384 U.S.

546
86 S.Ct. 1665
16 L.Ed.2d 765

UNITED STATES, Appellant,

v.
PABST BREWING COMPANY et al.
No. 404.
Argued April 27, 1966.
Decided June 13, 1966.

Edwin M. Zimmerman, Atty., U.S. Dept. of Justice, Washington, D.C., for

appellant.
John T. Chadwell, Chicago, Ill., for appellees.
Mr. Justice BLACK delivered the opinion of the Court.

In 1958 Pabst Brewing Company, the Nation's tenth largest brewer, acquired
the Blatz Brewing Company, the eighteenth largest. In 1959 the Government
brought this action charging that the acquisition violated 7 of the Clayton Act
as amended by the Celler-Kefauver Anti-Merger amendment.1 That section
makes it unlawful for one corporation engaged in commerce to acquire the
stock or assets of another 'where in any line of commerce in any section of the
country, the effect of such acquisition may be substantially to lessen
competition, or to tend to create a monopoly.' (Emphasis supplied.) The
Government's complaint charged that 'The effect of this acquisition may be
substantially to lessen competition or to tend to create a monopoly in the
production and sale of beer in the United States and in various sections thereof,
including the State of Wisconsin and the three state area encompassing
Wisconsin, Illinois and Michigan * * *.'2 At the close of the Government's
case, the District Court dismissed the case under Rule 41(b) of the Fed.Rules
Civ.Proc., holding that the Government's proof had not shown that either
Wisconsin or the three-state area of Wisconsin or the and Illinois was a
'relevant geographic market within which the probable effect of the acquisition
of Blatz by Pabst should be tested.' The District Court also ruled that the
Government had not shown that 'the effect of the acquisition * * * may be

substantially to lessen competition or to tend to create a monopoly in the beer

industry in the continental United States, the only relevant geographic market.'
233 F.Supp. 475, 481, 488.
I.
2

We first take up the court's dismissal based on its conclusion that the
Government failed to prove either Wisconsin or the three-state area constituted
'a relevant section of the country within the meaning of Section 7.' Apparently
the District Court thought that in order to show a violation of 7 it was
essential for the Government to show a 'relevant geographic market' in the same
way the corpus delicti must be proved to establish a crime. But when the
Government brings an action under 7 it must, according to the language of the
statute, prove no more than that there has been a merger between two
corporations engaged in commerce and that the effect of the merger may be
substantially to lessen competition or tend to create a monopoly in any line of
commerce 'in any section of the country.' (Emphasis supplied.) The language of
this section requires merely that the Government prove the merger may have a
substantial anticompetitive effect somewhere in the United States 'in any
section' of the United States. This phrase does not call for the delineation of a
'section of the country' by metes and bounds as a surveyor would lay off a plot
of ground.3 The Government may introduce evidence which shows that as a
result of a merger competition may be substantially lessened throughout the
country, or on the other hand it may prove that competition may be
substantially lessened only in one or more sections of the country. In either
event a violation of 7 would be proved. Certainly the failure of the
Government to prove by an army of expert witnesses what constitutes a relevant
'economic' or 'geographic' market is not an adequate ground on which to
dismiss a 7 case. Compare United States v. Continental Can Co., 378 U.S.
441, 458, 84 S.Ct. 1738, 12 L.Ed.2d 953. Congress did not seem to be troubled
about the exact spot where competition might be lessened; it simply intended to
outlaw mergers which threatened competition in any or all parts of the country.
Proof of the section of the country where the anticompetitive effect exists is
entirely subsidiary to the crucial question in this and every 7 case which is
whether a merger may substantially lessen competition anywhere in the United
States.

II.
3

The Government's evidence, consisting of documents, statistics, official

records, depositions, and affidavits by witnesses, related principally to the
competitive position of Pabst and Blatz in the beer industry throughout the

Nation, in the three-state area of Wisconsin, Illinois, and Michigan, and in the
State of Wisconsin. The record in this case, including admissions by Pabst in its
formal answer to the Government's complaint, the evidence introduced by the
Government, the findings of fact and opinion of the District Judge, shows
among others the following facts. In 1958, the year of the merger, Pabst was
the tenth largest brewer in the Nation and Blatz ranked eighteenth. The merger
made Pabst the Nation's fifth largest brewer with 4.49% of the industry's total
sales. By 1961, three years after the merger, Pabst had increased its share of the
beer market to 5.83% and had become the third largest brewer in the country. In
the State of Wisconsin, before the merger, Blatz was the leading seller of beer
and Pabst ranked fourth. The merger made Pabst the largest seller in the State
with 23.95% of all the sales made there. By 1961 Pabst's share of the market
had increased to 27.41%. This merger took place in an industry marked by a
steady trend toward economic concentration. According to the District Court
the number of breweries operating in the United States declined from 714 in
1934 to 229 in 1961, and the total number of different competitors selling beer
has fallen from 206 in 1957 to 162 in 1961. In Wisconsin the number of
companies selling beer has declined from 77 in 1955 to 54 in 1961. At the same
time the number of competitors in the industry were becoming fewer and fewer,
the leading brewers were increasing their shares of sales. Between 1957 and
1961 the Nation's 10 leading brewers increased their combined shares of sales
from 45.06% to 52.60%. In Wisconsin the four leading sellers accounted for
47.74% of the State's sales in 1957 and by 1961 this share had increased to
58.62%. In the three-state area the evidence showed that in 1957 Blatz was the
sixth largest seller with 5.84% of the total sales there and Pabst ranked seventh
with 5.48%. As was true in the beer industry throughout the Nation, there was a
trend toward concentration in the three- state area. From 1957 to 1961 the
number of major brewers selling there dropped from 104 to 86 and during the
same period the eight leading sellers increased their combined shares of beer
sales from 58.93% to 67.65%.
4

These facts show a very marked thirty-year decline in the number of brewers
and a sharp rise in recent years in the percentage share of the market controlled
by the leading brewers. If not stopped, this decline in the number of separate
competitors and this rise in the share of the market controlled by the larger beer
manufacturers are bound to lead to greater and greater concentration of the beer
industry into fewer and fewer hands. The merger of Pabst and Blatz brought
together two very large brewers competing against each other in 40 States. In
1957 these two companies had combined sales which accounted for 23.95% of
the beer sales in Wisconsin, 11.32% of the sales in the three-state area of
Wisconsin, Illinois, and Michigan, and 4.49% of the sales throughout the
country. In accord with our prior cases,4 we hold that the evidence as to the

probable effect of the merger on competition in Wisconsin, in the three-state

area, and in the entire country was sufficient to show a violation of 7 in each
and all of these three areas.
5

We have not overlooked Pabst's contention that we should not consider the
steady trend toward concentration in the beer industry because the Government
has not shown that the trend is due to mergers. There is no duty on the
Government to make such proof. It would seem fantastic to assume that part of
the concentration in the beer industry has not been due to mergers but even if
the Government made no such proof, it would not aid Pabst. Congress, in
passing 7 and in amending it with the Celler-Kefauver Anti-Merger
amendment, was concerned with arresting concentration in the American
economy, whatever its cause, in its incipiency. To put a halt to what it
considered to be a 'rising tide' of concentration in American business, Congress,
with full power to do so, decided 'to clamp down with vigor on mergers.' United
States v. Von's Grocery Co., 384 U.S., at 276, 86 S.Ct., at 1482. It passed and
amended 7 on the premise that mergers do tend to accelerate concentration in
an industry. Many believe that this assumption of Congress is wrong, and that
the disappearance of small businesses with a correlative concentration of
business in the hands of a few is bound to occur whether mergers are prohibited
or not. But it is not for the courts to review the policy decision of Congress that
mergers which may substantially lessen competition are forbidden, which in
effect the courts would be doing should they now require proof of the
congressional premise that mergers are a major cause of concentration. We
hold that a trend toward concentration in an industry, whatever its causes, is a
highly relevant factor in deciding how substantial the anti-competitive effect of
a merger may be.

Reversed and remanded.

Mr. Justice DOUGLAS, concurring.

While I join the Court's opinion, I add only a word in support of the Court's
description of the anatomy of the 'relevant geographic market' for purposes of
the Clayton Act. The alternative leads to a form of concentration whose
ultimate reductio ad absurdum is described in the Appendix to this opinion.

APPENDIX TO CONCURRING OPINION OF MR. JUSTICE DOUGLAS.

10

Every time you pick up the newspaper you read about one company merging
with another company. Of course, we have laws to protect competition in the

United States, but one can't help thinking that, if the trend continues the whole
country will soon be merged into one large company.
11

It is 1978 and by this time every company west of the Mississippi will have
merged into one giant corporation known as Samson Securities. Every
company east of the Mississippi will have merged under an umbrella
corporation known as the Delilah Company.

12

It is inevitable that one day the chairman of the board of Samson and the
president of Delilah would meet and discuss merging their two companies.

13

'If we could get together,' the president of Delilah said, 'we would be able to
finance your projects and you would be able to finance ours.'

14

'Exactly what I was thinking,' the chairman of Samson said.

15

'That's a great idea and it certainly makes everyone's life less complicated.'

16

The men shook on it and then they sought out approval from the Anti-Trust
Division of the Justice Department.

17

At first the head of the Anti-Trust Division indicated that he might have
reservations about allowing the only two companies left in the United States to
merge.

18

'Our department,' he said, 'will take a close look at this proposed merger. It is
our job to further competition in private business and industry, and if we allow
Samson and Delilah to merge we may be doing the consumer a disservice.'

19

The chairman of Samson protested vigorously that merging with Delilah would
not stifle competition, but would help it. 'The public will be the true beneficiary
of this merger,' he said. 'The larger we are, the more services we can perform,
and the lower prices we can charge.'

20

The president of Delilah backed him up. 'In the Communist system the people
don't have a choice. They must buy from the state. In our capitalistic society the
people can buy from either the Samson Company or the Delilah Company.'

21

'But if you merge,' someone pointed out, 'there will be only one company left in
the United States.'

22

'Exactly,' said the president of Delilah. 'Trank God for the free enterprise
system.'

23

The Anti-Trust Division of the Justice Department studied the merger for
months. Finally the Attorney General made this ruling. 'While we find some
drawbacks to only one company being left in the United States, we feel the
advantages to the public far outweign the disadvantages.

24

'Therefore, we're making an exception in this case and allowing Samson and
Delilah to merge.

25

'I would like to announce that the Samson and Delilah Company is now
negotiating at the White House with the President to buy the United States. The
Justice Department will naturally study this merger to see if it violates any of
our strong anti-trust laws.'

26

Art Buchwald, Washington Post, June 2, 1966, p. A21.

27

Mr. Justice HARLAN, whom Mr. Justice STEWART joins, concurring in the
result.

28

I concur in the judgment of reversal on the limited ground that the

Government's evidence is sufficient to establish prima facie that Wisconsin and
the tristate area comprising Wisconsin, Michigan and Illinois are both proper
sections of the country in which to measure the probable effects of the
acquisition of Blatz by Pabst under 7 of the Clayton Act, 38 Stat. 731, as
amended, 64 Stat. 1125, 15 U.S.C. 18 (1964 ed.). However, I am wholly
unable to subscribe to the Court's opinion which appears to emasculate the
statutory phrase 'in any section of the country.'

I.
29

The Court is quite right in stating that the primary question in a 7 case is
whether the effect of the challenged acquisition 'may substantially lessen
competition.' Ante, p. 550. But any resolution of this question necessarily
involves a study of statistics and other evidence bearing upon market shares,
market trends, number of competitors and the like. Obviously such figures will
vary depending upon what geographic area is chosen as relevant, and the
possibilities for 'gerrymandering' are limitless. The Senate Report which
discusses the 'section of the country' requirement, S.Rep. No. 1775, 81st Cong.,
2d Sess., 56 (1950), notes that it 'will vary with the nature of the product' so

as to determine an 'economically significant' area in which to measure a change

in the level of competition. Id., at 5. 'In determining the area of effective
competition for a given product,' the report continues, 'it will be necessary to
decide what comprises an appreciable segment of the market. An appreciable
segment of the market may not only be a segment which covers an appreciable
segment of the trade, but it may also be a segment which is largely segregated
from, independent of, or not affected by the trade in that product in other parts
of the country.' Id., at 6, U.S.Code Congressional Service 1950, pp. 4293, 4297,
4298.
30

The cases under 7 have established a flexible, but workable, approach to the
question of geographic market. In Brown Shoe Co. v. United States, 370 U.S.
294, 82 S.Ct. 1502, the Court recognized that a test for an appropriate
geographic market had been prescribed by Congress, 370 U.S., at 336, 82 S.Ct.,
at 1529, and that it must "correspond to the commercial realities' of the industry
and be economically significant.' 370 U.S., at 336337, 82 S.Ct., at 1530.1
The determination of relevant geographic market received more detailed study
in United States v. Philadelphia Nat. Bank, 374 U.S. 321, 83 S.Ct. 1715. The
Court there saw the 'proper question' as framed to ascertain 'not where the
parties to the merger do business or even where they compete, but where,
within the area of competitive overlap, the effect of the merger on competition
will be direct and immediate.' 374 U.S., at 357, 83 S.Ct., at 1738.

31

The appropriate geographic area in which to examine the effects of an

acquisition is an area in which the parties to the merger or acquisition compete,
and around which there exist economic barriers that significantly impede the
entry of new competitors. Of course, as Philadelphia National Bank and
commentators2 have noted, no such designation is perfect, for all geographic
markets are to some extent interconnected, and over time any barrier may be
overcome or may disappear owing to structural or technological changes in the
industry, e.g., refrigeration which widened markets for 'perishable' foods. Thus,
in Philadelphia National Bank, it was recognized that large borrowers and
depositors operate in something like a national banking market, and that very
small borrowers and depositors are likely to confine themselves to banks in
their immediate neighborhood. Nevertheless, the Court was able to find a fourcounty area in metropolitan Philadelphia to be a relevant 'section of the country'
in which to measure that merger. Some of the criteria cited there as supporting
such a determination were the convenience of location for all but the largest
bank customers as an important factor limiting competition by outsiders, the
concentration of the defendant's business in that region, and administrative
designations of that region as an 'area of effective competition.' 374 U.S., at 359
361, 83 S.Ct., at 1740. See also Tampa Elec. Co. v. Nashville Coal Co., 365

U.S. 320, 327, 330333, 81 S.Ct. 623, 627, 5 L.Ed.2d 580.

II.
32

In the case before us the Government has in my opinion made a prima facie
showing that the State of Wisconsin and the three-state area3 are both relevant
sections of the country for measuring the effects of this merger. That is, on the
basis of the evidence thus far submitted, I believe the Government has made a
sufficient showing that significant barriers exist to prevent outside brewers from
entering the Wisconsin market as effective competitors to those brewers already
marketing beer there.

33

As a preliminary matter, it is clear that Pabst and Blatz both carry on

substantial business and are direct competitors in Wisconsin. About 13% of
Pabst's sales in 1957, the year before the merger, were made in Wisconsin,
where Pabst maintained one of its four breweries. Blatz maintained its only
brewery in Wisconsin, where it sold 31% of its beer in 1957. It is thus clear that
the two beers were important competitors in that area; indeed Blatz was the
loading seller in Wisconsin and Pabst the fourth largest. There statistics
become meaningful for antitrust purposes in the context of the further evidence
showing substantial barriers to brewers who were not then selling beer in
Wisconsin.

34

The sales statistics submitted by the Government show not only a high
percentage of the Wisconsin market dominated by Pabst and Blatz, but also a
pattern of local concentration in the sale of beer there and throughout the
country. Wisconsin, with about the highest percapita beer consumption level in
the country, was dominated by substantially the same group of brewers
maintaining substantially the same market shares year after year without
serious challenge from other brewers operating in other sectors of the country.4
This picture of local concentration in various regional markets is supported by
evidence that brewers are able to sell the same beer in different States for
different prices (exclusive of transportation cost). Although there is no direct
evidence in the record that beer is subject to high transportation costs, which
would of course be highly persuasive evidence supporting the local-market
theory, it is relevant that about 90% of beer sold in Wisconsin comes from
breweries located in that State or nearby in Minnesota. Indeed, in 1959 the
Blatz brewery in Wisconsin was closed down, and Blatz beer was brewed in
the four Pabst breweries, because 'decentralization' was considered more
efficient. To the extent that it is true that local breweries have an advantage in
terms of efficiency and thus cost, a significant barrier exists to brewers who
wish to sell in Wisconsin but brew their beer in other areas of the country.

Thus, in terms of the structure of beer marketing as reflected in sales statistics

and brewery location the record supports the relevancy of Wisconsin as a
distinguishable and economically significant market for the sale of beer.
35

This picture of beer competition as essentially a localized or regional matter is

buttressed by evidence of marketing techniques used by the industry. Beer is
not a fungible commodity like wheat; product differentiation is important, and
the ordinary consumer is likely to choose a particular brand rather than
purchase any beer indiscriminately. The record demonstrates a recognition in
the industry that a successful sales program relies to a large extent on consumer
recognition and preference for particular brands, and that this preference must
be built up through intensive advertising and other promotional techniques.
There is evidence in the record regarding efforts by Pabst and Blatz to enter
new or undeveloped markets in this way, and the inference is inescapable that
were a brewer from, say, Colorado, interested in entering the Wisconsin market,
a great deal of costly preliminary promotional activity would be required before
sizable Wisconsin sales could be expected. In addition, the record indicates that
beer is sold through distribution networks operating on regional, statewide, and
local levels. There are numerous examples in the record of the highly
specialized salesmanship needed to induce local retail sellers to carry, display,
and advertise new brands of beer.

36

This heavy emphasis on consumer recognition and promotional techniques in

the marketing of beer supports the conclusion that there does exist a substantial
barrier to a new competitor in a regional market such as Wisconsin. To enter
this market the new entrant must be prepared to incur considerable expense
over a substantial period of time creating a distribution network and advertising
his brand in order to compete more or less on a parity with an established seller
in the Wisconsin market.

37

A further factor, the pervasive state regulation of the sale and promotion of
alcoholic beverages, well documented in the record supports the acceptability
of Wisconsin as a relevant geographic market for beer. Methods of sales
promotion permitted in one State are unlawful in others. State regulations
govern labeling, size of containers, alcoholic content of beer, shipping
procedures, and credit arrangements with wholesalers. A brewer wishing to
enter the Wisconsin market does not merely start transporting beer to
Milwaukee; he must comply with these various state requirements, which may
differ from those in the States in which he has always dealt. Although this
factor may not by itself be an effective barrier to distant competitors, it does
reinforce the other factors examined in justifying the conclusion that there is a
state or regional market for beer.

38

All of this, taken in the context of a prima facie case, supports the proposition
that Wisconsin is an identifiable 'section of the country' presenting
impediments to the entry of new competitors and insulating those already
within the market. In terms of antitrust consequences, this means that those
already within such a local market can engage in oligopolistic pricing or other
practices without a very real threat that brewers operating in other areas could
easily, and within a reasonably short time, enter the Wisconsin market as
effective competitors of those already entrenched there.

39

It should be emphasized that we are faced here only with a dismissal after the
presentation of the Government's case. On remand, the appellees can of course
attempt to refute this showing by introducing evidence demonstrating either that
these asserted barriers do not in practice exist, or that when seen in light of
other factors they are so unimportant that brewers who presently do not sell in
the Wisconsin market are not in fact appreciably hindered from entering as
effective competitors.

III.
40

The trial court also found that viewing the entire continental United States as
the relevant market, the evidence submitted did not sustain the Government's
contention that the acquisition may substantially lessen competition. I would
not disturb that conclusion. I do not of course pass upon the sufficiency of the
evidence to establish a prima facie violation of 7 within Wisconsin or the
three-state area, an issue which the District Court had no occasion to reach in
view of its determination that neither of these sections was a relevant market.

41

For these reasons I believe the District Court erred in dismissing the complaint
at the close of the Government's case.

42

Mr. Justice WHITE, concurring.

43

I join the Court's opinion insofar as it holds the merger of Pabst and Blatz may
substantially lessen competition in the beer industry in the Nation as a whole.

44

Mr. Justice FORTAS, concurring in the result.

45

The District Court clearly erred in dismissing the complaint. There is ample
proof that the effect of this acquisition may be substantially to lessen
competition in the production and sale of beer in well-defined sections of the
country. But I cannot join the Court's opinion because contrary to the

statements in that opinion, I believe that, in 7 cases, it is the Government's

duty, as plaintiff, to prove the 'market' or the 'section of the country' in which
the claimed effect of the acquisition is manifest. This is an important, even
essential, element of the judgment which must be made in a 7 case. This
Court has consistently recognized this. See, e.g., Brown Shoe Co. v. United
States, 370 U.S. 294, 82 S.Ct. 1502; United States v. Philadelphia Nat. Bank,
374 U.S. 321, 355362, 83 S.Ct. 1715, 1739. It is true that the search for the
relevant market is frequently complicated and elaborated beyond reason or need
sometimes for purposes of delay or obstruction. But the search is
nevertheless essential. It is not a snipe hunt.
46

In some situations, arithmetic as to the merging companies' aggregate volume

of sales of the commodity involved may be impressive. Sometimes, the
resulting size of the conjoined companies is great. But unless it can be shown
that the effect may be 'substantially to lessen competition, or to tend to create a
monopoly' in a specific section of the country, courts are not authorized to
condemn the acquisition. Congress has been specific in at least this respect, and
I cannot agree that this standard should be denigrated. Unless both the product
and the geographical market are carefully defined, neither analysis nor result in
antitrust is likely to be of acceptable quality. Compare majority and dissenting
opinions in United States v. Grinnell Corp., 384 U.S. 563, 86 S.Ct. 1698, 16
L.Ed.2d 778 (involving 1 and 2 of the Sherman Act).

38 Stat. 731, as amended, 64 Stat. 1125, 15 U.S.C. 18 (1964 ed.).

The complaint charged that the merger violated 7 of the Clayton Act in the
following ways among others:
'(a) Actual and potential competition between Pabst and Blatz in the sale of
beer has been eliminated;
'(b) Actual and potential competition generally in the sale of beer may be
substantially lessened;
'(c) Blatz has been eliminated as an independent competitive factor in the
production and sale of beer;
'(d) The acquisition alleged herein may enhance Pabst's competitive advantage
in the production and sale of beer to the detriment of actual and potential
competition;
'(e) Industry-wide concentration in the sale of beer will be increased.'

Times-Picayune v. United States, 345 U.S. 594, 611, 73 S.Ct. 872, 881, 97
L.Ed. 1277; United States v. E. I. Du Pont De Nemours & Co., 351 U.S. 377,
395, 76 S.Ct. 994, 1007, 100 L.Ed. 1264; United States v. Philadelphia Nat.
Bank, 374 U.S. 321, 360, n. 37, 83 S.Ct. 1715, 1739, 10 L.Ed.2d 915.

See, e.g., United States v. Von's Grocery Co., 384 U.S. 270, 86 S.Ct. 1478, 16
L.Ed.2d 555; Brown Shoe Co. v. United States, 370 U.S. 294, 82 S.Ct. 1502, 8
L.Ed.2d 510; United States v. Philadelphia Nat. Bank, 374 U.S. 321, 83 S.Ct.
1715; United States v. El Paso Gas Co., 376 U.S. 651, 84 S.Ct. 1044, 12
L.Ed.2d 12; United States v. Alcoa, 377 U.S. 271, 84 S.Ct. 1283, 12 L.Ed.2d
314; United States v. Continental Can Co., 378 U.S. 441, 84 S.Ct. 1738; FTC v.
Consolidated Foods Corp., 380 U.S. 592, 85 S.Ct. 1220, 14 L.Ed.2d 95.

See in addition my concurring opinion in Brown, 370 U.S., at 368369, 82

S.Ct., at 1548.

See, e.g., Bock, Mergers and Markets 3542 (1960); Kaysen & Turner,
Antitrust Policy 101102 (1959); Martin, Mergers and the Clayton Act 321
322 (1959).

The evidence in the record supporting the Government's contention that the
three-state area is a relevant geographic market in which to measure the effects
of this acquisition is not significantly different from that supporting the
Wisconsin market. For simplicity, this opinion will therefore discuss these
criteria only in terms of the Wisconsin market.

Only one-third of the Nation's beer producers sold beer in the Wisconsin
market.