container prices. The corrugated shipping container represents 18-20% of the cost of the final product as shipped. Glass containers are generally sold on a delivered price basis with freight included in the price. The Census Bureau publishes data as to glass container shipments. These statistics are grouped in terms of end use, in the following fourteen categories : Narrow Neck: Food, medicinal and health supplies; household and industrial ; toiletries and cosmetics; beverage, returnable; beverage, non-returnable; beer, returnable; beer, non-returnable; liquor; and wine. Wide Mouth: Food, including fruit jars and jelly glasses; medicinal and health supplies; household and industrial; toiletries and cosmetics; dairy products; and packer’s tumblers. Each of these general end use categories is composed of hundreds of individual end use items. But no detailed breakdown figures on the end use categories are available. (c) Plastic containers. Plastic containers are manufactured by various methods including blow molding and injection molding. They are made of such raw materials as polyethylene and polystyrene. Prices are principally determined by the price of raw materials. Some are sold on a delivered price basis and some are not. Plastic containers have distinct physical characteristics. They are neither rigid nor transparent. They are not impermeable to gases, and cannot be hermetically sealed. Such containers are virtually unbreakable, but they cannot contain internal pressure and their ability to hold a vacuum is limited. They are lighter in weight than glass containers and appear to be smaller than glass containers of equal capacity. They are electrostatic and therefore attract dust. Plastic containers are of many shapes and sizes and include such items as bottles, jars, tubes, vials and bags. They are used to package many kinds of foods, drugs, cosmetics, detergents and industrial products including such widely diverse products as rust removers, baby lotions, ice cream, insect repellents, shoe polishes, pills, water and deodorants. (2) Separate industries. (a) The metal can industry. This industry is composed of companies engaged in the manufacture of metal cans used to pack a large number and wide variety of diiferent products. Most of the companies in the industry manufacture cans for sale to industrial and agricultural processing customers who, in turn, use them to pack their own products for marketing. Some companies, on the other hand, the so-called captive compames, produce cans for their own use in packing their own products. Some of the captive companies produce cans for their own use and also sell to other users. A number of metal can manufacturers also manufacture tinware and other tin plate products. Some also produce other kinds of packaging materials and incidental items. There are no reliable figures in the record as to the number of companies engaged in the manufacture of metal cans in the United States. Estimates run from seventy-five to over ninety. The largest is American Can Company. Continental is second. Either Campbell Soup (a captive manufacturer) or National Can Company is third. Other important manufacturers include Crown Cork & Seal Company, Heekin Can Company, J. L. Clark Company, Carnation Milk and Sherwin-Williams. American Can, Continental, National Can and Crown Cork & Seal, among others, sell cans throughout the country. Most of the other companies operate on a regional basis. American Can, the industry leader, like Continental, manufactures a variety of products used by packers. In addition to metal cans it produces fibre, plastic and paper containers. It also manufactures machines for filling and closing both metal and fibre containers. Various other companies manufacturing metal cans also have diversified product lines. In 1955 American Can shipped approximately 38 % of the metal cans sold in the United States. Continental’s shipments amounted to approximately 33%. American’s shipments exceeded Continental's in nine of the thirteen Census categories. Together these two companies accounted for approximately 71% of the total metal can shipments in the country. It appears that can companies sell their products directly to users. There is nothing to indicate that there are any jobbers or wholesalers who purchase cans for resale to their own customers and it may be assumed that there are none. The trade association for this industry is the Can Manufacturers Institute. Its forty-nine members, limited to can manufacturers, include American, Continental, National, Crown, Heekin and Clark. Voting rights and representation on the Board are determined by the number of employees of the member companies. The Institute has a professional staff of three. Its activities, carried on largely through committees, deal with various technical industry problems such as industrial relations, traffic, safety and research and include a limited amount of promotion on the advantages of the metal can. A promotion and advertising program, jointly financed by the members of the Institute and tin plate manufacturers who supply raw materials for can manufacture, was carried on at one time. The program was dropped when the tin plate manufacturers withdrew financial support. A recent program of advertising to promote soft drinks in cans was not conducted by the Institute but was financed exclusively by tin plate manufacturers. Since 1957 the Institute has done no advertising and its only promotion work has been in connection with the celebration of the sesquicentennial of the tin can. The extent of the activities of the Institute and the effects, if any, which such activities may have upon the industry or upon the public are not reflected in the record. The annual production of cans has increased substantially since the end of World War II when the industry resumed its normal rate of growth after wartime curtailment of metal supply. Its facilities have also expanded substantially and continue to do so. Since 1950 American and Continental have substantially maintained their market positions as the number one and number two companies in the industry respectively. However, the medium sized producers, with assets of less than $100,-000,000 have not only participated in the growth of the industry but have increased their share in the market. The evidence did not show that there has been any reduction in the number of companies manufacturing cans since the Hazel-Atlas acquisition and, in fact, the number of companies engaged in the “Tin Can and other tinware industry” was greater in 1957 than in 1950. It did not appear that the initial capital investment needed to embark upon can manufacture is unreasonably high, that there is any obstacle to obtaining whatever technical knowledge is necessary or that there are any patent barriers to entry into the industry. Raw materials are plentiful and readily available. There was little in the record as to the shape and pattern of the industry in terms of such factors as the markets which it serves, the nature of the competition which exists in such markets, pricing practices, its methods of buying, selling and merchandising, the supply and demand picture or similar matters. From all that appears the industry is prosperous, healthy and highly competitive. Competition has been and remains keen and vigorous. What the record presents is a generalized picture of a large, strong, and relatively stable but expanding metal can industry. (b) The glass container industry. This well-defined and recognized separate industry is composed of companies engaged in the manufacture of glass containers sold to industrial and agricultural customers for use in packing their own products. Glass containers are also sold to the public for home preserving. The industry produces glass containers of a wide variety of types, shapes, sizes and colors for numerous end uses. A number of companies, including Owens-Illinois Glass Company and Hazel-Atlas, also produce glass table and kitchen ware and other glass products. Some also produce other products used by packers. There are at least forty-two companies engaged in the manufacture of glass containers. By far the largest is Owens-Illinois Glass Company with almost 35% of the total production and with annual sales in 1955 of some $370,000,000 and earnings of some $27,000,00o. Anchor-Hocking Glass Company, Hazel-Atlas and Knox Glass, Inc. appear to follow in that order. The Hazel-Atlas share of the glass container market in 1955 was about 9.6% with net sales of some $79,-000,000 and net earnings of approximately $3,000,000. Owens-Illinois, in addition to glass containers, manufactures plastic containers, metal and plastic closures, corrugated shipping containers, various types of fibre and paperboard containers, closure machinery and a wide variety of other glass and plastic products. Other companies, such as Anchor-Hocking, also have diversified lines. There are at least twenty companies in the industry with sales above or in the neighborhood of $10,000,000 a year. Most of these companies have been expanding their facilities and production and increasing sales at a rapid rate. There is nothing to indicate that smaller companies are not also prospering. Five companies in the industry sell throughout the country. They are Owens-Illinois, Anchor-Hocking, Thatcher Glass Mfg. Co., Ball Bros. Co., Inc., and Hazel-Atlas. Other companies sell on a regional basis. The trade association for the industry is the Glass Container Manufacturers Institute. Its membership consists of thirty-six glass container manufacturers, six closure manufacturers and twenty suppliers of raw materials and equipment. Dues are assessed on the basis of sales volume and the Board of Trustees is composed of employees of the member companies. The Institute has about forty-five paid employees. Its activities are carried on by standing committees. Members of the professional staff are assigned to each committee. Activities include market research and promotion, the collection and dissemination of statistics concerning the industry, technical research, package design and specifications, the development of standard testing and quality control procedures, problems of freight rates, labor relations, and liaison work with government. The Institute does advertising and publicity for the industry but the evidence does not indicate how substantial this is or how effective such activities are. As in the case of the metal can industry, there is virtually nothing in the record of significance regarding such matters as the markets served by the industry, the nature of the competition which exists in such markets, the problems faced by its customers, methods of selling and merchandising, price structure or pricing practices, the supply and demand picture, or similar matters. During World War II the tin plate supply was greatly curtailed and the glass container industry was able to make substantial advances at the expense of the metal can industry. Since the war the glass container industry has continued its substantial growth and expansion and this process has not abated since the Hazel-Atlas acquisition. The growth of the glass industry has been more rapid than that of the can industry. Numerous technical improvements have been made in the glass container which have increased its strength, resistance to breakage and overall utility, and have lightened weight. These improvements have contributed significantly to the growth of the industry. There appears to be no difficulty in entering the glass container industry and a number of new companies have recently entered and have had successful operations. There has been a continuous expansion of facilities by both large and small companies through new plant construction or additions to existing plants. There was no evidence that the initial capital investment needed to enter the industry was unreasonably high or that there is any obstacle to obtaining whatever technical knowledge or facilities are necessary. Nor are there any patent barriers to entry. Raw materials are plentiful and readily available, as are shipping containers. The industry is prosperous, healthy and highly competitive. Here again is a generalized picture of a large, strong, and rapidly expanding industry in which competition has been and remains keen and vigorous. (c) The plastic container industry. The plastic container industry is relatively new. It got under way in the mid 1940’s. The industry has since grown rapidly and is still undergoing rapid expansion. Neither the size and scope of the industry nor the respective positions of Continental and other manufacturers in it can be determined with any reasonable degree of accuracy from the evidence in this record. The larger companies in the industry include Plax Corporation, Injection Molding Company, American Can, Continental, Royal Manufacturing Company, Inc., Owens-Illinois, Wheaton Plastics Company and Foster-Grant Company, Inc. The dollar sales volume of the industry is small compared with that of the metal can and glass container industries. Plax, the largest producer, had plastic container sales in 1959 of about $12,000,000, which it estimated to be 30% to 40% of such sales in the United States. In 1955 Continental’s sales of plastic containers amounted to $2,400,000, and according to its estimate it shipped approximately 9.3% of the plastic squeeze bottles sold in the United States in that year. There are apparently thousands of small companies engaged in the manufacture of plastic containers. Some use the blow molding method of manufacture and others use injection molding. Among the many types of plastic packaging materials produced by companies in the industry are bottles, jars, vials, boxes, folding cartons, tubs, tubes, carboys, tubes with metal ends, film and other flexible materials and bags. These containers are sold to a wide variety of industrial customers who pack their own products. There is a Plastic Bottle and -Tube Manufacturers Institute, organized in 1957, which is a division of the Society of the Plastics Industry, Inc. Its members are American Can, Continental, Foster-Grant, Injection Molding, Plax and Royal. There was a paucity of information in the record about the activities of this Institute. It appears to collect statistics from its members, some of which apparently are published by the Department of Commerce but these figures are not in the record. Such statistics as are collected by the Institute concerning individual companies are destroyed when received and only overall totals are maintained. The Bureau of Census does not collect or publish statistics relating to the production of plastic containers. There is no showing that the initial capital investment needed to enter manufacture of plastic containers is high. Nor are there any technical obstacles to such manufacture. Raw materials and labor are readily and plentifully available and patents constitute no barrier to entry into this field. The number of companies manufacturing plastic containers is on the increase and has continued to increase since the acquisition. The industry is rapidly expanding and competition is keen and vigorous. There are no universal figures for the industry in the record and such statistics as there are concerning it are wholly unreliable and furnish no basis from which informed conclusions can be drawn. This relatively new and expanding industry plainly has substantial potential. However, its overall dimensions and the extent to which it may be in competition with the glass container and metal can industries remain, at best, obscure. (3) Closures. The term “closures” refers to a miscellany of devices used by packers to close and seal containers in which products are packed. The various types include crown caps, vacuum type closures, screw and lug type closures, paper and foil caps, and closures for home canning. Some are made of tin plate, some of aluminum or plastic, and others of paper or foil. As I mentioned earlier, prior to the acquisition Continental produced crown caps and, after acquiring White Cap Company, vacuum type metal closures as well through that subsidiary. Hazel-Atlas did not manufacture either of these products. It manufactured screw and lug type metal closures and home canning closures. Continental did not. (a) Crown caps are made of tin plate with cork or composition lining. They are used to close narrow neck glass bottles, primarily for beer and carbonated beverages. They are applied to the bottle by crimping and not by lugs or threads. They are not sold in competition with screw or vacuum type metal closures. The largest producer of crown caps was Crown Cork & Seal Company, which was also a metal can producer. Other producers, in addition to Continental, were Armstrong Cork and Guttman, Though Anchor-Hocking and Owens-Illinois did not manufacture crown caps at the time of the acquisition, both of them had been for some time large manufacturers of beer bottles and beverage bottles. In 1956 Continental shipped 17.1% of the crown caps sold in the United States, in 1957 18.4% and in 1958 18.5%. (b) Vacuum type metal closures are made of tin plate or aluminum, with various kinds of linings. They may be of the side-seal, top-seal (or twist-off) or roll-on varieties. They are used on glass containers almost entirely for packing food. Vacuum type metal closures are applied by closing machines which create a vacuum in the head space of the container. The products to be packed are sterilized and steam is inserted into the area remaining between the food and the top of the jar, thus exhausting the air in the head space. The closure is then applied and when the product cools and the steam evaporates a vacuum seal is created. Closing machines for the application of vacuum metal closures are leased or sold to packers by Continental through its White Cap Division and also by Owens-Illinois, Anchor-Hocking and Aluminum Company of America. Vacuum closing machines for a particular type of vacuum closure made by different manufacturers, are interchangeable with similar machines made by other manufacturers, or may be made so with relatively minor modifications. Such machines cannot be used to apply screw type metal closures and they operate at much higher speeds than machines for the application of screw type closures. The White Cap Company, now subsidiary of Continental, is the leading manufacturer of vacuum type closures. Other manufacturers include Anchor-Hocking, Owens-Illinois and Crown Cork & Seal. In 1956 White Cap produced approximately 60% of the vacuum closures made from tin plate. A recent development, apparently pioneered by White Cap, is the twist-off vacuum closure which is used for the same general purposes as other vacuum closures. (c) Some screw and lug type metal closures are made of tin plate with various kinds of linings. Others are made of aluminum or plastic. It does .not appear that screw and lug type closures made of different materials have end uses substantially different from one another. Closures of this type are normally used on glass containers. These closures engage the glass container by screwing into continuous threads in the neck of the container. They cannot be used where a vacuum is required and in general are not used for food products for which vacuum metal closures are needed because of spoilage problems. Screw and lug type closures are used on both food and non-food products. There are at least 18 companies manufacturing screw and lug type metal closures, including Owens-Illinois, Crown, Ball Bros, and Hazel-Atlas. In 1958 Hazel-Atlas produced approximately 4.7% of the screw and lug type metal closures shipped in the United States. There are several companies, including Owens-Illinois, which manufactured both metal and plastic type screw and lug type closures, the uses of which appear to be substantially interchangeable. From 24 to 36 companies make plastic screw type closures. The statistics in the record relating to closures do not include metal closures used in home canning, aluminum closures, plastic closures or paper caps, though Hazel-Atlas made home canning closures as well as screw and lug type closures for commercial packing. With the exception of home canning jars sold with closures attached, glass containers and closures for them are sold separately. Closures are sold by the manufacturer directly to packers and there appear to be no wholesalers or jobbers of these products. Closure customers generally have multiple sources of supply. There is no evidence that prices of one type of closure have any effect on the sales volume of any other types. There is no shortage of raw materials necessary to manufacture closures. There was no showing that there were any substantial obstacles to entry into any of the closure fields. Crown caps, vacuum type closures and screw and lug type closures have in the main quite different uses and do not significantly compete with one another. However, competition within each of the respective screw type, vacuum type and crown cap fields has been and remains keen and vigorous and there does not appear to have been any significant diminution in the number of companies engaged in these respective fields either before or after the acquisition. IV. The Contentions of the Parties. (1) Lines of commerce and sections of the country claimed to be relevant. A year and a half before the commencement of the trial, the Government, in answer to defendants’ interrogatories, specified with particularity ten separate lines of commerce which it claimed were adversely affected by the acquisition under attack. The lines of commerce so specified remained unchanged throughout the exhaustive pre-trial proceedings in which the issues to be tried were carefully limited and defined, and during the six weeks of the trial itself. The ten lines of commerce are as follows: 1. The packaging industry. 2. The can industry. 3. The glass container industry. 4. Metal closures. 5. Containers for the beer industry. 6. Containers for the soft drink industry. 7. Containers for the canning industry. 8. Containers for the toiletries and cosmetic industry. 9. Containers for the medicine and health industry. 10. Containers for the household and chemical industry. The Government contended that the relevant geographic market in which adverse effects of the acquisition were felt in each of these ten lines of commerce was the United States as a whole. It contended also that in lines of commerce numbered 2, 3, 5, 6, 7, 8, 9 and 10 there were adverse effects in two separate sections of the country, as well, (a) the United States east of the Rocky Mountains, and (b) the United States west of the Rocky Mountains. No discussion of the attempted distinction between the areas east and west of the Rocky Mountains is necessary here. The evidence wholly failed to establish that, in the context of this case, there were any differences between these areas or between either of them and the United States as a whole indicating that they constituted economically significant separate geographic markets in any of the lines of commerce specified. Nor was there evidence that such effects of the acquisition as might be felt were any different in different sections of the country. The only “section” of the country which was relevant was the United States as a whole. That is the geographic market with which we are concerned here. The defendants agreed with the Government that the can industry and the glass industry were separate lines of commerce for Section 7 purposes. They contended, however, that the other eight lines of commerce specified did not in fact exist and that there were no such separate relevant product markets or sub-markets. Hazel-Atlas, said the defendants, was engaged in two lines of commerce, glass containers and screw and lug type metal closures and these were the only relevant markets in so far as it was concerned. They said further that the only relevant product markets in which Continental was engaged were metal cans, plastic bottles, crown caps and vacuum type closures. Thus defendants contended that there were but six separate and distinct relevant lines of commerce or product markets. Moreover, they took the position that the lines of commerce in which Hazel-Atlas and Continental were respectively engaged, were quite different and did not overlap to any significant degree. (2) Claims as to anti-competitive effects. The Government conceded that it had no proof that any person or firm, seller or buyer, suffered any actual injury as a result of this acquisition, although the trial took place more than three arid a half years after it occurred. There were no complaining witnesses. None of the 78 witnesses whom the Government placed on the stand testified to any actual anti-competitive effects or tendency to monopoly. There was no evidence of actual anti-competitive effects or tendency to monopoly in this record. The Government’s case was predicated upon what it claimed were potential anti-competitive effects. As its standards for determining whether such effects were reasonably probable, the Government advanced four criteria referred to in the House Report on the 1950 amendment to the section. It claimed that the acquisition (1) had eliminated in whole or in material part the competitive activity of Hazel-Atlas which had been a substantial factor in competition with Continental; (2) had increased the relative size of Continental to such point that its advantage over its competitors threatened to be decisive; (3) had resulted in an undue reduction in the number of competing enterprises; and (4) had established relationships between buyers and sellers which deprived their rivals of a fair opportunity to compete. The Government also stressed a statement in the Senate Report on the 1950 amendment that the statute was intended “to cope with monopolistic tendencies in their incipieney and well before they have attained such effects as would justify a Sherman Act proceeding. * * * ” It emphasized prior acquisitions by Continental of companies in the metal can and other fields, and urged that when Continental acquired Hazel-Atlas, the process of acquisition had reached a stage where it was reasonably probable that anti-competitive effects would occur and that the acquisition was therefore unlawful. ii The Government took the position that, while the anti-competitive effects referred to in the House Report might not be apparent presently, it was probable that they would occur in the future in each of the lines of commerce which it attempted to delineate. Defendants, on the other hand, while conceding that the criteria referred to in the House Report might be relevant considerations in an appropriate Section 7 case and that, in appropriate circumstances, a continuing process of cumulative acquisition might become unlawful, insisted that there was no substitute for a showing that there be reasonable probability of substantial anti-competitive effects or tendency to monopolize in the product markets relevant to the case under consideration. They pointed out that the intention of Congress to cope with restraints of trade and monopolistic tendencies in their incipieney was carried out by the concept of reasonable probability embodied in the statute and that this was the sole standard to be applied to the particular facts of each case. Defendants also pointed'out that Section 7 cannot be applied mechanically or quantitatively but that each case must be decided on its own facts. They maintained, moreover, that in any event, the Government could not prevail since there was a complete failure of proof here. They urged that Hazel-Atlas and Continental did not compete with one another to any significant degree and there was no reasonable probability that they ever would; that the merger was utterly devoid of anti-competitive significance; and that it had not resulted and there was no probability that it would result in any substantial lessening of competition or tendency toward monoply in any of the lines of commerce delineated by the Government or in any other lines of commerce. V. Uncommon Features of the Case. This case does not fit into any of the classic anti-trust patterns. It deals with three separate and distinct industries manufacturing separate and distinct types of products. As the earlier discussion indicates, each type of container is made from different raw materials and each has different physical characteristics and properties. Different plant and machinery are required for each and the processes of manufacture are different. The different types of containers manufactured by these different industries are of wide varieties of sizes and shapes and are put to hundreds, if not thousands, of different end uses. Concededly there was substantial and vigorous inter-industry competition between these three industries and between various of the products which they manufactured. Metal can, glass container and plastic container manufacturers were each seeking to enlarge their sales to the thousands of packers of hundreds of varieties of food, chemical, toiletry and industrial products, ranging from ripe olives to fruit juices to tuna fish to smoked tongue; from maple syrup to pet food to coffee; from embalming fluid to floor wax to nail polish to aspirin to veterinary supplies, to take examples at random. Each industry and each of the manufacturers within it was seeking to improve their products so that they would appeal to new customers or hold old ones. Hazel-Atlas and Continental were part of this overall industrial pattern, each in a recognized separate industry producing distinct products but engaged in inter-industry competition for the favor of various end users of their products. It does not necessarily follow from this, however, that the acquisition of Hazel-Atlas by Continental falls within the ambit of Section 7 of the Clayton Act. That section of the Act deals specifically with relevant product markets and the lessening of competition within them. The fact that there is inter-industry or inter-product competition betweqp metal, glass and plastic containers is not determinative of the metes and bounds of a relevant product market. As the Supreme Court said in the Cellophane case: “Determination of the competitive market for commodities depends on how different from one another are the offered commodities in character or use, how far buyers will go to substitute one commodity for another. For example, one can think of building materials as in commodity competition but one could hardly say that brick competed with steel or wood or cement or stone in the meaning of Sherman Act litigation; the products are too different. This is the interindustry competition emphasized by some economists. See Lilienthal, Big Business, c. 5.” Thus the relevant product market for anti-trust purposes by no means includes all substitutes. In this connection the Court said in the Times-Picayune case: “For every product, substitutes exist. But a relevant market cannot meaningfully encompass that infinite range. The circle must be drawn narrowly to exclude any other product to which, within reasonable variations in price, only a limited number of buyers will turn; in technical terms, products whose ‘cross-elasticities of demand’ are small.” This appears to be what the Court had in mind in Brown Shoe when it said: “The outer boundaries of a product market are determined by the reasonable interchangeability of use or the cross-elasticity of demand between the product itself and substitutes for it.” (Emphasis added.) In this case the circle referred to in Times-Picayune cannot be drawn to include within the boundaries of a single product market the metal can, glass container and plastic container industries and their wide variety of products. Attempts by the Government here to combine these separate industries and their products or to combine separate and distinct products from separate and distinct industries into single product markets necessarily failed because appropriate distinctions were not made between inter-industry or overall commodity competition and the type of competition between products with reasonable interchangeability of use and cross-elasticity of demand which has Clayton Act significance. The boundaries of a product market or sub-market may only be determined “by examining such practical indicia as industry or public recognition of the [market] as a separate economic entity, the product’s peculiar characteristics and uses, unique production facilities, distinct customers, distinct prices, sensitivity to price changes, and specialized vendors.” Nevertheless, the Government here has made an attempt to establish a product market embracing all of these separate industries and products and many more in the line of commerce which it denominated as the packaging industry. The theory upon which it proceeded on this line of commerce is illustrative of its failure to make the distinctions I have pointed out. Moreover, with the exception of the lines of commerce denominated as the metal can industry and the glass container industry, each of which were conceded to be separate product markets and the line denominated “containers for the beer industry” which I have found to be a separate product market, the Government also ignored these concepts in attempting to combine products produced by separate industries, which were not shown to have reasonable interchangeability of use or cross-elasticity of demand, into relevant lines of commerce. Examination of such practical indicia for determining product markets as were in the record did not establish that there were such lines of commerce. These lines of commerce were artificially carved out by the Government and'did not conform to the realities of the marketplace. We therefore do not have here the pattern of a horizontal combination between two companies which manufacture or sell the same products, as the Government seemed to assume. Nor are we concerned with the pattern of a vertical combination. Neither Continental nor Hazel-Atlas was engaged in any essential step in the processing, manufacture or sale of products made or used by the other. What we have here, basically, is a conglomerate combination in which one company in two separate industries combined with another in a third industry for the purpose of establishing a diversified line of products suitable for a variety of end uses to be sold to a wide range of customers with differing packing requirements. “Such a merger * * * does not have the effect of automatically foreclosing to competitors any market outlet or source of supply as in a vertical merger, nor does it have the effect of automatically eliminating a competitor as in a horizontal merger.” Here the Government moved into virtually uncharted Section 7 territory. In the twelve years since Section 7 was amended there are apparently only two other cases raising this exceptional problem. They are United States v. General Motors (Euclid Road Machinery) which is currently pending in the District Court for the Northern District of Ohio, and the Procter & Gamble case before the Federal Trade Commission which has just been cited. A third case, United States v. General Dynamics, filed in this district on November 8, 1962 and as yet undetermined, may also involve the same problem to some extent. To complete the background I should add that I have been unable to find any case dealing with a pattern of inter-industry and inter-commodity competition comparable to that which exists here nor in which the diversification of products, industries and consumers is so pervasive. This is not to suggest that enforcement of Section 7 may not be extended beyond the range of any of the cases thus far decided. For, as both Brown Shoe and the legislative history which it reviews make clear, Section 7 is applicable to conglomerate mergers where the facts warrant. But there must be evidence that the facts warrant such application. Understandably the case of a conglomerate merger set in such a complicated inter-industry pattern as this presented great difficulties of proof for the Government. But that does not mean that the Government’s burden was lessened or that it was relieved from the obligation of establishing relevant product markets or of showing reasonable probability of substantial anti-competitive effects in one or more of them as a result of the acquisition. In fact, in the case of a conglomerate merger such as this, where such a wide diversity of factors bear on questions of relevant markets and anti-competitive effects within them, the Government must be at pains to examine in detail all practical indicia which might bear on both questions. In the case at bar the Government not only failed to do this but the evidence concerning such indicia as were examined was woefully inadequate. Even assuming that the theory upon which the Government sought to construct its line of commerce for the packaging industry, for example, were tenabl