Before BIGGS, Chief Judge, and STALEY and HASTIE, Circuit Judges.
HASTIE, Circuit Judge: This petition requires that we review an order of the Federal Trade Commission directing Erie Sand and Gravel Co. to divest itself of the recently purchased assets of another corporation which had been its competitor.
Erie is engaged, directly and through wholly owned subsidiaries, in the business of dredging and selling lake sand from the bottom of Lake Erie. Before 1955, Erie's principal competitor in the sale of lake sand was the Sandusky Division of the Kelly Island Co. In 1954 two investment banking firms bought control of Kelly. Soon thereafter they voted to liquidate the entire corporation. The assets of the Sandusky Division were publicly offered for sale as a unit. Erie submitted the highest bid and early in 1955 purchased all of the Sandusky assets at a total price of $1,074,309.13. This purchase included three ships, one fully equipped dock, leasehold interests in six other docks, inventories, unfilled orders, and customer lists.
As a result of these acquisitions Erie's business increased greatly in 1955 and 1956, so that it became the dominant lake sand producer on Lake Erie.
Late in 1956 the Federal Trade Commission issued a complaint against Erie alleging that the above-described acquisition of the assets of a competitor violated Section 7 of the Clayton Act, as amended. The hearing examiner and the Commission itself successively held against Erie and ordered it to divest itself of almost all of the acquired assets and to create a competitive entity substantially equivalent to the Sandusky Division as it had existed before the sale. Erie then filed the present petition asking that we review and set aside the order of the Commission.
Section 7 of the Clayton Act, as amended, 64 Stat. 1125, 15 U.S.C. § 18, reads as follows:
"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."
At the outset, Erie argues that its 1955 acquisition could not have violated Section 7 because the owner of the competing Sandusky Division had made a firm and unqualified decision to liquidate its business before Erie entered the picture as one of several bidders for the Sandusky assets. This fact, which is admitted, is said to show that Erie would have been relieved of the Sandusky competition whether or not it purchased the Sandusky business.
The evidence does not support this factual inference. Sandusky was a profitable enterprise and it was offered for sale as a going concern. Its ships and docks and internal organization were all in condition for the indefinite continuation of the business. In the years immediately preceding the decision to liquidate, the business earned substantial profits. No reason appears for believing that it would not have continued to prosper. It is not surprising, therefore, that although Erie was high bidder with an offer of about one million dollars, there were several other substantial offers of $800,000 or more for the going concern. Thus, had Erie not bid, the prospect was not the elimination of a competing enterprise but merely its continuation under some new proprietorship.
In support of its position on this point, appellant cites the so-called "failing company" doctrine of International Shoe Co. v. Federal Trade Commission, 1930, 280 U.S. 291. But the fact that the proprietors of Sandusky had decided to liquidate is not enough to create a "failing company" situation. That doctrine, as its name suggests, makes Section 7 inapplicable to the acquisition of a competitor which is in such straits that the termination of the enterprise and the dispersal of its assets seems inevitable unless a rival proprietor shall acquire and continue the business. The International Shoe opinion itself describes the situation before the Court as that of "a corporation with resources so depleted and the prospect of rehabilitation so remote that it faced the grave probability of a business failure with resulting loss to its stockholders and injury to the communities where its plants were operated . . . (there being no other prospective purchaser) . . . ." 280 U.S. at 302. It was in such circumstances that a merger was viewed as likely to be less harmful in its possible adverse effect on competition than obviously advantageous in saving creditors, owners and employees of the failing business from serious impending loss. See Bok, Section 7 of the Clayton Act and the Merging of Law and Economics, 74 Harv. L. Rev. 226, 340-42. The picture presented by the prosperous Sandusky Division here was the antithesis of such a "failing company" situation. Erie's first argument is, therefore, without merit.
Section 7 of the Clayton Act prohibits those mergers which may substantially lessen competition "in any line of commerce in any section of the country". The application of the quoted ...