Full opinion text
OPINION FREEMAN, Chief Judge. This is a Government divestiture action under Clayton Act, § 7, as amended, 15 U.S.C. § 18, challenging the 1961 purchase, for 28 million dollars, of select assets of Electric Autolite Company by Ford Motor Company, the nation’s second-largest producer of mechanized vehicles, with annual sales then exceeding two million units and resources approaching four billion dollars. The automotive machine is a complex assembly of hundreds of parts. This litigation revolves around a comparative handful: the battery, spark plugs, and a group of possibly less-familiar items, together with their components, in the electrical system — the starter, voltage regulator, ignition coil, generator (or alternator) and distributor. Like all of its competitors, principally General Motors, Chrysler and the much smaller American Motors, Ford has never manufactured everything which has gone into its cars, trucks and farm tractors. In the mid-1950’s, most of these enumerated elements were among those which it purchased from outsiders. While buying rather than making can be economical in some instances in any industry, Ford management, faced with excess plant capacity and ample capital reserves, was beginning to have serious doubts about the breadth of its extra-organizational procurement policy. Contributing to the misgivings was an obvious shift in the service habits of the car-owning public. The more than 9,000 Ford franchise vehicle dealers throughout the country, among whom there existed a strong propensity to obtain materials for repairs through the defendant’s wholesaling divisions feeding the aftermarket (replacement-parts trade), were losing maintenance business to gasoline filing stations and engine specialty shops which found it more convenient to get supplies from nearby non-Ford affiliated distributors. Although this trend was irreversible, Ford felt that it could make the most of a bad situation if it could obtain a manufacturer’s profit on as much of the merchandise as possible moving through these so-called independent middlemen. Thus, one goal was for it to build more components for its own automobile population. Furthermore, for reasons detailed hereafter, in order to secure stocking rights for some Ford-application parts at the retail level, it seemed wise to also offer a variety of electrical articles for at least Chrysler and General Motors models. The Electric Autolite Company was founded in 1922 to assume the Electric Auto-Lite Division of Willys Corporation; it has been a leader in automotive lighting and ignition apparatus ever since. In 1934, it merged with Moto Meter Gage and Equipment Corporation, the President of which, Royce Martin, chiefly on the basis of personal contacts, succeeded in drawing to the firm the bulk of Chrysler’s electrical needs. Auto-lite’s history is a story of expansion, contraction and diversification according to the latter’s demands. For example, spark-plug fabrication was commenced at its specific request. During most of the two decades after the Moto Meter acquisition, Chrysler was the primary outlet for Autolite plugs and batteries, together with, among additional components instruments, die castings, cable and fractional-horsepower motors. While American Motors and, in the truck and tractor field, International Harvester Corporation and others did deal with Autolite, Chrysler was truly its raison d’etre. The scene changed drastically upon Mr. Martin’s death in 1955. The subsequent year Chrysler ordered a significant share of its batteries from Autolite’s rivals, which by 1960 were furnishing more than two thirds of its requirements. In 1957, the word went out that Chrysler intended to integrate construction of distributors, generators, starters and voltage regulators — all of which previously had been gotten from Autolite. This upheaval, along with several other disturbing considerations, led Autolite to foresee the possibility that it might shortly be left with a fixed-volume spark-plug plant but without a customer big enough to warrant the output; for, of the two major users besides Chrysler, General Motors made its own and Ford had been buying exclusively from another source for half a century. The brand name “Autolite,” which had been raised to prominence by a multi-million-dollar investment in advertising, was also a subject of much anxiety. Due to the peculiarities of the industry, it could become nearly worthless for spark plugs if the company lost the Chrysler entree. Moreover, that portion of the aftermarket accustomed to the label on most of the items definitely being phased out at Chrysler carried them because of their original-equipment status which was then fast disappearing. Around the beginning of 1960, Auto-lite sent a task force of salesmen to Ford in a concerted effort to convince defendant to take on at least some “Auto-lite” plugs. Ford had a better idea; it would relieve Autolite of the potential albatross of a factory. After arduous negotiations, the agreement precipitating this lawsuit was signed, pursuant to which Ford received the plug facility at Fostoria, Ohio, together with the “Auto-lite” trade name, one of six operating battery installations, at Owosso, Michigan, the services of a few personnel, and limited distribution rights. Within a few months, Electric Autolite was again turning out spark plugs on a small scale, having continued uninterrupted manufacture of batteries and a host of other electrical elements. At the same time it started publicizing, although not with the vigor which had attended the promotion of “Autolite,” another mark, “Prestolite,” previously seen only on batteries in isolated regions but now destined to appear on its full automotive line across the nation. However, the emphasis shifted to the private-label accounts, including, in a few instances, Chrysler, Ford and General Motors, which prefer the goods under their own insignia. Finally, it widened its base by venturing into new areas and, upon its merger in 1963 into Mergenthaler Linotype Company to form a combination with a 200 million dollar asset value, became known as ELTRA Corporation. Ford ended up in the position to satisfy its entire call for spark plugs internally. On the other hand, to this day it still purchases several million batteries annually; for Owosso cannot furnish enough for both new-vehicle and replacement purposes. Furthermore, defendant has gone forward under “Auto-lite” with a plan first implemented in 1960 for an independent-aftermarket assortment of other parts. An Autolite Division was formed to advance the cause among non-franchisee retailers and the acquired name appears frequently on Ford engines. I MARKETS Almost six months to the day after the transfer had been completed, the United States filed the present complaint asserting that the effect is a probable substantial lessening of competition in four lines of commerce throughout the entire country. While Ford vehemently denies the likelihood of injury, it agrees that the Government has correctly described the relevant geographical territory and concedes the appropriateness of three product markets: automobiles, automotive batteries and spark plugs. With respect to the fourth, which plaintiff denominates “ignition parts,” there is a dispute. In the Government’s lexicon, the expression encompasses starters, generators and alternators, ignition coils, voltage regulators, distributors, and, more important, many of their members. Ford holds that no “meaningful definition of * * ‘ignition parts’ can be framed so as to constitute a line of commerce.” This criticism is leveled for two reasons: insufficient economic identity in the industry and lack of interchangeability among the alleged constituents, that fundamental quality of any properly delineated market. United States v. E. I. DuPont De Nemours & Co., 351 U.S. 377, 76 S.Ct. 994, 100 L.Ed. 1264 (1956). The evidence does demonstrate that there is little chance of substitution within this category. Each element fulfills a unique function. Generators and alternators, which convert mechanical into electrical energy, can hardly be replaced by distributors, which assign a given amount of current to a particular spark plug. Coils and regulators cannot stand in for one another nor for starters, distributors or generators. In the aftermarket, the concern here, where sales are on a finished-goods instead of production-contract basis, exchangeability within a generic type is also severely restricted. Sometimes it is a matter of performance. A six-point distributor cannot be used in an eight-cylinder motor. In other instances it is a question of size and mounting. A generator simply may not fit on a Chevrolet if it was designed for a Plymouth. Variations occur not only from vehicle manufacturer to manufacturer and year to year, but also among different contemporary vehicle styles of the same make and even between two identical models built several months apart. All in all, the variations are awesome. A fully stocked garageman bent on following Detroit’s instructions to the letter would have had to have on hand in order to service Chrysler Imperials of 1957 through 1960 vintage, ten numbers of generators, seven of distributors, and four each of starting motors and regulators. The amount he would have charged for a distributor would have run from $27.45 to $34.45, with the one picked depending upon year, style, and, if he was working on a 1959 car, whether it had been rolled out early or late in that period. The obstacle in matching portions of basic units is the same. The distributor cap for most 1956 Buieks was fastened with screws inserted vertically. The succeeding year’s version, half again as tall, was affixed with a horizontal clamping device. A price list of the more commonplace General Motors electrical items for 1955-64 passenger automobiles and light trucks, virtually all of GM or American Motors origin, contains approximately 800 entries. It is also true that “ignition parts” is ambiguous. To a Ford representative the term includes spark plugs and high-tension wiring. A Government witness was not even sure that, as the United States urges, it embraces generators. Of three ignition-parts brochures in evidence, two mention plugs while the third does not. However, it displays numerous switches, e. g., horn relays, not seen in the others. Of course, these discrepancies could be more accidental than substantive; groceries can comprise a market even if a few food stores in a community handle gastronomic exotica while many carry culinary utensils or children’s encyclopedias. See United States v. Von’s Grocery Co., 384 U.S. 270, 86 S.Ct. 1478, 16 L.Ed.2d 555 (1966). Indeed, the advertising materials submitted by Ford do much to discredit its stand on both counts. They affirm what the testimonial record already shows— that there are competitive lines of articles for ailing engine electrical systems, which, according to their most significant function, might be called the ignition systems. Realistically, the firms behind them are best thought of as cataloguers and branders — merchandisers—• rather than fabricators. While many do some manufacturing, few, if any, make all they sell and most build very little. To round out their selections they deal with each other. Thus, they regularly buy from and produce for rivals with which they are locked in combat for space on the repairman’s shelf. Generally, this battle is actually waged by the salesmen of non-exclusive, independent-contractor warehousers and jobbers. A decade ago merchandisers were classified according to the adaptability of their wares. The greater slice of the business had been captured by sponsors of items for only certain vehicles, the ones on which the same components under their names were original equipment. Electric Autolite, a supplier to Chrysler and American Motors, was typical of the “genuine parts” proponents. The rest belonged to outfits, referred to by the Establishment as “gyps” because they lacked original-equipment status, furnishing specially conceived assortments of commendable workmanship, which, through slight deviations from original specifications for the sake of increased fungibility, covered all popular machines (and, incidentally, those of any single company) with a minimum of numbers per generic type. With the movement toward neighborhood gasoline stations for simpler tune-ups, by the late 1950’s everyone began to strive toward the same objective: the compilation of a quality assemblage of faster-moving items, easily inventoried and used by the frequently more inexperienced serviceman engaged in predominantly light work, and suitable for the majority of the conveyances on the highway. Nevertheless, the restricted versus wide-application dichotomy endures. Traditionally, wholesalers carried narrow or all-make aggregations, but not both. Those of the former inclination composed the Automotive Electric Association, dedicated to the genuine-parts concept. An AEA adherent normally would take on nothing electrical for engines, except spark plugs and batteries, unless it had a factory-installed twin. Although this practice is breaking down, the largest segment of the AEA continues to be ruled by the authenticity notion, which also retains its attraction among most outlets. Middlemen handling the broader clusters stress convenience over ideology and score with retailers who prefer simplicity in ordering and storing. While every important merchandiser currently has an all-make line, some, chiefly Chrysler, Ford and General Motors, each now in the independent aftermarket and using its own brand on practically all original-equipment electrical engine parts even when it does not build them, are able to take advantage of the diminishing but still predominating requests for exact replicas, and, thus, have a genuine line as well. Were all the tiers of the industry composed entirely of people who felt as strongly about pedigree as the AEA once did Ford’s position would approach tenability. A line of commerce is at least a recognition of competitive friction which subsides as the clamor for true copies grows. See Brown Shoe Co. v. United States, 370 U.S. 294, 82 S.Ct. 1502, 8 L.Ed.2d 510 (1962). There would be none in regard to rarely damaged pieces of the chassis, which, when restoration is necessary, must be secured through the one foundry having the requisite dies. Similarly, it seems that complete distributors are available solely under the original label. The demand is apparently so slim that not only has no other producer found justification for tooling-up, but, more significantly, no other merchandiser has been prompted to purchase and resell them. By unqualifiedly insisting that distributors are within the relevant market, the United States fuels defendant’s argument. The response to the complaint about substitutability lies outside the authentic-parts area but in the acknowledgment of the contention among all-make groups and between them and genuine components. While authentic parts are not interchangeable with each other either individually or by brand array, they are with their extended-scope counterparts; furthermore, all full-range collections are mutual alternatives. A mechanic can opt for what original-equipment-type replacements he wants and/or choose a portion or, more readily because they are condensed, all of one of the universal packages. In terms of the farthest reaches of cross-elasticity, a series of markets is under consideration, each with all all-make lines and one genuine line designated by the vehicles for which it was engineered. However, nothing is gained by fragmenting the discussion in this fashion nor by proposing a procedure for calculating percentage shares. In each market the multi-purpose lines are surrounded by distinguishing features. They bear a taint of illegitimacy and have particular appeal to a less skilled clientele which accepts only relatively uncomplicated maintenance assignments. They present the special problem of achieving compactness without sacrificing completeness, and, of course, travel somewhat different paths to the consumer level. Thus, it is expedient that they be placed in submarkets for weighing the probable results of the acquisition. See Brown Shoe Co. v. United States, supra. Since any undesirable consequences will show up most clearly here, the submarkets must be the foci of attention, ibid.; but, because the outcome will be the same whether they are viewed separately or together, they will be treated as one. The varieties tendered under the names active in the markets and submarkets are not identical but they are certainly comparable. Indeed, the fact that they differ is in itself pro-competitive. The all-makes succeed precisely because they have been trimmed. Moreover, components can be procured by number rather than by lot. A distributor may be bought through the only catalogue in which it is pictured, while coils and regulators come from another with possibly lower prices. Among the full-utility assortments where the likelihood is greater that stocking would be on an entire-line instead of an individual basis, the disparities in offerings doubtless stem from conflicting opinions about whether a given element will experience sufficiently high volume to warrant its imposition on potential customers. To find no struggle at all when some of the combatants retrench with an eye toward becoming more efficient would hardly be in keeping with the intent of Section 7. A distillation of the evidence shows that nearly every firm purporting to be in the ignition field advertises generator brushes, coils, regulators and distributor rotors, points (contact sets), caps and condensers. These are the heart of the enterprise. That uniformity is not as noticeable among the rémainders of the lines is immaterial, for there is no indication that the impact of the acquisition will be milder or heavier whether the supplemental ingredients are dimmer switches and generator bushings or cable and starter motors. If anything, the inference is to the contrary. The core articles are the ones for which a garage-man has the greatest need. His sourcing of the others is apt to hinge upon his satisfaction with these. Catalogues Distrib- Distributor utor Caps_ Rotors Distrib- Distrib- Distributor utor utor Points Condensers Bushings United Delco X X X X Niehoff X X X X X Wagner X X X X X Atlas (a) X X X X Unico (b) X X X X Catalogues uistrib- Distributor Leads utor Plates Vacuum Ignition Chambers Cables United Delco X (c) X X Niehoff X X X Wagner X X Atlas X Unico X Starting Motors Starter Brushes Starter Starter Switches Bushings United Delco X (c) (d) X X Niehoff X X X Wagner Atlas Unico X X X Ignition Coils Voltage Regulators Stop Light Ignition Switches Switches United Delco X X X X (c) Niehoff X X X X Wagner X X Atlas X X X Unico X X Horn Relays Dimmer Switches Spark Plugs United Delco X X X Niehoff X X Wagner X X Atlas X Unico X (a) - Atlas products are carried by filling stations of the Standard Oil companies only. (b) - Unico is a parts line specifically designed to service farm co-operatives. As in the case of Wagner, the bulk of this assortment is manufactured by ELTRA. (c) - Primarily for cars for which the sponsor of this line, General Motors, is an original equipment supplier. (d) - Rebuilt. II IGNITION PARTS The introductory survey noted two attributes of Ford’s component operations — excessive reliance upon suppliers and aftermarket participation confined to vehicle dealers — -and intimated that they were leaving an adverse impression on the earnings statement. Defendant was losing a manufacturer’s profit on franchisees’ sales, as well as additional income on those of non-affiliated retailers responsible for an increasing proportion of the nation’s automotive servicing who were not persuaded to favor Ford’s wholesaling over that of an independent and often more accessible middleman. The proposals adopted for integrating production of ignition parts— a term hereafter meaning electrical engine components, except spark plugs and batteries, and, in particular, the core articles listed above — are irrelevant; growth in this regard, not yet culminated, was by internal expansion. On the other hand, the defendant’s distribution endeavors on behalf of these elements are crucial. They commenced in the Spring of 1959 when the Executive Committee approved the development of a merchandising program to be conducted through independent warehousers and jobbers on an initial Ford-population-application but eventual all-make basis and under the “Motoreraft” brand. The selection was small at first; more items were to be included from time to time. However, they were always to be only of a “competitive” type, i. e., also obtainable from the “gyps” or from United Motor Service, the new wide-adaptability marketing branch of General Motors, the first assembly-line supplier to enter the multipurpose field. This qualification together with “Motoreraft,” a label different from any of those, principally “FoMoCo,” which Ford would use on original equipment and put on Ford-vehicle replacements contained in the new line but shipped to its franchisees, came in answer to the biggest drawback it encountered in the new undertaking. Caution was necessary to minimize the diversion of business away from these old outlets, which with dual-branding, now abandoned, would have the really genuine parts. The trade through them is more lucrative for Ford, because they buy directly from defendant without the expensive intercession of other promoters. Ford also wanted to protect the licensees’ repair revenues, which, when car turnover is slow, can pay their overheads. While Motorcraft got off the ground, the performance was less than prodigious. Because it had not yet achieved all-make breadth, defendant centered its efforts within the Automotive Electric Association and by 1961 had contracted with half of the approximately 100 AEA warehousers. Yet, the first year’s forecasted million-dollar net gain ended up a deficit. Unlike General Motors, Ford had been unable to reach agreements with any major oil or rubber companies whereby they would push Motorcraft among their gasoline and tire customers. By 1961, Management thinking was that survival turned upon a “good” name (which should also be employed on new automobiles), coverage for non-Ford cars and trucks, and more inside construction. The evidence highlights few of the facts from which this conclusion may have been derived. Neither the view about the weight of each of these factors nor the difficulty foreseen in improving “Motorcraft’s” stature is disclosed. The acquisition came too quickly to permit a scientific evaluation of the success defendant would have had in following the guidelines without Autolite’s help. Indeed, how well Ford is doing with it is purely a question of speculation. Those attorneys who have castigated the “introduce the statistics and rest” methodology which has permeated the Government’s attitude in so many Section 7 cases may be startled to learn that with respect to ignition parts its presentation reveals not one meaningful figure. The record does show that “there’s about 12 or 16” little corporations similar to the F & B Manufacturing Company, the Vice President of which, Vladimir Filko, was plaintiff’s only industry witness. He did not relate the number of more sizeable concerns he runs across. Darkness also shrouds another consideration which heretofore has been thought germane to merger litigation — the standings, absolute and relative, of the contenders. Although the Court will thus not dwell upon such hackneyed terms as “share” and “concentration,” the novelty will not provoke unbounded enthusiasm among the Bar. Plaintiff’s scenario announces this as the bigness-is-badness act of the drama and at the outset warns: “It would be a serious oversight to attempt to analyze the probable effects of this acquisition [without appreciating that] there are smaller competitors who are dependent solely on the sale [of ignition parts] for their success or failure.” One misconception easily drawn from this excerpt from the United States’ brief and from Mr. Filko’s preoccupation with the diminutive requires an immediate word of clarification. While undoubtedly some of the companies are not giants, Ford is by no stretch of the imagination a lonely bull in a china shop. Such stalwarts besides itself as Chrysler, ELTRA, General Motors, Gulf and Western Industries and the Standard Oil companies, working together through a joint subsidiary, are found in the all-make sub-markets. Boiled down to its essence, the Government’s case is that the Clayton Act has been violated because, by virtue of the combination in issue, Ford augmented the Motorcraft electrical line, is capable of providing spark plugs and batteries in conjunction with it, and has the benefit of a pre-existing distribution network and of “Autolite.” However, there is not a scintilla of proof that the defendant’s present ignition array, suiting all popular machines, is causally connected with the transaction. The independent-aftermarket venture was born with a multipurpose outlook in the hope of capitalizing upon the shift of maintenance work to neighborhood shops. A full year before earnest negotiations with Electric Autolite began, the goal, to all appearances on the information then known fully attainable, had been a gradual buildup in breadth and manufacture. At no place in the hundreds of pages of documents retrieved by the United States from Ford’s files was it suggested to be beyond reach unless the defendant bought a trade name or went into plugs and batteries. None of the inter-office memoranda written after April 1961 noting an addition to the catalogue hints that incorporation was prompted by the events of that month; nor does it foster the inference that sales were expected to, or actually did, hit such volume subsequent to the acquisition that tooling-up for any element only then would have been practical. The overwhelming probability is that the ignition scheme as initially designed would have come every bit as far in scope as it is today and just about as quickly. Several people commented on the desirability of handling plugs and batteries with other products. Mr. Filco státed that the former function was a wedge for driving the latter through to warehouses; however, on cross-examination, he contradicted himself by claiming that his organization, which has neither plugs nor batteries, is advantaged by its narrower area of responsibility because it can specialize in solving ignition problems. The General Sales Manager of Champion Spark Plug Company testified that as late as 1962, he, too, favored narrow expertise but now believes that his people could use ignition parts to boost plug revenue. Nevertheless, he refused to say that Champion would take on any, although admittedly it could easily finance them. The President of General Battery and Ceramic Corporation saw merit in its practice of devoting its energy entirely to batteries and a few spark plugs. In the same vein, a spokesman for Electric Storage Battery Company told how his firm had thought about carrying a wide-application collection but decided not to. Although both proprietary- and private-label plugs and batteries are available to small merchandisers, Mr. Filko knew of only one which had seized the opportunity. As of mid-1966, no more than 15% of Ford’s Autolite direct accounts stocking ignition parts also bought either of the other two types. The finding is inescapable that the three are not complementary to any significant degree. The defendant’s capacity to display them together will not notably strengthen Ford’s performance in any. Furthermore, under these circumstances considered in the shadow of the anti-trust prohibitions against tying, it would be unfeasible for Ford to try to overrun its parts opposition by setting its prices on batteries and plugs below the general levels — a maneuver more easily accomplished by a builder than by a mere purchaser and reseller. Of course, since the acquisition allows Ford to use “Autolite” on different classes of goods, each is lent a hand from the presence of the same name in, and on publicity directed to, other markets. This overlapping effect evokes attention not because of defendant’s wealth, for there is no indication of the extent to which it can be put at the disposal of the Autolite Division, a minor aspect of the company’s total involvement, but because Ford, as anticipated, does quite well in spark plugs and can be expected to use a percentage of its return there for advertising in that area. In the interest of avoiding redundancy, this train of thought should be coupled with a study of plaintiff’s lament over the very transfer of the brand. In the early 1960’s, “Autolite” was familiar; after all, it had been visible under Chrysler hoods for a quarter century. What is not clear is that any name has much intrinsic worth on ignition parts. Identification is of utmost moment, not in any usual trademark sense, but for designating authenticity. To those who stress legitimacy — and they are the majority — defendant’s only real selling point is not “Autolite” but its new-vehicle status which Ford could have given any name. Thus, the thrust of plaintiff’s solicitude must be toward the struggle among all-make lines. In their submarkets, recognition falls far short of being talismanic, as Electric Autolite’s experience portrays. Contemporaneously with the advent of Motorcraft, it teamed up with two other original-equipment suppliers to sponsor a multi-application selection as a joint effort; their progress was not inspiring. Perhaps the Government deems it axiomatic that a well-known brand has magnetism. Logically, the converse seems closer to reality. The real ultimate consumer of ignition parts is not the same fickle housewife who shops with an eye toward compensating the detergent which entertains her with some adulterous affair on television. Although the man on the street buys them, he rarely sees them. Often he is even unaware that he needs them. He leaves his car for an overhaul or routine checkup and comes back to settle the bill. The trick is to persuade not him but the mechanic who, if not an authority, is at least a professional in things automotive, unlikely to be swayed by gimmickry. This fellow wants craftsmanship — and he should not need a trade name to discover it — with low inventories, ample profit margins, easy credit and obsolescence rebates. Therefore, it is not surprising that in the literature the emphasis is on the fewer numbers in one assortment than in another which will fit the same conveyances. Complimentary cabinets and racks to facilitate storage and segregation are common. Executives from the Firestone and Goodyear tire companies, deposed by defendant, failed to mention labeling as a criteria in the decision to offer their dealers United Motor Service replacements exclusively. The paramount factor to them was the series of U.M.S. training centers giving free instruction in proper motor diagnostic and treatment techniques. Refiners, to which it is imperative that filling-station operators not jeopardize gasoline business with shoddy repair work, prefer U.M.S. for the same reason. Witnesses also spoke of General Motors’ parentage of 50% of the automobiles on the road and the implication that one stocking U.M.S. will be using genuine components on about half of his jobs. In 1960, Ford’s salesmen called upon many rubber and petroleum firms. The summaries of these conferences passed along to defendant’s higher echelons reported that the matter of branding came up with four prospects, three of which were said to have thought that “Motorcraft” was satisfactory and the fourth to have talked in the vague language of needing a name with “wide acceptance.” The preceding is the gist of the hard information bearing on customer motivation. That defendant paid for “Autolite” is wholly equivocal because the plug and battery plants could not have been secured without it. The other pertinent material is set out in Ford intra-corporate communications in the form of pure opinions that the infant Motorcraft project should have a “good” name and that modest expenditures should be budgeted to create one. The authors, sometimes anonymous, did not ground their beliefs upon any actual appraisal of sales development predictable as notoriety grew. Upon these unexplained declarations the Government relies almost completely. Mr. Filco was its single living exponent on the aftermath of the acquisition in the ignition field. Although plaintiff asserts that with the annexation of “Autolite” to Ford’s other assets the “scale has been tipped decisively” against smaller competitors, he was never asked about the value of labeling. Since his direct testimony consumes a mere nine pages of the transcript, the neglect cannot be attributed to insufficient time or an unwillingness to risk confusion by probing too many topics. Shortly after this trial had been concluded, the Department of Justice told the Supreme Court in another Section 7 proceeding, where the assigned error below had been the allegedly excessive credence given by the judge to statements of company officials: “In our view, management views, at whatever level, should not be the focus of analysis.” Brief for Appellant, p. 43, United States v. Penn-Olin Chemical Co., 389 U.S. 308, 88 S.Ct. 502, 19 L.Ed.2d 545 (1967). Irrespective of the soundness of this antisubjectivism under all conditions, its virtue here is manifest. The solution to the question posed by the sale of “Auto-lite” must turn upon empirical investigation, for, unlike the situation where the issue is a debated course of conduct as it was in Penn-Olin, no official’s reflections could modify the economic structure. What counts is buyer sentiment and, in establishing this, the United States has been utterly deficient. The evidence is in bad shape in another way. Since the object is popularity among garagemen who daily see defendant’s engines, the odds are that Ford would have elevated “Motorcraft” quickly and quite painlessly by conferring upon it original-equipment exposure. Electric Autolite had no full-range line of its own in 1961; thus, “Autolite” had no submarket share which it could have brought to Ford, and the take-over did not abort the defendant’s potential to cut into its grasp on the trade. Electric Autolite thereafter introduced a multi-purpose package and certainly would have marked it with “Autolite” if it still owned the name. Were branding a cardinal consideration, competitors with labels of low ratings would have been up against two major hurdles where now there is one. There has been no attempt to suggest what this double handicap would have meant to them in contrast to the Ford-“Autolite” union. The residual facet of the Government’s four-pronged attack is the assumption of the Autolite distribution system. What really transpired is much less menacing than the imposing nomenclature used to describe it. Ford received six regional offices, personnel and a list of Electric Autolite’s warehousers and jobbers. All of these have been and still are at liberty to deal with anyone they wish. Each old direct account had to be visited individually and, if it consented, be re-signed by defendant. Within a few months, 52 did enter into new ignition contracts. However, 50 of these for the previous year had also been involved in the Motorcraft experiment. They belonged to the Automotive Electric Association and looked upon Ford as a source of genuineness. By mid-1966, direct accounts totaled 156, of which 104 in 1960 had been pledged to neither Ford nor Autolite. The same bloc of 50 had been committed to both. The net increase traceable with any semblance of accuracy to the acquisition is two first-layer middelmen, who may or may not care about Ford’s all-make assortment. A fair assessment of the evidence justifies at most the inference that Ford possibly has benefited from the Auto-lite bargain. Section 7 is a prophylactic where competitive harm looms reasonably probable and substantial. Brown Shoe Co. v. United States, supra. Apart from attempting to apply the likelihood and significance tests, the Court would face a hopeless ordeal in trying to translate even certain gain to Ford into competitive injury. Although no statistics have been proffered, it is a safe bet that Ford has a large share of the market starring its original-equipment-type line, due solely to the extensive but decreasing demand for factory duplicates and the company’s unique capability to meet it. Defendant’s all-make success is not susceptible to an educated guess. Yet the advantages suspected by the United States to be fruits of the transaction in suit, if they exist, would be observable only in the wide-application submarkets, where the merits of branding and adjunctive products such as spark plugs and batteries would not be eclipsed by authenticity. Furthermore, unless the harm in the submarkets be of the requisite dimension, neither could be the effect in the markets. The Government’s working premise must be that, given any degree of advantage to defendant, sufficient competitive detriment arises from the fact that Ford is big and some of the opposition is not. Present or trending concentration —indeed, all numerical intelligence — is thus rendered superfluous. However, by adopting this stance it has forsaken recourse to many of the doctrines it previously fought to mold, such as the “ranking rules” of United States v. Philadelphia Nat’l Bank, 374 U.S. 321, 83 S.Ct. 1715, 10 L.Ed.2d 915 (1963) and United States v. Aluminum Co. of America, 377 U.S. 271, 84 S.Ct. 1283, 12 L.Ed. 2d 314 (1964). The alarming merger tendency rationale of United States v. Von’s Grocery Co., supra, is inapposite. One is even hard-pressed to speak knowledgeably about incipiency, although he could conjecture. He might start with the simplistic supposition that size always harbingers an inordinate command. Even the United States senses the inherent unreliability of this thesis when it doubts, albeit without foundation in the record, that defendant could not have averted the collapse of Motorcraft had it not been for outside aid. He could postulate dominance on Ford’s car population, which, according to the testimony, influences some all-make clientele. This approach would close the gap left by the Government’s reluctance to disclose how similarly endowed firms, like General Motors here, are doing, and, therefore, must be rejected. Perhaps the most tolerable course, although not to the Court, would be to devise some theory about the inexorableness, of historical patterns to prophesy from Ford’s participation in the vehicle oligopoly that it is destined to repeat this achievement with full-coverage ignition parts. Ill BATTERIES Besides the fact that the relevant technology is widely known and unprotected by patents, automotive batteries have little in common with either spark plugs or ignition parts. Manufacturing facilities can be operated efficiently on a very small scale and their outputs are highly fungible. No component must be designed to exacting tolerances. The only problem in matching a storage battery to an engine is size, and a line of five sizes will satisfy every application. For this reason, there is no overt tendency for a replacement to follow the vehicle maker’s choice of brand. The article is heavy and bulky, and in order to avoid prohibitive freight penalties, the nationally oriented producers have plants around the country. On the other hand, because low-volume construction is profitable, some 150 companies compete in regional markets, often as geographically confined as west central Florida or New York City. Service-battery purchasing, occurring at least thrice during the lifetime of the average car, is frequently a spur-of-the-moment affair, immediately preceded by that sinking feeling associated with a driver’s impotence at the starter, and is accomplished through the nearest retailer— usually a filling station — on the basis of whatever name happens to be in stock. In instances attended by less urgency a buyer may visit a mass merchandiser dealing over-the-counter under its own trademark, which is invariably able to give the best price. Since labeling is of negligible import under emergency circumstances and outlets of this kind often patronized under others, a large amount of a typical major battery builder’s business is for private-brand accounts, which, overall, consume 55% of production. In addition to such famous chains as Sears, Roebuck and Montgomery Ward, many oil companies fall into this category along with localized and eoast-to-coast groups of department, hardware, cut-rate, tune-up, and tire and accessories stores. Joining them at a fast pace have been non-integrated vehicle firms, notably American Motors and Chrysler, for both installation and wholesaling to franchise dealers. Fabricators derive approximately the same net revenue per item whether they sell to these quantity customers or through their own efforts, including distribution expenses, in the aftermarket. Among them five were responsible for more than 80% of the domestic shipments between 1955 and 1960: Electric Autolite, Electric Storage Battery, General Motors, Globe Union and Gould National. While all maintained proprietary insignia, those of the first three — •“Autolite,” “Willard” and “Exide,” and “Del-co,” respectively — were the most popular. At the end of this period, Autolite was functioning with six well-dispersed factories, of which all but Owosso now belong to ELTRA; a seventh had been decommissioned in recognition of traditionally static demand and the 25% overcapacity problem felt by an industry generally thought, nevertheless, to be in good health. Due to the essentially standardized nature of the commodity and its perennial adaptability without modification to Detroit’s specifications, original-equipment-sourcing habits have not been as fixed in this area as elsewhere. Of course, General Motors’ needs have long been met internally. Since the mid-1930’s Chrysler relied principally, and on occasion entirely, upon Autolite, but this practice changed drastically in 1956 when it began to turn chiefly to Gould National. Ford regularly called upon several if not all of the Big Five except General Motors in a single year. This practice has continued despite the acquisition, for, in rough terms, Owosso’s maximum annual capability is about 2.3 million units, or less than the 2.6 million cars, trucks and tractors with an average of one battery each rolled out by defendant in 1964. At the same time the independent aftermarket swallowed in excess of 1.3 million, and the special franchisee channels more than 0.5 million elements bearing Ford’s “Autolite” label. Consequently, three years after the transaction defendant’s outside sourcing missed its 1960 total of better than 2.6 million by only about 160,000. While foreclosure of Ford as a customer, which the Government urges is of considerably greater significance than these computations suggest, is one of the allegations in the complaint, attention should first be directed to the horizontal aspects of the 1961 agreement. Previously, defendant had not been a battery manufacturer; thus, the takeover of the Michigan plant did not give rise to the implications accompanying the classic merger between direct competitors. Illegality cannot be gauged by merely adding shares or figuring the rise in concentration in the line of commerce. A more extensive review must be embarked upon to determine what potential Ford had for becoming a producer without assistance from Autolite and what deleterious result the acquisition may have had in light of a possibility of growth in this alternative manner. Plaintiff begins, and so might the Court, with a look at defendant’s 1960 financial picture, showing assets surpassing three and three-quarters billion dollars and net yearly sales of more than five billion. However, if resources alone were the key, Ford, which in the contemporary era has always stood near the very top of the list of America’s foremost industrial corporations, would have to be considered a likely entrant into practically any field. While the evidence lacks a precise indication of the degree to which the firm’s holdings could have been dedicated to or hypothecated for any new venture, it does prove that Ford was seriously exploring opportunities for automotive and allied expansion as well as for diversification. From this activity and the enterprises under examination, the inference is plain that defendant could have borne the relatively small outlay and obtained the little expertise necessary to commence a battery operation. Ford’s main line of endeavor did foster a special interest in batteries, yet it could have conveniently supplied itself but still have avoided what for present purposes is the really meaningful risk of seeking the favor of other, smaller buyers less able to ward off the evils of insufficient competition. Only one preliminary study was made —in 1960 — and the ensuing revelations about prospective profitability were highly discouraging and depicted Ford as a potential contender in a most remote sense. In the face of defendant’s target of 15% net after-tax return on new investments, this estimate pegged earnings at 5.5% of capital employed. Furthermore, the dismal projection, formulated with a multi-plant network in mind, was contingent upon a 10% penetration of the market over and above in-house and franchisee requirements. Apparently the only option to a full national undertaking contemplated was a single-facility program to furnish about a third of the assembly-line quota; this was calculated to pay back 3.1%. These forecasts, not dependent for their pessimism upon temporary conditions or severe startup costs, came at a time when Electric Autolite, through both proprietary and private labels, commanded slightly under 10% of the replacement custom. Ford had no peculiar advantage suggesting a likelihood that a one-tenth goal was easily attainable. Although “Delco” is the leader in the aftermarket, this achievement seems generally unrelated to its new-car association at General Motors; “Autolite’s” share there was in the proximity of 4% in 1959 and 1960 just as it was being disengaged at Chrysler, which, incidentally, did not include batteries among the electrical items it was integrating. Requests for original-equipment replicas as such have been miniscule. Defendant’s factory-installed brands in the late 1950’s, e. g., “ThunderPower,” available exclusively through its dealers, serviced a mere 6% of the Ford vehicles on the road. “Exide” and “Willard,” handled by many types of retailers but having virtually no background of new-automobile affiliation, ran fractions of a point behind “Autolite” in a 1964 survey. In short, Ford’s reaching 10% meant, in all probability, that it would have to secure much private-name business, just as every maker except General Motors with anything approaching an impressive standing has done. For this struggle defendant was particularly unsuited because many of the private accounts are rivals in car, truck and tractor construction. These considerations demonstrate primarily that Ford was far from the brink of expanding internally and, secondarily, that its potentiality may have had an imperceptible influence upon the industry as already composed, functioning at three quarters of peak load and unshielded by any significant barriers against newcomers, which, unless they had more ability than Ford seemed to, were liable to end up simply additional numbers. Thus, this case is quite distinguishable from FTC v. Procter & Gamble Co., 386 U.S. 568, 87 S.Ct. 1224, 18 L.Ed.2d 303 (1967), and United States v. El Paso Natural Gas Co., 376 U.S. 651, 84 S.Ct. 1044, 12 L.Ed.2d 12 (1964), wherein the Court noted the undeniable concern over the plans of extraordinarily competent outsiders on the part of current competitors, which presumably moderated their prices so that invasion would seem less inviting. The Government has not attempted to analyze quantitatively the effect Ford may have had nor even to establish that the ranks of conceivable entrants — and, on balance, this is all Ford was — were thin or that some of the 150 small outfits were not themselves toying with the idea of going into new territorial markets. Instead, plaintiff espouses a per se rule that the removal of any bystander, regardless how weak its impact, in the context of concentration is violative of Section 7. The law has not gone so far. See United States v. Penn-Olin Chemical Co., 246 F.Supp. 917 (D.Del.1965). Nevertheless, there is no cause to pursue this tact. Ford did not extinguish its potential. From the standpoint of manufacture, it neither joined with nor substituted for a going company. Electric Autolite (ELTRA) was left where it had been, as the fifth-largest firm, and in possession of most of its capacity together with the money and a base for growth as the occasion arises. For the moment anyway, it also retained performance substantially untouched, averaging 10.-1% of the industry total in the period 1962-64, down only 2.8 points from the average for the years 1958-60. Defendant took the one realistic route open to it by obtaining a respected name to insure a chance of success and to make an expenditure on hardware worthwhile; however, it is far from a fully matured fabricator. Besides the half of the immediate demand which Owosso cannot satisfy, there is vast room for improvement in strategic location. Today Ford fills the bulk of the orders from warehousers and jobbers with outside purchases. It has already announced its intention of starting up a new factory in Louisiana. More are in the offing if Ford is to become an efficient countrywide force — and if defendant’s potential was for only the Michigan area, it was obviously of little value. Certainly the transfer of “Autolite did not subvert the known competitive structure. On this record defendant is powerless to do more for the name than did Electric Autolite with Chrysler exposure — about 4% of the replacement-battery total. 1964 research into householder buying, which compiled the most authoritative comparative data, assigned it 2.3% and placed it sixth, 16.2 points behind frontrunning “Delco,” in a field in which the first five labels aggregated 51.7%, but the following eight only 12.7%. Among filling stations, where a third of all sales to individuals are rung up and the brands of mass merchandisers infrequently handled, it came in eighth with 1.1%. In no class of outlet did it surpass 8%. “Prestolite,” the sole proprietary mark of Electric Autolite (and ELTRA) since 1961, is less familiar than the one relinquished, although by 1964 it appeared on approximately 1% of all replacements and, according to the evidence, will gain in the independent aftermarket substantially as fast as any that Ford may have founded there. In the perspective of these statistics, coupled with information that one consumer in twelve specifies a name and one in a hundred is so adamant that he will refuse all others, at worst ELTRA has suffered minor harm. Detecting injury when the inquiry is framed in the appropriate language of competitive deterioration is exasperating in its futility. The emphasis today is on the private labels. As a practical matter they are never stocked side by side. Each of the prominent ones belongs to a particular chain and in large measure reflects the owner’s reputation as a tire, accessories or gasoline vendor; or, in the case of “Allstate” (Sears, Roebuck) and “Riverside” (Montgomery Ward), the benefits of low distribution and pro-rated-overhead costs. Only four proprietary insignia are among the foremost thirteen according to the 1964 poll: “Delco” (18.5%), “Autolite” (2.3%), “Exide” (2.2%) and “Willard” (1.8%). Whatever bothersome bunching-up there is involves “Del-co,” “Allstate,” “Riverside”, “Wizard” (Western Auto Stores) and “Atlas” (Standard Oil), the five with the 51.7.% cumulative share. Excluding this quintet, any but an ivory-tower theoretician would hesitate to proclaim the feasibility of a more diffuse consumer-goods market. For the acquisition to have noticeably jeopardized the reduction of the concentration which does exist, either of two absurd assumptions is indispensable: that Ford, if it were to make a grassroots entry, would do better by introducing a trademark previously unheard of in the arena than it will with “Autolite,” or that after years of watching “Delco” predominate, ELTRA (Electric Auto-lite) will suddenly find the strength, somehow denied to defendant, to stem the tide but will falter without the old name. The nature of the distributorship assignments to Ford is described in Part II. By the Fall of 1961, 831 direct battery accounts had recontracted, although 298 of them were lost by mid-1966. Presumably, ELTRA and Ford can grant identical terms to middlemen, to which, therefore, the distinction between the two must lie in “Autolite.” ELTRA has been set back insofar as it is cut off from wholesalers who are content with “Autolite” and undesirous of adding “Prestolite.” Competition may have sustained a blow only if good distributors are scarce, as they seem to be, so that the unavailability of those who do not want an extra line would be an oppressive handicap and if defendant, were it to inaugurate a label, could be expected more readily than ELTRA to persuade those carrying “Autolite” to take on another kind as well, e. g., if original-equipment identification were a significant factor in advancing sales. As a conceivable entrant, Ford, by definition, had latent appeal to some warehousers and jobbers. Of course, ELTRA has distributors today. There is no sound basis for contrasting the sizes and expansion characteristics of the two groups, one real and the other conceptual, on the evidence at hand. The critical feature of the Government’s case is “Autolite” rather than Owosso, which is so clearly inadequate to diminish any important battery potential Ford may have had. Thus, the United States must prove that defendant could have given birth to a brand, which, working in opposition to “Autolite,” would probably do more good for the market than does this label juxtaposed with “Prestolite.” See United States v. Penn-Olin Chemical Co., 378 U.S. 158, 84 S.Ct. 1710, 12 L.Ed.2d 775 (1964). Given “Autolite’s” quite unspectacular pre-1961 showing, which “Prestolite” could well match in a few years, plaintiff bore an imposing burden from the outset. It failed formally when it could adduce no evidence that Ford has special talents conducive and adaptable to exalting trade names and to overcoming the general apathy toward them. Where abundant indications point the other way, the Court will not read into “Delco’s” achievements a correlation between initially equipped vehicle population and aftermarket volume, absent testimony sufficient to weld the link. It will not latch on to Ford’s wealth and surmise that therein lies the seed of brand power, when, for all that appears, ELTRA is every bit as capable of launching a massive campaign of any appropriate sort, from discounts to media publicity, if there were merit in this course despite the steady downward trend of proprietary labels and the counterbalancing emphasis on private accounts as the backbone of the battery enterprise. Much the same understanding of the situation which undermines the United States’ contention that the acquisition had adverse horizontal consequences constrains acceptance of its supplemental view that detrimental vertical effects are likely to be of enough magnitude to warrant condemning the arrangement. Because Ford is now a battery manufacturer, the Government maintains, other producers sooner or later will be denied the chance to deal with what in 1960 was one of their very best customers, actual or hopeful. Admittedly, the foreclosure so far has been de minimis — 160,000 units in 1964 in comparison with defendant’s 1960 procurements and about all that can be anticipated with Owosso’s 2.3 million capacity. However, in a strong economy, Ford should build at least 2.5 million vehicles annually and send 500,000 batteries to franchisee repair departments. Requirements equivalent to the sum of these last two figures are at present obtained largely from other companies but could be met internally if more plants are constructed. Thus, the problem takes on complexities not brought to the surface in the decisions relied upon by plaintiff, e. g., United States v. E. I. DuPont De Nemours & Co., 353 U.S. 586, 77 S.Ct. 872, 1 L.Ed.2d 1057 (1957). Since Section 7 prohibits not every foreclosure but only those stemming from stock or asset transactions, the issue becomes whether the instant combination will probably spawn additional factories. That one is already on the drawing board is suggestive of an affirmative response. While post-merger planning cannot be determinative, the steps taken by Management here confirm the course shown by other relevant factors to be the reasonable choice of informed commercial judgment. The controlling consideration is the essence of what defendant received. Owosso does not lend itself to proliferation, having given Ford no technology or meaningful savings helpful in further integration. The relationship between it and any future facilities will be temporal rather than causal. Caution is in order lest every purchase of surplus machinery preceding greater expansion be misconstrued as the reason for the progression instead of part of a design which would have been executed as satisfactorily without assistance. “Autolite” is a different story. This name brought Ford into the independent aftermarket with an assured penetration of about 4% ab initio. It guaranteed goodwill with trade loyalty from the start, thereby alleviating the door-opening difficulty confronted by any new firm. Defendant took over from Electric Autolite an entire going business as surely as if the pair had merged. Although Ford subsequently has been engaged in this business, the “Autolite” independent aftermarket, on a national scale to the extent of 1.3 million batteries annually, 1.9 million of Owosso’s 2.3 million units in 1964 went to Ford assembly divisions, primarily in the Detroit area. The bulk of its service volume, including that through franchisees, beyond the normal transportation range from Michigan has been obtained elsewhere with a loss to defendant of a manufacturer’s profit. If it is wise to fabricate a portion of the total needs, the uncontradieted inference is that full production is even smarter over the long run where scale can be flexible and monetary outlay conservative Therefore, augmented and, because of freight penalties, scattered facilities are the foreseeable eventuality. Furthermore, a fair share of the investment which was projected by the 1960 preliminary investigation into battery opportunities to earn 5.5% has already been made in the form of working capital to finance inventories and credit for current replacement sales. Therefore, the rate of return could well be improved on incremental fixed assets, estimated at a net cost of four to ten million dollars for a seven plant series depending upon the size of each. Indeed, this study suggests a much more enticing yield- — now the difference between buying and making — if Ford can stay within the operating-expense framework which was employed as a guideline by the author of the 1960 report. In a