Full opinion text
MEMORANDUM OPINION AND ORDER FINESILVER, District Judge. The Government commenced this action pursuant to 15 U.S.C.A. § 25 (1948) [Clayton Act], challenging the acquisition by defendant M.P.M., Inc., [MPM] of two formerly independent ready-mix concrete firms, Mobile Conerete, Inc. [Mobile] and Pre-Mix Concrete, Inc. [Pre-Mix], and the subsequent corporate merger of the firms as violative of Section 7 of the Clayton Act, 15 U.S.C.A. § 18 (1950). The Government seeks divestiture of the acquisition and merger and injunctive relief to prevent defendants from acquiring similar companies in the future. The several pivotal issues in this litigation are: (1) Do the facts of this case satisfy the “engaged in commerce” jurisdictional requirement? (2) Is ready-mix concrete a “line of commerce” within the meaning of the Clayton Act? (3) What geographical area comprises the appropriate “section of the country” for purposes of this action? (4) Was Mobile a “failing company” in the sense which will avoid the strictures of the Clayton Act? (5) Did the acquisition and/or the merger complained of result in a substantial lessening of competition or tend to create a monopoly? Finally, (6) Are certain equitable and constitutional defenses available to defendants under the facts peculiar to this case which defeat plaintiff’s attempt to apply the Clayton Act to them? In this opinion, we consider in detail each of the contentions of the litigants. For the reasons articulated below, we find in favor of the defendants. The parties have been previously notified of this result in our Preliminary Order of January 27, 1975. I. BACKGROUND For an overview of this case, we recite the following uncontroverted facts and chronology of events. During the pertinent times, Mobile was engaged in the production and sale of ready-mix concrete in the Denver metropolitan area. For approximately 15 years prior to June 1, 1967, Mobile was principally owned by Eobert Anderson. On June 1, 1967, Mobile was purchased by Meade, Boothby, and Fulen-wider (Meade at 272-74). Meade became the majority (57%) stockholder and active company manager. Boothby and Fulenwider each held 21%% of the stock (Meade at 272-74 & 315-16; Boothby at 717-18). Prior to June 12, 1970, defendant Pre-Mix was engaged in the production and sale of ready-mix concrete in the Denver metropolitan area (P/T 1 at 4). During this period it was owned by M. E. Moore, MEMCO Corp., and Texas Industries, Inc. (P/T 1 at 9). On May 29, 1970, defendant MPM was incorporated under the laws of the state of Colorado. It functioned as a holding company with Meade and Booth-by as the sole stockholders (Meade at 306-07),. Thereafter, on June 12, 1970, MPM acquired all of the outstanding common stock of both Mobile and Pre-Mix (P/T 1 at 4) and' commenced joint operation of the two companies. Pursuant to Colorado statutory law, on November 12, 1971, Pre-Mix, Mobile and Mobile Concrete of Colorado Springs, Colorado (an off-shoot of Mobile, Meade at 276-78) merged under the name of Pre-Mix. Plaintiff filed the present action in 1972, claiming a violation of § 7 of the Clayton Act. The Government contends that the violation consisted of the acquisition by MPM of all of the outstanding common stock of two formerly independent ready-mix companies and the merger of Mobile and Pre-Mix. These activities, the Government alleges, substantially lessened competition or tended to cause a monopoly in the ready-mix concrete industry within the Denver metropolitan area (designated to include four counties: Denver, Adams, Arapahoe, and Jefferson). Market sales figures for the Denver metropolitan area ready-mix concrete industry demonstrate that for the year 1969 Pre-Mix was the third largest producer and seller of ready-mix in this area with a market share of 16.5% (Appendix I). Mobile was the fourth largest producer and seller with a 14.8 % share of the market during the same period (Appendix I). In 1970—the year in which MPM acquired the stock of the two companies and began operation of them on a joint basis—the combined sales of Mobile and Pre-Mix aggregated 31.6% of the ready-mix concrete market in the four-county area, making this corporate combination the largest single producer and seller of ready-mix concrete in metropolitan Denver (Appendix I). II. “ENGAGED IN COMMERCE” REQUIREMENT Federal courts have jurisdiction to “prevent and restrain violations” of the Clayton Act. 15 U.S.C.A. § 25 (1948). Activity constituting a “violation” of the Act is defined in 15 U.S.C.A. § 18 (1950). This statute, inter alia, provides; No corporation engaged in commerce shall acquire, directly or indirectly, the whole or any part of the stock or other share capital and no corporation subject to the jurisdiction of the Federal Trade Commission shall acquire the whole or any part of the assets of another corporation engaged also in commerce, 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. For pur purposes, the term “commerce” means “trade or commerce among the several States . . . .” 15 U.S.C.A. § 12 (1914). For a violation of the Clayton Act to occur, both the acquiring and the acquired companies in a merger case must be engaged in interstate commerce. There is no question in this case but that all sales of ready-mix concrete by both Mobile and Pre-Mix were and continue to be solely intrastate—they sell no product outside of the state of Colorado. The Government contends, however, that the interstate commerce jurisdictional requirement is met because both companies purchase substantial amounts of cement necessary for the production of ready-mix concrete from out-of-state suppliers. Data from the year 1969 is relied on in support of this allegation (GX 22). Defendants counter with two arguments. First, they maintain that since early 1970 (two years prior to the April 11, 1972, filing of this action) Mobile and Pre-Mix obtained all but 4% of their cement requirements from suppliers located within Colorado. This amount, they argue, is de minimis and therefore insufficient basis upon which to posit jurisdiction in the present action. Second, they contend that even if such amount is not considered di minimis, jurisdiction cannot attach because production and sale of ready-mix concrete is purely a local business activity, and Sherman Act cases are inapposite in a § 7 Clayton Act suit—i. e., even if defendants do purchase essential ingredients from foreign suppliers and are thus within the flow of commerce, such fact is of no avail to a plaintiff in a Clayton Act prosecution. Serious questions are thus raised as to our power to entertain this suit. Cement is an essential ingredient of concrete (GX 22, para. 14; Thurman at 234 & 236) and is produced by grinding and heating limestone with additives (GX 16 at 6; Berkey at 33-34). Ordinarily, cement is shipped from production plants to concrete-producing customers on a daily basis by truck and rail (Barnes at 44-45; Smith at 59; GX 17 at 30; GX 18). Ready-mix companies blend the cement with other ingredients (sand, gravel, additives, and water) to make concrete (GX 17 at 4-5; GX 16 at 13; GX 15 at 17). Ready-mix concrete is delivered to the customer’s job site in a plastic, viscous state and poured from mobile trucks into building forms in which the concrete subsequently hardens through the hydration process (Brown at 73). The Government's evidence demonstrates that during the year 1969 both Mobile and Pre-Mix bought substantial amounts of their cement requirements from out-of-state suppliers and purchased, respectively, 56.% and 53% of the necessary cement from sources located outside Colorado ■ (P/T 1 at 7; GX 22) (percentages computed from figures given in these sources). These facts are undisputed. Also undisputed, however, is the fact that early in 1970 the Martin Marietta company (a primé supplier of both defendants) opened a new cement production facility in Lyons, Colorado (Barnes at 47). Prior to that time, the cement supplied by Martin Marietta to Mobile and Pre-Mix originated from Tulsa, Oklahoma (P/T 1 at 7; GX 22, para 11). Defendants assert—as a result of this change in source of supply—that as of the time of the allegedly unlawful stock acquisition (June 12, 1970) only a small amount (4%) of the combined cement requirements of Mobile and Pre-Mix was being purchased from non-Colorado suppliers. We note that although this assertion was made several times by the defendants in pre- and post-trial pleadings, nothing was offered by defendants in the way of exhibits or testimony to substantiate this statement in the record other than the fact that after early 1970, all Martin Marietta cement came from Colorado and not Oklahoma (Barnes at 47). The Government offered no post-1969 data with respect to cement purchases by defendants. However, neither did the defendants. Thus we need not consider the issue of whether purchase of ingredients in the amount of 4% is di minimis. Since it is uncontroverted that neither defendant in this action effectuates sales of ready-mix concrete across state lines, determination of the jurisdictional question depends upon the resolution of the following issue. Can the fact that a defendant in a § 7 Clayton Act suit uses ingredients purchased across state lines for the production of a product sold exclusively intrastate satisfy the “in commerce” jurisdictional requirement? We think that this question should be answered in the affirmative. Initially, we note that eases arising under the Robinson-Patman Act, 15 U.S.C.A. § 13 (1936), have uniformly held that at least one interstate sale is required before jurisdiction under that statute can attach. See, e. g., Belliston v. Texaco, Inc., 455 F.2d 175 (10th Cir. 1972), cert. denied, 408 U.S. 928, 92 S.Ct. 2494, 33 L.Ed.2d 341 (1972). The movement of ingredients of a product across state lines cannot confer jurisdiction under that Act when sales are exclusively intrastate. Id.; Scranton Construction Co. Inc. v. Litton Industries Leasing Corp., 494 F.2d 778 (5th Cir. 1974), U.S. appeal pending. The present action, however, arises under § 7 of the Clayton Act anti-merger provisions and not under the price discrimination provisions of the Robinson-Patman Act. In cases arising under the former, courts have construed the “in commerce” requirement to be synonymous with the commerce requirement under the Sherman Act, 15 U.S.C.A. § 1 et seq. (1955), as commonly interpreted by the courts. In such cases, the movement of mere ingredients across state lines can suffice as a jurisdictional basis. See, e. g., United States v. South Florida Asphalt Co., 329 F.2d 860 (5th Cir. 1964); Hardrives Co. v. East Coast Asphalt Co., 329 F.2d 868 (5th Cir. 1964). Furthermore, Sherman Act jurisdiction may be properly premised upon purely local activities which have a substantial effect on interstate commerce. See, e..g., Mandeville Island Farms, Inc. v. American Sugar Co., 334 U.S. 219, 68 S.Ct. 996, 92 L.Ed. 1328 (1948). The following cases offer support for the proposition that the jurisdictional requirements under § 7 of the Clayton Act and the Sherman Act are substantially equivalent. Standard Oil Co. v. United States, 337 U.S. 293, 314-15, 69 S.Ct. 1051, 93 L.Ed. 1371 (1949); Transamerica Corp. v. Board of Governors, 206 F.2d 163, 166 (3d Cir. 1953), cert. denied, 346 U.S. 901, 74 S.Ct. 225, 98 L.Ed. 401 (1953); cf. United States v. Grinnell Corp., 384 U.S. 563, 573, 86 S.Ct. 1698, 16 L.Ed.2d 778 (1966). The precedential value of these cases remains fully viable despite the recent case of Gulf Oil Corp. v. Copp Paving Co., Inc., 419 U.S. 186, 95 S.Ct. 392, 42 L.Ed.2d 378 (1974). We do not regard Copp directly dispositive of a contrary result in the present action. First, in that case, the products sold by the companies involved was “made wholly from components produced and purchased intrastate.” 95 S.Ct. at 397. The instant action, on the other hand, involves companies which purchased ingredients from foreign suppliers. Second, although the Supreme Court in Copp expressed some doubt as to whether the reach of § 7 of the Clayton Act should be coextensive with that of the Sherman Act, it did not so decide because the case did “not present an occasion to decide the question.” 95 S.Ct. at 402. Third, the plaintiff in the present suit, unlike the Copp plaintiffs, did not rely on a “nexus” theory of jurisdiction or the affectation doctrine. Rather, the Government rests its jurisdictional argument on the fact that the defendants’ activities are within the flow of commerce due to the fact that some part of the product’s essential ingredient (cement) has a point of origin from a place outside of the state of Colorado where all ultimate sales take place. See United States v. Richter Concrete Corp., 328 F.Supp. 1061 (S.D.Ohio 1971). In view of the preceding discussion, we hold that the defendants herein were engaged in commerce within the meaning of § 7 of the Clayton Act in view of the fact that an essential component of their product was in the flow of commerce. III. “LINE OF COMMERCE” Competition is the essential concern of the antitrust laws. Thus, prior to considering whether a challenged merger may have a proscribed effect on competition, it is necessary to define the' market with respect to which the competition may be said to exist: “ [d] etermination of the relevant market is a necessary predicate to a finding of a violation of the Clayton Act because the threatened monopoly must be one which will substantially lessen competition ‘within the area of effective competition.’ Substantiality can be determined only in terms of the market affected.” Brown Shoe Co. v. United States, 370 U.S. 294, 324, 82 S.Ct. 1502, 1523, 8 L.Ed.2d 510 (1962), quoting from, United States v. E. I. duPont de Nemours & Co., 353 U.S. 586, 593, 77 S.Ct. 872, 1 L.Ed.2d 1057 (1957). “Unless we know where to look, in other words, we cannot know what effect the merger will have or how substantial that effect will be.” Kintner, Primer on the Law of Mergers at 221 (1973). The “relevant market” concept entails two separate dimensions: (1) the product market or “line of commerce,” and; (2) the geographical market or “section of the country.” Indiana Farmer’s Guide Pub. Co. v. Prairie Farmer Pub. Co., 293 U.S. 268, 279, 55 S.Ct. 182, 79 L.Ed. 356 (1934). At issue in this case is whether ready-mix concrete is a product market or “line of commerce” with regard to which there is competition of a nature protectible by a Clayton Act suit. Defendants maintain that ready-mix concrete is not the relevant product market in this action but that the sphere of competition must also include other construction materials such as brick, steel, wood, and especially, prefabricated concrete (precast and/or prestressed). In Brown Shoe, supra, 370 U.S. at 325, 82 S.Ct. at 1523, the Court stated that: 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. In support of their argument for a product market broader than that postulated by the Government, defendants point to the interchangeable uses and cross-elasticity of demand for construction materials. They contend that since substitutes for ready-mix concrete are available then such materials must be considered to be in competition with it. Defendants find authoritative, by analogy, United States v. General Dynamics Corp., 415 U.S. 486, 94 S.Ct. 1186, 39 L.Ed.2d 530 (1974), in which the Court left undisturbed a district court finding that the relevant product market was the energy market as a whole—not just coal. We find defendants’ attempt to expand the product market from ready-mix concrete to construction materials, in general, unpersuasive. Case law suggests several criteria against which the facts of a particular case can be measured. These include the following “practical indicia”: [1] industry or public recognition of the submarket as a separate economic entity, [2] the product’s peculiar characteristics and uses, [3] unique production facilities, [4] distinct customers, [5] distinct prices, [6] sensitivity to price changes, and [7] specialized vendors. Brown Shoe, supra, 370 U.S. at 325, 82 S.Ct. at 1524 (citation and footnote omitted) (bracketed numbers added). Comparing the evidence presented at trial to the Brown criteria, we find that ready-mix concrete is a proper “line of commerce” within the meaning of the Clayton Act. We do not view defendants’ reliance on General Dynamics, supra, as persuasive of a contrary finding. First, the analogy defendants would have us accept (that coal is to the energy market as ready-mix concrete is to the construction materials market) misses the mark for the reason that ready-mix concrete has peculiar characteristics which render it, as a practical matter, exclusively appropriate for some uses. Second, the Court did not, in General Dynamics, pass on the question of the relevant product market but affirmed the district court’s decision against the Government on the basis of that court’s reliance on the scarcity of usable coal reserves as the primary basis for its disposition of the case. General Dynamics, supra, 415 U.S. at 510, 94 S.Ct. 1186. The evidence adduced at trial satisfies the parameters of the relevant product market enunciated in Brown and related cases. Certainly, the building industry recognizes ready-mix concrete producers as comprising a separate economic entity within the construction trade. Indicative of this recognition is the fact that trade associations consisting only of ready-mix concrete companies have-been formed to promote use of their product (Smith at 67; Thurman at 320). Further evidence that ready-mix concrete is recognized as a distinct product is indicated by its assignment of a standard industrial classification code (DX HH at 141; Peterson at 641-42). Production facilities of ready-mix concrete may be utilized only for the production of ready-mix concrete and for no other purpose (Morton at 145; Meade Deposition at 18-19). No Denver ready-mix firms have significant sales of materials other than ready-mix concrete (Boothby Deposition at 21-25). Delivery equipment is equally specialized; ready-mix concrete trucks are not suitable for any purpose other than the delivery of ready-mix concrete. These specially designed large vehicles are expensive and constitute a high proportion of the capital investment in a ready-mix company. Ready-mix concrete is unique among construction materials to the extent that it is the only practicable material for some building purposes. Unlike other construction materials generally, ready-mix can be used to conform to any desired shape within practical structural design limitations (Brown at 73). It also has qualities of tremendous strength, durability, and fire resistance upon hardening (Brown at 73; Buchanan at 108). The testimony indicated that building contractors extensively use only ready-mix concrete for the following construction purposes: foundations (Brown at 72-73 & 75; Curtiss at 124); footings (Buchanan at 109; Curtiss at 124; Yordan at 178; Thurman at 253-54); floor slabs (Brown at 75; Buchanan at 108; Yordan at 178); sidewalks, curbs, and gutters (Brown at 75; Buchanan at 108-09; Morton at 147-48; Yordan at 178; Thurman at 254-55). In sum, with few exceptions, ready-mix concrete is used in some phase of the construction of all modern buildings (Smith at 69). In view of the persuasive evidence outlined above (see also Yordan at 174; McNown at 749-55), we conclude that defendants’ objection to plaintiff’s characterization of ready-mix concrete as a “line of commerce” as defined in the Clayton Act has no basis in fact and is not in harmony with the economic or functional reality of the construction industry. Other courts faced with the question have reached a conclusion identical to that which we draw here—that ready-mix concrete is a proper “line of commerce” for Clayton Act purposes. See, e. g., Mississippi River Corp. v. FTC, 454 F.2d 1083 (8th Cir. 1972); United States Steel Corp. v. FTC, 426 F.2d 592 (6th Cir. 1970); United States v. Richter Concrete Corp., 328 F.Supp. 1061 (S.D.Ohio 1971). IV. “SECTION OF THE COUNTRY” The Clayton Act prohibits the combination of businesses: . . . where in any line of commerce in awy section of the country, the effect of such acquisition may be substantially to lessen competition, or to tend to create a monopoly. 15 U.S.C.A. § 18 (1950) (emphasis added). Preliminary to a determination of whether a violation of the Act has occurred, it is necessary to define the relevant “section of the country.” See, e.g., Brown Shoe, supra, 370 U.S. at 324, 82 S.Ct. 1502. For Section 7 purposes, “section of the country” is synonymous with the relevant geographical market which is defined “as the area in which the goods or services at issue are marketed to a significant degree by the acquired firm.” United States v. Marine Bancorporation, supra, 94 S.Ct. at 2869. “Section of the country” is not amenable to scientifically precise definition. Unquestionably, a certain amount of “fuzziness” is inherent in any attempt to delineate the required geographical boundaries in a Clayton Act suit. United States v. Philadelphia Nat’l Bank, 374 U.S. 321, 360 n. 37, 83 S.Ct. 1715, 10 L.Ed.2d 915 (1963). “Metes and bounds” descriptions cannot be realistically required. United States v. Pabst Brewing Co., 384 U.S. 546, 549, 86 S.Ct. 1665, 16 L.Ed.2d 765 (1966). The Government does have a burden, however, “to come forward with evidence delineating the rough approximation” of the geographical market in question. United States v. Connecticut Nat’l Bank, 418 U.S. 656, 94 S.Ct. 2788, 2796-97, 41 L.Ed.2d 1016 (1974). Political boundaries or Standard Metropolitan Statistical Areas may or may not suffice in a given case. Id. The burden which the plaintiff must discharge is best described as one which must meet a standard of “reasonable” or “rough approximation.” Id.; Marine Bancorporation, supra, 94 S.Ct. at 2868. In applying this standard, we are guided by these concepts: Congress prescribed a pragmatic, factual approach to the definition of the relevant market and not a formal, legalistic one. The geographic market selected must, therefore, both “correspond to the commercial realities” of the industry and be economically significant. Brown Shoe, supra, 370 U.S. at 336-37, 82 S.Ct. at 1530. More specifically: [T]he “area of effective competition in the known line of commerce must be charted by careful selection of the market area in which the seller operates, and to which the purchaser can practicably turn for supplies.” Philadelphia Nat’l Bank, supra, 374 U.S. at 359, 83 S.Ct. at 1739, quoting from Tampa Electric Co. v. Nashville Co., 365 U.S. 320, 327, 81 S.Ct. 623, 5 L.Ed.2d 580 (1961). Both firms with which we are concerned in this action marketed their product only in the near-north central eastern slope of the state of Colorado. At all times pertinent hereto, Mobile operated plants for the production of ready-mix concrete at five locations within the 4-county Denver metropolitan area, and Pre-Mix operated seven plants located in the same area (Appendix II). Thus- all plants of both companies were located either in Denver or a contiguous county. We are therefore not concerned with a national, regional, or even a statewide market. Rather, the market in question is clearly centered around the City and County of Denver, Colorado. Neither party appears to dispute the fact that Denver must be regarded as the hub or axis of the relevant geograhical market. The parties do vigorously differ, however, with respect to the question of how far the market radiates outward from Denver. The Government contends that the appropriate section of the country is limited to an area comprised of the following four counties: Denver, Adams, Arapahoe, and Jefferson (Appendix III). Defendants, on the other hand, maintain that the relevant geographical market must encompass a 10-county area along the Front Range of the Rocky Mountains. This area, in addition to the four counties! proposed by the Government, includes the counties of: Larimer, Weld, Boulder, Douglas, El Paso, and Pueblo (Appendix III). Defendants thus contend that the sphere of ready-mix sales should extend along the eastern side of the mountains from an area north of Fort Collins, Colorado, to an area south of Pueblo, Colorado—a distance of some 300 miles. In view of the nature of the product involved in this suit, we conclude that the “section of the country” conception offered by the defendants is overly and unrealistically expansive. We are persuaded by the evidence that the plaintiff satisfactorily met its burden as to this element of the case, and hold that the 4-county Denver metropolitan area (Denver, Adams, Arapahoe, and Jefferson counties) is the appropriate geographical market for purposes of this case. A critical limiting factor with regard to the distribution and sale of ready-mix concrete is the effective delivery radius from the company’s production plants. Concrete is an enormously heavy material, weighing almost two tons per cubic yard (Carter Deposition at 5-6 & 15). Obviously, the vehicles designed to transport it must be very large and expensive to operate. Since the concrete must be delivered in a viscous state, the delivery trucks must be equipped with a revolving storage drum. Delivery costs therefore are substantial and extremely significant in determining the price of the product. Transportation expenses present a formidable barrier to delivery of ready-mix concrete outside a relatively short distance from production plants (Yordan at 174-76). For the first six months of 1970, for example, the average round trip distance traveled by the delivery trucks of Mobile and Pre-Mix were, respectively, 14.01 and 17.38 miles (P/T 1 at 9). These figures suggest that the economically effective delivery radius for ready-mix concrete from the production facility is less than 10 miles. Industry statistics indicate that of all of the ready-mix concrete sold in the Denver metropolitan area, only a de minimis amount was sold by companies located outside that area—.5% in 1969 and 0.0% in 1970 (Appendix I at A-2). Construction contractors invariably turn to firms located within the 4-county area for supply of projects situated in that area. The above evidence demonstrates to our satisfaction that the delivery range for ready-mix concrete is limited to a relatively short distance from production plants. When this fact is coupled with the additional fact that all of the plants operated by Mobile and Pre-Mix were located within the 4-county area, we feel that the 4-county Denver metropolitan area must be considered a “reasonable approximation” of the relevant geographical area for purposes of this action. We recognize that the 4-county area is perhaps not a totally self-contained competitive sphere in all particulars. There is, no doubt, some overlap of competition on the outer perimeters of this area between companies with plants located in the Denver metropolitan area and those located nearby, but outside of, the area. Such “fuzziness,” however, cannot defeat the conclusion that the 4-county area substantially depicts the competitive arena pertinent to this suit. V. PROBABLE COMPETITIVE OR MONOPOLISTIC EFFECT A. Purposes of the Clayton Act Section 7 of the Clayton Act prohibits mergers where in a relevant product and geographical market “the effect of such acquisition may be substantially to lessen competition, or to tend to create a monopoly.” 15 U.S.C. § 18 (1950). Deliberate choice of the word “may” in the preceding phrase indicates that Congress’: . . . concern was with probabilities, not certainties. Statutes existed for dealing with clear-cut menaces to competition; no statute was sought for dealing with ephemeral possibilities. Mergers with a probable anti-competitive effect were to be proscribed by this Act. Brown Shoe, supra, 370 U.S. at 323, 82 S.Ct. at 1522. The Clayton Act provides “authority for arresting mergers at a time when the trend to a lessening of competition in a line of commerce [is] still in its incipiency.” Id. at 317, 82 S. Ct. at 1520. For a given merger to be proscribed, however, more is required than a “ ‘mere possibility’ of the prohibited restraint .... Probability of the proscribed evil is required.” FTC v. Consolidated Foods, 380 U.S. 592, 598, 85 S.Ct. 1220, 1224, 14 L.Ed.2d 95 (1965). Thus the Clayton Act is essentially preventive in nature. Congress intended that it be employable against mergers in a relevant market at a time when the trend toward concentration is merely incipient or a probability—as opposed to an accomplished fact or virtual certainty. Mergers which fall somewhere between the extremes of certain menace to competition and an ephemeral possibility of anticompetitive effect may be held violative of the Clayton Act. With regard to a determination of effect on competition, “Congress indicated plainly that a merger had to be functionally viewed, in the context of its particular industry.” Brown Shoe, supra, 370 U.S. at 321-22, 82 S.Ct. at 1522. A functional view of the industrial context entails consideration of several factors: That is, whether the consolidation was to take place in an industry [1] that was fragmented rather than concentrated [2] that had seen a recent trent toward domination by a few leaders or had remained fairly consistent in its distribution of market shares among the participating companies [3] that had experienced easy access to markets by suppliers and easy access to suppliers by buyers or had witnessed the ready entry of new competition or the erection of barriers to prospective entrants, all were aspects, varying in importance with the merger under consideration, which would properly be taken into account. Brown Shoe, supra, at 322, 82 S.Ct. at 1522 (bracketed numbers added) (footnote omitted). Listing of these factors is but another way of saying that, in a § 7 suit, the Court must undertake analysis of the history and structure of the relevant market in order to assess meaningfully the probable effect on competition portended by a particular merger. In cases, such as the one at hand, involving horizontal mergers, other factors deserve special attention: [1], the relative size and number of the parties to the arrangement; [2] whether it [the merger] allocates shares of the market among the parties; [3] whether it fixes prices at which the parties will sell their product; or [4] whether it absorbs or insulates competitors. Id. at 334-35, 82 S.Ct. at 1529 (footnote omitted). Objective criteria play an important role in making a § 7 predictive economic judgment. Such data, however, are but a point of departure in the Court’s analysis and are not conclusive in their effect. For example: Statistics reflecting the shares of the market controlled by the industry leaders and the parties to the merger are, of course, the primary index of market power; but only a further examination of the particular market— its structure, history and probable future—can provide the appropriate setting for judging the probable anti-competitive effect of the merger. Id. at 322 n. 38, 82 S.Ct. at 1522. See also General Dynamics, supra, 415 U.S. at 498, 94 S.Ct. 1186. In summary, “the statute prohibits a given merger only if the effect of that merger may be substantially to lessen competition.” Brown Shoe, supra, 370 U.S. at 332, 82 S.Ct. at 1527 (footnote omitted). The wording of § 7 “requires a prognosis of the probable future effect of the mérger.” Id. (footnote omitted). The burden to demonstrate a substantial lessening of competition or a tendency to create a monopoly lies, of course, with the plaintiff. United States v. First Nat’l Bancorporation, Inc., 329 F.Supp. 1003 (D.Colo.1971), aff’d by an equally divided Court, 410 U.S. 577, 93 S.Ct. 1434, 35 L.Ed.2d 507 (1973). The applicable standard is well-captured by the following statement: The touchstone of § 7 is the probability that competition will be lessened. But before a court takes the drastic step of ordering divestiture, the evidence must be clear that such a probability exists. The Act does not require that there be a certainty of anticompetitive effect. But that does not mean that the courts or the Commission can rely on slipshod information confusingly presented and ambiguous in its implications. The law does not require proof that competition certainly will be lessened by the merger. But the record should be clear and convincing that the requisite probability is present. FTC v. Consolidated Foods, supra, 380 U.S. at 605, 85 S.Ct. at 1228 (Stewart, J., concurring) (emphasis added). B. Statistical Evidence According to the only statistics produced at trial, Pre-Mix and Mobile were, respectively, the third and fourth largest producers of ready-mix concrete in the Denver metropolitan area with a combined percentage share of the market of 31.3% in the year 1969. In 1970, Pre-Mix was the second largest producer, Mobile fourth, and their combined share of the market was 31.6%. See Appendix I. The market statistics therefore present a prima facie violation of the Clayton Act according to the standard announced in United States v. Philadelphia Bank, 374 U.S. 321, 83 S.Ct. 1715, 10 L.Ed.2d 915 (1963). That case, decided one year after Brown Shoe, established a quantitative test of sorts to be used in evaluating effect on competition: . . . we think that a merger which produces a firm controlling an undue percentage share of the relevant market, and results in a significant increase in the concentration of firms in that market, is so inherently likely to lessen competition substantially that it must be enjoined in the absense of evidence clearly showing that the merger is not likely to have such anticompetitive effects. Philadelphia Bank, supra, at 363, 83 S.Ct. at 1741. The case involved the proposed merger of two banks in the 4-county Philadelphia area. Consummation of the merger would have resulted in the control of at least 30% of the commercial banking business in the relevant market by a single bank. The Court concluded that this percentage share of control was “undue,” and absent mitigating circumstances, held the proposed merger a prohibited threat to competition. Thus, as we apprehend the case, if the Goverment presents statistical evidence showing that the challenged merger has or will result in one firm controlling 30% of the relevant market, it has met its initial burden of proving that the merger will substantially lessen competition. The burden then shifts to the defendants to demonstrate clearly that the merger portends no probability of substantial diminution of competition. In the instant case, we conclude that the defendants successfully satisfied this burden. Horizontal mergers, of course, entail three inevitable results: (1) the combined market share percentage of the merged enterprises exceed that previously enjoyed by either of .the two parties to the merger (2) the new firm will be larger in assets, and; (3) the number of competitors in the relevant market will be reduced by one. To hold these bare results sufficient to proscribe a merger under the Clayton Act would amount to an absolute prohibition against horizontal mergers—a result obviously not intended by the framers of the Act. Only those mergers which, in the industrial context peculiar to the relevant product and geographical market, give rise to a probability that competition will be lessened substantially or that monopolistic tendencies will be created are forbidden. C. Overview of Ready-Mix Concrete Activity in Metropolitan Area In our view, the history and structure of the ready-mix concrete market in the 4-county Denver metropolitan area imparts a uniqueness to this case which permits the instant merger despite the relatively large market shares involved. The ready-mix concrete market in the Denver area has always been concentrated (Yordan at 188). Prior to the merger, there were 10 separate companies in the Denver metropolitan area (Appendix I).' It is highly unlikely that there will ever be as many as 20 ready-mix companies in the Denver market (Yordan at 188). Any market has an upper limit on the number of producers which it can support (Peterson at 635). The only significant barrier to entry into the Denver ready-mix concrete market is economic in view of the relatively high capital investment required due to the high cost of equipment and facilities (e. g., Carter at 624). Despite high initial costs, however, new entries have been made into the market in the recent past (Meade at 308; Thompson at 502), and we have no reason to believe that this pattern will change significantly in the future. Entry is fairly possible (McKean at 502), and the economic barrier to entry can be dramatically reduced through purchase of used, rather than new, equipment (Carter at 624). There are several practical reasons why it is probable that the Denver ready-mix concrete market will remain concentrated. First, as mentioned previously, ready-mix concrete is a market which will always be extremely localized due to the nature of the product. The cost of delivery imposes an economic limitation upon geographical market expansion (discussed supra at 89). Any contractor desiring to purchase ready-mix concrete for a local project must buy from a local producer (Curtiss at 139). Second, the character of the product and the context in which it is sold reflects a significant need for large-sized ready-mix companies. This is so because the business custom is to look to a single supplier to provide ready-mix concrete for a given job. Contractors ordinarily deal with only one ready-mix concrete producer with respect to a particular project for two primary reasons. First, consistency in the concrete is highly desirable, and using only concrete from a single supplier throughout construction enhances consistency. Second, and more importantly, purchasing from a single source with respect to a given project greatly simplifies planning, scheduling, and delivery of materials and work—crucially important aspects of any large building endeavor. Dividing ready-mix concrete needs among more than one supplier involves significant impracticalities and disadvantages which, in large part, can be avoided through the practice of buying from one supplier. Furthermore, contractors large enough to undertake large construction projects must turn to ready-mix concrete producers which are of adequate size to enable them to provide the required materials expeditiously in sufficient volume and uniformity of quality. See Hookanson at 100-01; Curtiss at 139; Morton at 158; Craft at 553; Appell at 602. In view of the extremely short economic delivery radius of ready-mix concrete, geographical dispersal of production plants is essential. Production facilities, delivery equipment, centralized locations, and work force are necessities which tend to militate toward largeness in ready-mix concrete companies. Thus of necessity substantial financial enterprises are involved in this industry. Given these circumstances, the instant merger was, in part, motivated by a desire to improve the companies’ competitive position due to the need to keep abreast of contractor customers, who were themselves becoming larger, in order to compete for the bigger construction jobs. Antitrust law, of course, favors internal expansion as a means of maintaining competitive position; this avenue, however, was not a feasible alternative in the present case in light of Mobile’s debilitated financial condition (discussed infra at § VI). In sum, the Denver metropolitan area ready-mix concrete market, historically, has been and will likely remain concentrated. The number of competitors has remained relatively stable, and no discernible trend toward greater concentration is apparent. To the contrary, the market has experienced new entrants in recent years. This case does not present a situation in which the number of companies in the relevant market was declining. Compare, e. g., United States v. Von’s Grocery Co., 384 U.S. 270, 277, 86 S.Ct. 1478, 16 L.Ed.2d 555 (1966). Post-acquisition evidence as to the effect of the merger uniformly suggested that the merger under challenge did not, in fact, adversely affect, nor carry the potential of adverse effect to, the competition in the relevant market. All persons questioned as to the real or probable effect on competition manifested during the post-acquisition period testified that they perceived no adverse effect on competition (Hookanson at 96-98; Curtiss at 132; Morton at 152-53; Thompson at 495 & 509; Baumgartner at 514; Flanagan at 520; Spratlen at 531; Craft at 551, and; Peterson at 628). Although we should not accord too much weight to such evidence, we may properly take cognizance of it in considering the record as a whole. See FTC v. Consolidated Foods, supra, 380 U.S. at 598, 85 S.Ct. 1220. Furthermore, there was testimony to the effect that the merger involved pro-competitive effects (Hookanson at 96; Curtiss at 132-; Spratlen at 534). As Congress has recognized, competition may be stimulated by particular mergers. Brown Shoe, supra, 370 U.S. at 319, 82 S.Ct. 1502. Service offered by the Mobile-Pre-Mix combination was superior to that offered by either of the previously independent companies alone (Morton at 152; Meade at 298; Spratlen at 534). The primary motive behind the merger was a desire on the part of Mobile’s owners to save the company from imminent financial demise. Substantial economies could be realized through combination of the two entities. A valid business purpose obviously cannot, without more, defeat the application of the Clayton Act, but it is also a proper contextual element to consider. Mississippi River Corp. v. FTC, 454 F.2d 1083 (8th Cir. 1972). The merger did produce operational improvements, and more importantly, allowed Mobile to take advantage of Pre-Mix’s solid line of credit and thereby avoid foreclosure on its own property (Appell at 576ff). Also, the companies tended to complement each other in terms of customers (Meade at 305; Carter at 617; Peterson at 663). Most significant with respect to the economic predictive judgment necessary to be made here is our conclusion (discussed more fully, infra, at § YI) that the probable future competitive ability of Mobile was undermined drastically by its deteriorating financial position. In Brown Shoe, supra, the Supreme Court has recognized that factors exist which may mitigate possible detriment to competition ; they are: . the business failure or the inadequate resources of one of the parties that may have prevented it from maintaining its competitive position, [or] a demonstrated need for combination to enable small companies to enter into a more meaningful competition with those dominating the relevant markets. Id. 370 U.S. at 346, 82 S.Ct. at 1535. We find that the first mitigating factor has been established clearly by the evidence in this case. Given the nature and structure of the ready-mix concrete market (discussed, supra, at 92), some aspects of the second factor were also present. The Government rested its entire effort in this case on statistical evidence, attacking the instant merger from an abstract and theoretical point of view. The heart of its case on the issue of effect on competition was presented through the expert testimony of Dr. Wesley J. Yordan (Yordan at 165-209). Yordan relied primarily upon the well-known book by Kaysen and Turner, Antitrust Policy and Economic and Legal Analysis (1959). We question the utility of this work when applied to an extremely localized market such as the one at hand. We agree with the opinion of Dr. Rodney D. Peterson, defendants’ expert witness, that the Kaysen and Turner parameters have little meaning when applied to a narrowly localized market (Peterson at 636). We accede to the view that: . . . a local or regional banking market presents a wholly different competitive situation from a national retail sales or supply market in shoes, chemicals, paper or steel. We are not here dealing with nation-wide giant corporations threatening to take over an entire line of commerce and divide it up between them, and the measure of substantiality must be gauged in the context of the particular industry and market involved. First Nat’l Bancorporation, Inc., supra, at 1019. This statement is equally apt when applied to a local ready-mix concrete market. In summary, we think that despite the largeness of the market share now enjoyed by the Mobile-Pre-Mix combination, the merger presents no probability of a substantial lessening of competition, nor does it tend toward the creation of a monopoly. The Denver ready-mix concrete market has always contained a limited number of producers. The number is stable, and no trend toward increased concentration is evident (Yordan at 188; Peterson at 635). Indeed, the occurrence of new entries in the recent past indicates the contrary. Large building projects demand correspondingly sizable ready-mix concrete suppliers. As a future competitive force, Mobile’s prospects were remote at best. Post-acquisition evidence, without exception, showed no adverse effect on competition wrought by the merger of Mobile and Pre-Mix. There is evidence that the merger may have, in fact, stimulated, rather than depressed, competition. No special market power on the part of the defendants as a result of the merger existed (Peterson at 640). D. Conclusion As a practical matter, the merger challenged by this action, in all probability, carries with it no threat of substantial lessening of competition in the ready-mix concrete market, nor does it tend to create a monopoly in that market. The totality of the evidence presented in this case shows neither clearly nor convincingly that the merger challenged here entails results prohibited by § 7 of the Clayton Act. VI. THE “FAILING COMPANY” DEFENSE As an affirmative defense to the complaint, defendants assert that on or about June 12, 1970, when MPM acquired all of the outstanding stock of both Mobile and Pre-Mix, both enterprises were “failing” within the meaning of the “failing company” defense (Answer at 4). The “failing company” doctrine is a judicially-created defense to a § 7 Clayton Act suit. It was first enunciated in International Shoe Co. v. FTC, 280 U.S. 291, 50 S.Ct. 89, 74 L.Ed. 431 (1930), in which the Court defined a “failing company” for § 7 purposes as: . a corporation with resources so depleted and the prospect of rehabilitation so remote that it face[s] the grave probability of a business failure with resulting loss to its stockholders and injury to the communities where it plants were operated Id. at 302, 50 S.Ct. at 93. If, in addition to the failing condition of the acquired company, it can be shown that there was no prospective purchaser other than the one which acquired the failing company, then the merger: is not in contemplation of law prejudicial to the public and does not substantially lessen competition or restrain commerce within the intent of the Clayton Act. Id. at 302-03, 50 S.Ct. at 93. Thus the defense, as formulated in International Shoe, contains two elements: (1) grave probability of business failure on the part of the acquired company, and; (2) the acquiring company being the only prospective purchaser. Proof that a company acquired in a merger was in “failing” circumstances constitutes a defense to the charge that the transaction is illegal. The apparent rationale underlying the creation of this § 7 defense is the notion that if one of the merging companies is bound to fail, then competition cannot be substantially harmed when that company is acquired by a similar firm. See generally, Bok, Section 7 of the Clayton Act and the Merging of Law and Economics, 74 Harv.L.Rev. 226, 339-47 (1960). More recently, the Court has described the defense in terms of a “choice of evils” approach in which “the possible threat to competition resulting from an acquisition is deemed preferable to the adverse impact on competition and other losses if the company goes out of business.” General Dynamics, supra, 415 U.S. at 507, 94 S.Ct. at 1199 (footnote omitted). In 1950, the Clayton Act was amended to broaden its reach significantly by plugging certain loopholes in the statute which had been exploited since its inception; this extension is popularly known as the Celler-Kefauver Amendment. Both the Senate and House Reports on the amendment indicate clearly that Congress intended the “failing company” defense to survive modification and expansion of the Act and that the doctrine be carried forward to cases arising under the amendment. 1950 U.S.Code Cong.Serv. p. 4299; Brown Shoe, supra, 370 U.S. at 319, 82 S.Ct. 1502; General Dynamics, supra, 415 U.S. at 506-07, 94 S.Ct. 1186. On several occasions since 1930 when International Shoe was announced, the Supreme Court has reiterated its approval of the “failing company” defense and recognized its continuing validity. The defense has been sustained in two cases. One of the Court’s more comprehensive treatments of the doctrine may be found in Citizen Publishing Co. v. United States, 394 U.S. 131, 89 S.Ct. 927, 22 L.Ed.2d 148 (1969). That case involved a joint operating agreement between two competing newspapers. Defendants principally interposed the “failing company” defense. In that case the Court found that the defendants had failed to maintain their burden of establishing the defense, and stated that “[w]e confine the failing company doctrine to its present narrow scope.” Id. at 139, 89 S.Ct. at 931. In defining that scope, the Court appeared to add a further requirement of proof for successful assertion of the defense, namely that the “prospects of reorganization [under Chapter X or XI of the Bankruptcy Act] would have had to be dim or nonexistent to make the failing company doctrine applicable to this case.” Id. at 138, 89 5. Ct. at 931. Subsequent decisions dealing with the doctrine, however, omit any reference to the “dim reorganization prospects” element apparently created by Citizen Publishing. For example, Justice Douglas,- describing the “failing company” exception to a § 7 suit for a unanimous Court in United States v. Greater Buffalo Press, 402 U.S. 549, 91 S.Ct. 1692, 29 L.Ed.2d 170 (1971), stated: That test is met only if two requirements are satisfied: (1) that the resources of International were “so depleted and the prospect of rehabilitation so remote that it faced the grave probability of a business failure . ,” International Shoe Co. v. Federal Trade Comm’n, 280 U.S. 291, 302 [50 S.Ct. 89, 93, 74 L.Ed. 431] and (2) that there was no other prospective purchaser for it. Citizen Publishing Co. v. United States, 394 U.S. 131, 138 [89 S.Ct. 927, 931-932, 22 L.Ed.2d 148]. Id. at 555, 91 S.Ct. at 1696. The most recent discussion of the defense makes no mention of any third element but merely restates the two-pronged test laid down in International Shoe. General Dynamics, supra, 415 U.S. at 507, 94 S.Ct. 1186. We conclude that a § 7 defendant need not be required to show that reorganization prospects under the Bankruptcy Act were dim or nonexistent in order to discharge its burden of proof as to the “failing company” defense. Contra, United States Steel Corp. v. FTC, 426 F.2d 592, 608 (6th Cir., 1970). But see International Shoe, supra, 280 U.S. at 301-02, 50 S.Ct. 89. See also Annot., 11 A.L.R.Fed. 858, § 6 at 872 (1972); E. Kintner, Primer on the Law of Mergers at 264 (1973).' We think that the statement as to dim reorganization prospects in Citizen Publishing, when read in context, should be restricted to facts peculiar to that case. As the Court pointed out, the defendants offered no evidence to demonstrate that the acquiring company was the only prospective purchaser—“the record [being] silent on what the market, if any, for the Citizen might have been.” Citizen Publishing, supra, at 138, 89 . S.Ct. at 931. Under these circumstances, the Court concluded that “[t]he prospects of reorganization of the Citizen in 1940 would have had to be dim or nonexistent to make the failing company doctrine applicable to this case.” Id. at 138, 89 S.Ct. at 931 (emphasis added). Reading the statement in this context, therefore, leads us to conclude that the Court, rather than prescribing a third element to the defense by its dim reorganization prospects language, was suggesting an alternative to the second prong (no other prospective purchaser) of the two-pronged test set forth in International Shoe. This interpretation, we think, reasonably squares the Court’s discussions of the “failing company” doctrine contained in Citizen Publishing (which seems to add the dim reorganization prospects element) and those found in the other earlier and later cases (which make no reference to this possible requirement). Another reason for holding that proof of dim reorganization prospects is not a necessary predicate to the “failing company” defense is the fact that the cases subsequent to Citizen Publishing omit any reference to this element and, therefore, by implication have dispensed with it. In short, we feel that if the evidence demonstrates that one of the merging companies faced a grave probability of business failure at the time of the merger and the other party to the merger was the only prospective purchaser, then the “failing company” defense has been satisfactorily established. Reorganization prospects may play a significant role in a particular defendant’s attempt to substantiate the defense. We merely hold that the failure to address reorganization prospects—at least where there is, as here, evidence as to the market for the failing company—cannot conclusively defeat an effort to establish the defense. A. The “Failing Company” Defense as Applied to the Instant Case The complaint challenges as violative of § 7 of the Clayton Act two distinct events: (1) the June 12, 1970, acquisition by MPM of all of the outstanding stock in both Mobile and Pre-Mix, and; (2) the November 12, 1971, merger of Mobile and Pre-Mix in accordance with the Colorado Corporation Code (Complaint at 4). In our view, the only transaction relevant to the present suit is the June 12, 1970, arrangement whereby two previously separate and independent competitors were brought under the same aegis and management. The only significance of the November 12, 1971, merger was to formalize what had, in fact, existed throughout the previous calendar year. To our mind, if a violation of the Clayton Act occurred, it occurred at the time the two companies entered into joint operation and lost their relative identities as competitors when acquired by MPM. Therefore, the time period pertinent to the “failing company” defense relates to the facts as they existed at or before the stock acquisition accomplished through MPM: the months leading up to June 12, 1970. Our conclusion in this regard finds ample support in Citizen Publishing, supra, in which the Court chose not to look at the time of the formal extension of the joint operating agreement involved in that action—1953. Rather, for purposes of determining whether the “failing company” defense was fulfilled, the Court looked to the time the agreement was originally formulated—1940. See Citizen Publishing, supra. Defendants have asserted in their Answer that both Mobile and PreMix were “failing companies” at the time of the acquisition of them by MPM (Answer at 4). Considerable evidence was adduced at trial relative to this defense. However, little or none of it pertained to Pre-Mix. This defense, therefore, was seriously proffered only with respect to Mobile, and the evidence fails, to support a finding that Pre-Mix was a failing company. Thus, if defendants are to succeed in maintaining this defense, they can do so only by showing that Mobile was a failing company. We recognize that in the case at bar the alleged “failing company” acquired a non-failing entity. Ordinarily, the roles are reversed in a merger case, and, understandably it is the stronger company which usually acquires the failing one. Careful analysis of the rationale underlying the “failing company” doctrine, however, leads to the conclusion that this reversal of traditional roles should not per se defeat the application of the defense. If one subscribes to the premise that the merger of an ongoing business with a failing competitor cannot substantially lessen competition or if one accedes to the “choice of evils” theory which permits the combination of a viable and a terminally weak competitor, then which of the two companies is the purchaser has little theoretical or practical significance. The underlying purposes of allowing the defense have been served so long as one of the two entities to a merger is shown to have been in a failing condition at the time of the merger. In so holding, we reject rigid obeisance to technical labels and look to the substance of a given transaction. Clayton Act cases are to be viewed functionally, in terms of economic realities applicable to a particular business transaction. General Dynamics, supra, 415 U.S. at 498, 94 S.Ct. 1186. Furthermore, as mentioned above, the allegedly improper activity challenged in this case is the June 12, 1970 acquisition by MPM of the stock of Mobile and Pre-Mix. In our view, when the action involves, as here, the acquisition of two competitors by a third entity, common sense suggests that it should make no difference at law which of the two companies being joined together is “failing.” The effect on competition, if any, will be the same, regardless of whether one company or the other is denominated as “acquiring” or “acquired.” B. Evidence Pertaining to the “Failing Company” Defense The record demonstrates that prior to the challenged acquisition of Mobile and Pre-Mix stock by MPM on June 12, 1970, Mobile was deeply in debt and in very serious and dire financial straits. Its situation was precarious, deteriorating, and bleak. Virtual collapse of the enterprise was imminent and inevitable. Officers of Mobile engaged in extensive, sincere, and ambitious efforts to stave off business failure. Painstaking and concrete attempts were made to recruit new investors and obtain fresh financial backing and capital and/or to sell the business. These endeavors were uniformly unsuccessful with the sole exception of the transaction ultimately arranged with Pre-Mix which is the subject of this suit. We expressly find that from a financial viewpoint Mobile was irretrievably failing without possibility of recovery. From a totality of the record as a whole and for the reasons expressed below, we conclude that the defendants have satisfactorily discharged their burden in proving that, at the time of the purportedly unlawful stock acquisition, Mobile was a “failing company” within the meaning of the pertinent authorities. 1. Grave Probability of Business Failure For purposes pertinent herein, Mobile came into existence on June 1, 1967, when it was formed as a Colorado corporation in order to assume the assets and business of an existing corporation of the same name. There were three shareholders: (1) Thomas W. Meade— majority 57% shareholder and active manager; (2) Burton C. Boothby—a 21 & y2% shareholder, and; (3) L. C. Fulenwider—a 21 & %'% shareholder (Meade at 272-74 & 315-16; Boothby at 717-18). In addition to the capital contributions made by the three shareholders, capital was provided by virtue of credit arrangements with the former owner (Meade at 273) and by the D