The opinion of the court was delivered by: SHAW
This is an action by the United States brought pursuant to the provisions of Section 15 of the Clayton Act (15 U.S.C.A. § 25) to restrain defendants Standard Oil Company (Jersey) and Potash Company of America (PCA) from consummating an agreement whereby Jersey would acquire all the stock and assets of PCA in alleged violation of Section 7 of the Clayton Act (15 U.S.C.A. § 18).
Jersey is a New Jersey corporation maintaining its principal place of business in New York. PCA is a Colorado corporation with its principal place of business in Denver, Colorado. Jersey organized a Delaware corporation known as Potash Company of America, Inc. (Delaware) to function as a wholly owned subsidiary of Jersey. On September 16, 1964 Jersey, PCA and Delaware became parties to an agreement captioned "AGREEMENT AND PLAN OF REORGANIZATION" whereby PCA would transfer all of its assets to Delaware in exchange for 850,000 shares of Jersey's par value capital stock. Upon consummation of the agreement PCA as an independent, separate corporate entity would pass out of existence and its successor, Delaware, would conduct the business in which PCA had been engaged. Consummation of the agreement was enjoined pending determination on the merits of the government's complaint alleging that the acquisition of PCA by Jersey in the form of a wholly owned subsidiary of Jersey would violate Section 7 of the Clayton Act.
The pertinent provisions of the Act are quoted 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."
Both of the defendants are corporations engaged in interstate and foreign commerce and are subject to the jurisdiction of this Court. Production and sale of potash is the relevant line of commerce and the United States as a whole is the relevant geographical area or market within which the effects of the acquisition of PCA by Jersey upon competition must be measured. The parties have so stipulated and the stipulation is supported by the evidence. An association composed of potash producers called the American Potash Institute computes statistics of the trade in potash as a separate and distinct industry. The Bureau of Mines, Department of the Interior of the United States Government publishes a yearly pamphlet of information on the potash industry. Producers of potash in the United States compete with each other for the business of customers in all parts of this country.
The potassium content of potash is usually expressed by the trade either in terms of potassium oxide (K (2)O) or muriate of potassium (KCl). The K (2)O content represents the potassium concentration. The commercial muriate of potash has a K (2)O equivalent of approximately 60%.
Potash produced in Canada is and will be competitive with potash produced in this country. Increasing amounts of potash produced in Canada are being sold in the United States in competition with potash mined in this country.
As a corporate entity, Jersey functions primarily as an investment corporation. It invests the funds of its stockholders in subsidiary and affiliated corporations which are directly responsible for the operation of the various industrial enterprises which produce revenue for the parent company. Viewed in the light of its management, control and participation in the operating enterprises of its subsidiaries and affiliates which produce Jersey revenues, Jersey is, for all practical purposes, directly engaged in the business which each of them conduct.
It is the general policy of Jersey, subject to a few exceptions, to hold 50% or more of the capital stock of operating industrial corporations in which it invests its funds. The conduct of the business of these corporations is closely supervised by Jersey.
Jersey holds more than 50% of the capital stock of over 200 foreign and domestic corporations engaged primarily in exploration, production, refining, transportation and sale of petroleum and derivative products including petrochemicals. Its capital expenditures for research, exploration and capital investment are world-wide, extending into more than 100 countries. In addition to its broad scale participation in the petroleum and petrochemical industries, it has reached and is reaching into other areas of industrial enterprise. During 1964 it arranged for the purchase of the business of American Cryogenics, Inc., a company engaged primarily in the manufacture and sale of liquified industrial gases and associated equipment used to create extremely low temperatures. Jersey has engaged in the development of real estate in Texas for light industry, residential and commercial use; it has acquired interests in the manufacture of textiles and film from polypropylene and in the production and sale of fertilizer products in foreign countries; and also anticipates entry into the field of production of sponge iron.
In the administration of its investment policies, emphasis has been placed upon expansion of present corporate subsidiary and affiliate enterprises and continuing search for profitable diversification in new fields either by self-development or acquisition.
In 1963 Jersey's gross revenues totaled $11,931,463,000; its assets aggregated $11,996,691,000; and its net profits after taxes were $1,019,469,000. It was reputed in 1963 to be the largest industrial corporation in the United States and in the world in terms of assets, and the second largest in the world in terms of net profits.
In 1963 Jersey's total capital of $11.9 billion was employed: $5.6 billion in the United States; $2.7 billion in other Western Hemisphere countries; and $3.5 billion in the Eastern Hemisphere. The company's 1963 net income of $1 billion was derived: $354 million from the United States; $310 million from other Western Hemisphere countries; and $355 million from the Eastern Hemisphere.
Liberal capital expenditures over the years in furtherance of the policy of expansion and diversification of corporate activities have resulted in a significant growth of Jersey in terms of capital assets and profits. Jersey's capital assets in 1948 approximated $3.4 billion and its net profit after taxes for that year was ...