Marquette Cement Manufacturing Company

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IN THE MATTER OF MARQUETTE CEMENT MANUFACTURING COMPANY ORDER, OPINION, ETC., IN REGARD TO THE ALLEGED VIOLATION OF SEC. 7 OF THE CLAYTON ACT AND THE FEDERAl, TRADE COMMISSION ACT Docket 8685. Complaint, May 20, 1966-Decision, Jan. 1969* Order requiring the ::ation s seventh largest rnanufadurcr of portland cemcnt with headquarters in Chicago, ill, to divest itself of three affliated ready-mixed concrete companies in the Kew York City area which it acquired in 1964, and not to acquire any cement consumers for the next 10 years without prior approval of the Commission. COMPLAINT"

The Federal Trade Commission, having reason to believe that the above-named respondent has violated the provisions of Section 7 of the Clayton Act, as amended, and Section 5 of the Federal Trade Commission Act, 15 U. C. , 45, and that a proceeding in respect thereof would be in the public interest issues this complaint, stating its charges as follows: .. Order staying- effective date of final order and granting :10 days to reply to respondent' reCjucst to re01Jen record, issucd April 1969. Proeeedin"s reopened and modified Sept, 8, 1969, 76 F. C. 361. ** Re\)orted as amended by Hearing Examiner s OI.,ler of .Jun" 26 , 1967 , by am"ndin paragraphs 7, 8, and 10 of Part III so 3-'1 to p;ive effect to the fact that the aeCjuisition by respondent of certain assets uf Cooney Bros. , Inc., also Involved the assets of certain other companies controlled hy the Cooney family, viz, Plaza Concrete Corporation aJl! Mamaroncck Stone f'J(rp.

Complaint DEFINITIONS 1. For the purpose of this complaint, the foil owing definitions "hall apply:

a. "Portland cement" includes Types I through V of portland cement as specified by the American Society for Testing Materials. Neither masonry nor white cement is included. b. "Ready-mixed concrete" includes all portland cement concrete which is manufactured and delivered to a purchaser in a plastic and unhardened state. Ready-mixed concrete includes central-mixed concrete, shrink-mixed concrete and transit-mixed concrete.

c. "The New York City Area" consists of the five boroughs of the city of New York and the New York Counties of Nassau Suffolk and Westchester.

II. MARQUETTE CEMENT MANUFACTURING COMPANY 2. Marquette Cement Manufacturing Company, hereinafter referred to as "Marquette " is a corporation organized and existing under the laws of the State of Ilinois with its principal offces located at 20 North Wacker Drive, Chicago, Ilinois. 3. Marquette, the seventh largest portland cement manufacturing company in the United States, operates twelve portland cement manufacturing plants and twenty distribution terminals located in eighteen different States. In 1961, Marquette had sales of approximately $80 milion, assets of about $148 million and net income of about $7.3 milion.

1. In the State of New York, Marquette presently operates a portland cement manufacturing plant at Catskil and a distribution terminal at Flushing; a second manufacturing plant at Howes Cave was sold during 1961. The total shipments of portland cement from these two plants, in 1964, amounted to approximately 1.6 milion barrels; about 405 000 barrels, or approximately 25 percent, were shipped to customers located in the New York City Area.

5. Marquette, through its wholly owned subsidiary, Lawrence Concrcte Corporation, is engaged in the production and sale of ready-mixed concrete in the New York City Area. In 1964, the total shipments of ready-mixed concrete by this subsidiary amounted to over 50 000 cubic yards.

6. Marquette is and for many years has been engaged in the shipment of portland cement across State lines. Marquette is .

Complaint 75 F.

engaged in commerce, as "commerce" is defined in the Clayton Act.

II. COONEY BROS. , INC. , PLAZA CONCRETE CORPORATION , AND MAMAROKECK STONE CORP.

7. Cooney Bros. , Inc., Plaza Concrete Corporation and Mamaroneck Stone Corp. (hereinafter collectively called "Cooney were each corporations organized and existing under the laws of the State of New York, each having its principal offce and place of business at 129 Main Street, Tarrytown, New York. The above three corporations were each owned and operated by the same members of the Cooney family.

8. At the time of the acquisition, Cooney was engaged in the production and sale of ready-mixed concrete in the New York City Area. A substantial amount of such production and sales was in the Westchester County portion of the Ncw York City Area. At the time of the acquisition, Cooney operated seven ready-mixed concrete plants, of which Cooney Bros. , Inc. operated five, and Plaza Concrete Corporation and Mamaroneck Stone Corp. each operated one such plant. In 1964, Cooney constituted the sixth or seventh largest producer of ready-mixed concrete in the N ew York City Area. In 1964, Cooney made the following sales of ready-mixed concrete: Gu.lli,: Doll",,. !Ids lIal1L Cooney Bros. , Inc. 1:3fi i)77 26,! 993. Plaza Concrete Corp. - 221 020,150. Mamaroneck Stone Corp. :15 243 573 307. 841 $,J,857 451.39 Total 22nin 1961, Cooney consumed the following amollnts of cement: Barrels Cooney Bros. , Inc. 163 084. Plaza Concrete Corp. 642. Mamaroneck Stone Corp- 36,487. 214. Total - . 270 9. Cooney was, at the time of the acquisition, engaged in commerce, as "commerce" is defined in the Clayton Act. IV. THE ACQUISITION 10. On or about November 16 , 1961, Marquette through its wholly owned subsidiary, Lawrence Concrete Corporation, acquired the ready-mixed concrete assets of Cooney, as well as assets of other related corporations owned by the Cooney family, for a total consideration of about $2.2 milion. The acquisition of Complaint Cooney by Marquette was an act or practice in commerce within the meaning of the Federal Trade Commission Act. NATURE OF TRADE AND COMMERCE 11. Portland cement is a material which in the presence of water binds aggregates, such as sand and gravel, into concrete. Portland cement is an essential ingredient in the production of ready-mixed concrete. There is no practical substitute for portland cement in the production of concrete. 12. The portland cement industry in the United States is substantial. In 1964, there were about 52 cement companies in the United States operating approximately 181 plants. Total shipments of portland cement in that year amounted to approximately 365 milion barrels, valued at about $1.1 bilion. 13. Cement manufacturers scll their portland cement to consumers such as ready-mixed concrete companies, concrete products companies, and to contractors and building materials dealers. However, on a national basis, approximately 57 percent of all portland cement is shipped to firms engaged in the production and sale of ready-mixed concrcte. 14. In recent years, there has been a significant trend of mergers and acquisitions by which ready-mixed concrete companies in major metropolitan markets in various portions of the United States have become integrated with portland cement companies. Since 1959, there have been at least 35 such acquisitions.

15. In the New York City Area the trend toward vertical integration is well advanced. The acquisition of Cooney is the fourth acquisition of a substantial portland cement consumer by a portland cement manufacturer in this area since 1959. More than 20 percent of the market for portland cement in the New York City Area has been potentially forecloscd as a result of vertical acquisitions.

16. Each vertical merger or acquisition which occurs in the portland cemcnt industry potentially forecloses cement manufacturers from a segment of the market otherwise open to them and places great pressure on competing- manufacturers likewise to acquire portland cement consumers in order to protect their markets. Thus, each such rtical acquisition may form an integral part of a chain reaction of such acquisitions-contributing both to the sharc of the market alrcady forecloscd, and to the impetus for further such acquisitions. . .. . .. .

Initial Decision 75 F.

VI. VIOLATION OF SECTION 7 17. The effect of the acquisition of Cooney by Marquette, both in itself and by aggravating the trend of vertical mergers and acquisitions, may be substantially to lessen competition or to tend to create a monopoly in the manufacture and sale of portland cement and ready-mixed concrete in the United States as a whole and various parts thereof, including the State of New York and the New York City Area, in the following ways, among others:

a. Marquette s competitors may have been and/or may be foreclosed from a substantial segment of the market for portland cement.

b. The ability of Marquette s non-integrated competitors effectively to compete in the sale of portland cement and readymixed concrete have been and/or may be substantially impaired. c. The entry of new portland cemcnt and ready-mixed concrete competitors may have been and/or may be inhibited or prevented.

d. The production and sale of ready-mixed concrete, now a decentralized, locally-controlled, small business industry, may become concentrated in the hands of a relatively few manufacturers of portland cement.

Now therefore, the acquisition of Cooney by Marquette is in violation of Section 7 of the Clayton Act, as amended, and constitutes an unfair act or practice in commerce in violation of Section 5 of the Federal Trade Commission Act. Mr. Alan C. SchneebeTgeT, Mr. A. Roy Lavik and Mr. Thomas W. PaTquhaT supporting the complaint. Norman, Engelhardt, Pranke Lauritzen by Mr. Ralph Miller and Mr. William P. O'Keefe of Chicago, Ilinois, for respondent. INITIAL DECISION BY .JOHN LEWIS, HEARING EXAMINER FEllRUARY 27 )(jS INDEX Page STATEMENT OF PROCEEDINGS FINDINGS OF FACT -- -- I. Identity and Business of Respondent and Acquired Companies A. The Respondent B. Lawrence Concrete Corporation C. The Cooney Companies II. The Acquisition A. Events Leading to Acquisition MARQUETTE CEMENT MFG. CO.

32 Initial Decision FINDINGS OF FACT—Continued B. The Cooney Acquisition .-.....--------------------- III. Market Conditions ---------.-- bee eee eee eee ee ee eee eee A. The Product Markets _.......---------------------- 1. Portland Cement ._.._----------. | .-------- 2. Ready-Mixed Conerete _.-------------------- B. The Industries ___...__-.-_------------------------ 1. Portland Cement _.__.....------------------ Customers __._...---------------------- Structure __.__...---------------------- Market Characteristics _..--------------- 2. Ready-Mixed Concrete .._.------------------ Customers ___....-_-------------------- Structure _._...-._--..----------------- Market Characteristics __....._--------- C. Conditions in the Relevant Markets ..--------------- 1. Portland Cement _.._...-------------------a. Northeastern U. 8S. __---------------b. The NYMA .._._.._--.---------------ce. Westchester County -.-.-------------- 2. Ready-Mixed Concrete ....-.---------------a. The NYMA Market ____-..-.-------b. Westchester County ..--.------------ IV. The Alleged Competitive Impact ......_..-..---------------. A. Cement Company Level __..........--.. (lee eee 1. Foreclosure _._-..---.-----.---------------- 2. Barriers to Entry, and Decline in Selling Activity by Existing Companies __..-..--.- B. Ready-Mix Level _.._._____..____--_ eee eee eee CONCLUSIONS _._..__.__.2-2 222.

I. Interstate Commerce ._..._..._....----.--_---_------------ A. The Acquiring Companies __.-..-..-._------------- B. The Acquired Companies ___..._.-.---.------_----- II. The Product Markets __..... ..._..-_.------------------- A. Portland Cement _..__.........-..----------------- B. Ready-Mixed Concrete .._..___._-.---_------------- III. The Geographic Markets ._..__....___.-_.--------------.-- A. Portland Cement __.__.____.._...--.--------------- The Northeastern Market ..________..-__.------ The NYMA ._._________-_.___-------- eee ee Westchester County __._....-__.--------------- B. Ready-Mixed Concrete ..__..........---------------- The NYMA __.___..___. 2-2-2 eee Westchester County -.._.._.-_----------------- IV. Competitive Impact ...........-22022..2-- wee eee wee eee eee A. Portland Cement ___._..........._--.-------------- B. Ready-Mixed Concrete ._......--------------------- C. Conclusions as to Impact ____._.___._--.-..--.------ FINAL CONCLUSIONS OF LAW ____._____.-----_------------- ORDER ._..-..2020 08 ee eee eee 84.

Initial Decision 75 F.

STATEMENT OF PROCEEDINGS The Federal Trade Commission issued its complaint against the above-named respondent on May 20, 1966, charging it with having violated Section 7 of the Clayton Act, as amended, and Section 5 of the Federal Trade Commission Act, by the acquisition, on or about November 16, 1964, through its wholly owned subsidiary, Lawrence Concrete Corporation, of the ready-mixed concrete portion of the assets of Cooney Bros. , Inc., a company principally engaged in the production and sale of ready-mixed concrete in the Westchester County portion of the New York City area.

Following service of said complaint upon it, respondent moved for the dismissal thereof or, in the alternative, to stay all further proceedings on the grounds that, (1) complaints in two other proceedings involving acquisitions of ready-mixed concrete producers in the same market area had been dismissed after hearing by the examiner, and (2) the Commission was then conducting an industrywide hearing on vertical integration in the cement industry. Said motion was denied by the examiner, by order dated July 11, 1966. However, by order issued July 27, 1966, the Commission g-ranted, in part, respondent' s request for permission to file an interlocutory appeal on the question of the alleged unfairness arising from the Commission s conduct of hearings in the cement industry while this adjudicative proceeding was pending. The Commission s order also provided for a stay of all proceedings before the examiner in this matter until further order by it. Following the completion of its industrywide hearing, and the issuance of its statement of "Enforcement Policy With Respect To Vertical Mergers In The Cement Industry," the Commission, by order issued February 6, Ihi7, denied respondent' s interlocutory appeal and remanded this proceeding back to the hearing examiner.

Respondent thereafter fied its answer on March 20, 1967 , in which it admitted making the challenged acquisition, but denied that such acquisition was made in violation of law, as charged. Upon joint motion and stipulation of the parties, the complaint and answer were amended by order of the examiner, dated June , 1967, so as to give effect to the fact that the acquisition by respondent of certain assets of Cooney Bros. , Inc., also involved the assets of certain other companies controlled by the Cooney family, viz Plaza Concrete Corporation and Mamaroneck Stone Tnitial Decision Corp. Prehearing conferences were convened herein in Washington, D. , on April 7, June 7, and July 25, 1967, at which there was some definition and narrowing of issues, and at which substantially all Government exhibits were marked for identification and received in evidence. The parties also reached agreement on a stipulation incorporating into the record of this proceeding various portions of the findings of the examiner in his initial decision in United States Steel Cnrpor-ation Docket No. 8655 (71 F. C. at 399). The transcripts of said conferences were, by agrecment of the parties, made a part of the public record, and the results of said conferences were embodied in the examiner Prehearing Orders Nos. 1 to 3.

Hearings for the reception of testimony and other evidence were held in New York, New York, and Washington, D. between September 25 , 1967 , and October 2, 1967. All parties were represented by counsel, participated in the hearings, and were afforded fui1 opportunity to bc heard and to examine and cross-examine witnesses. At the close of all the evidence, and pursuant to leave granted by the undersigned, proposed fmdings of fact and conclusions of law, together with supporting briefs were fied by the parties on December 1 , 1967, and replies thereto were filed on December 14 , 1967.

After having carefully reviewed the evidence in this proceeding and the proposed findings and conclusions submitted by the parties/ and based on the entire record, including his observation of the witnesses, the undersigned makes the following: FINDINGS OF FACT C 1. Identity and Business of Respondent and Acquired Companies A. The Respondent 1. Marquette Cement Manufacturing Company (sometimes referred to herein as "Marquette ), is a corporation organized and J Proposed findings not herein adopted, either in the form proposed or in snhstaT1('e, are rejeP.eu as not supported by the evidence or as involving immaterial matters. References to proposed findings and briefs Rre made with the folluwing abbreviations; "CPF" (for complaint counsel' s proposed findings); "RPF" (for respondent' s proposed finding!1); "cn" (for complaint counscJ's brief) : " RE" (for respondent' s brief) ; "CR" (for complaint counsel's reply); ani! "RR" (for respondent s reply). 2 References are hereinafter made to certain portions of the record in support of particular finrJings, Such references are to the principal portions of the record relied upon by the examiner, hut are not intended as an exbaustive cumpendium of the portions of the recurd reviewed and relied upon by him. Thc following abbreviations are used in referring to tbe recoru: "Tr. " (for transcript of testimony), " CX" (for complaint counsel' s exhibits), "RX" (for respondent's exhit,its), and "PHO (for examiner s J1rehearing orders). Initial Decision 75 F.

existing under the Jaws of the State of Ilinois, with its principal oflce located at 20 North Wacker Drive, Chicago, Ilinois (Adm. Ans. par. 2; PRO No. , par. 2).

2. Marquette is principally engaged in the manufacture of portland cement. It is the seventh or eighth largest portland cement manufacturing company in the United States. In 1964 it operated 12 portland cement manufacturing plants and 20 distribution terminals located in 18 different States (Adm. Ans., par. 3; PRO No. , par. 3). As of 1965 , it distributed its products in 29 States (CX 18 , p. 1). In the years 1962 to 1966 its net sales and net income were as follows (CX 17, p. 19; CX 19, p. 6):

Year Net Sales Net Incomr' 560 5921962 $82 021,366 $9 807,6191963 79 086700 8 303 553J964 79,972,832 7 1471965 83 295163 5,8B485J ,3071966 83 832126 2 3. In New York State, Marquette presently operates a portland cemcnt manufacturing plant at Catskill, New York, and a distribution terminal at Flushing, Queens, New York (Adm. , Ans. par. 4). The Catskil plant has been operated by Marquette since 1961, when it took over operation of the plant as a result of its acquisition of North American Cement Company. Prior to 1961 Marquette did not operate any plants in the N ortheastcrn United States (Tr. 533-534). Beginning in 1964, Marquctte undertook a modernization and expansion of the Catskil plant which resulted in closing some of the kilns, and it purchased substantial quantities of cement Jrom other ccment companies to fill the requirements of its own customers. During 1964 Marquette shipped 1 940 )8 barrcls oJ cement, both manufactured by it or purchased from other cement companies, to customers located in the N orthcastern United States. Of this amount 405 530 barrels or 20. 970 was shipped to customers in the New York metropolitan area (Adm., Ans., par. 4; CX 22- 102- 103).

B. Lawt' ence Concrete Corporation 4. In 1964 Marquette organized Lawrence Concrete Corporation (sometimes referred to herein as "Lawrence L as a wholly owned subsidiary, to conduct business as a ready-mixed concrete producer. Lawrence was incorporated under the laws of Delaware on June 11, 1964, with its offce and principal place of business Initial Decision at Whitestone, Queens, New York. Two of Lawrence s three directors were also directors of respondent. The site and readymixed concrete equipment used by Lawrence in its business were leased from a bankrupt ready-mixed concrete producer. Lawrence began the sale of ready-mixed concrete on August 4, 1964, and undertook to serve adjacent areas of New York City and western Nassau County (CX 20 A, C-D; Tr. 504). C. The Cooney Companies 5. On November 16, 1964, Lawrence, acting with the approval and financial assistance of Marquette, acquired certain of the assets of three corporations controlled by members of the Cooney family. These were Cooney Bros. , Inc., Plaza Concrete Corporation, and Mamaroneck Stone Corp., each of which was engaged in the production and sale of ready-mixed concrete. At the time of the acquisition, the Cooney interests owned seven ready-mixed concrete plants, of which four were located in Westchester County (at Tarrytown, Verplanck, Mamaroneck, and Yonkers), two in Orange County (at Pellets Island and Newburgh), and one in Broome County (at Binghamton). The Pellets Island plant was not in opcration due to insuffcient demand, and the Binghamton plant served only a single highway project. The sales area of the Cooney companies consisted of Orange and Broome Counties outside of the New York City metropolitan area (sometimes referred to herein as the NYMA), and Westchester and Bronx Counties within the New York City metropolitan area (CX 20 , 25 A-D; Adm., Amended Ans. , par. 7, 8). 6. Prior to their acquisition, the three Cooney companies were the fifth or sixth largest consumers of portland cement, among ready-mixed concrete companies, in the NYMA (CX 105-A). Set forth below is a table showing thc purchases of portland cement, for the period 1962-1966 , by the Cooney companies (up to I!J64), and by the Cooney plants acquired by Lawrence (after 1964). Such table reflects both the total purchases of cement by these plants and the portion thereof consumed by the plants located in the NYMA (CX 29-32):

Purchases of Portland Cement by Cooney Companies or Plants Total nu. bbl. pun;has",d No. bbl. r;onsumed in NYMA 1962 295 100 235 429 1963 262 162 207 046 1964 270 214 208 008 1965 349 664 244 997 1966 428 6H7 268 293 j):

Initial Decision 75 F. 7. The Cooney companies, as a group, operated at a profit in only one of the three years prior to the acquisition of their assets by Lawrence. Set forth below is a table reflecting the net sales and net income (or loss) of the Cooney companies for the fiscal years 1962 to 1964 (RX 2 Net Sales and Income of Cooney Companies Sales Income (loss) 671)1962 $8 175045 ($85 ( 24 885)1963 8 611 974121662552 1921964 7 8. The net sales and income of the Lawrence operations, which began in August! 964, including those derived from the operation of the Cooney plants after November 16, 1964, are set forth in the table below (HX 29):

Net Sales and Income of Lawrence Sales Income (loss) 698)J964 $988073 ($104 ( 47 642)1965 7 ( 721,472) 9134881966 8 9. For some years prior to,686567and at the time of, the acquisition of their assets, the Cooney companies made substantial purchases of portland cement from sources located outside the State of New York, and such purchases were shipped to the Cooney companies from points outside the State of New York (CX 29-31). During 1962 to 1964, the Cooney companies sold all of the readymixed concrcte manufactured by them within the State of New York (CX 25 A-B).

II. The Acquisition A. Events Leading to A equisition 10. During the period from I!J62 to 1964, Marquette suffered a substantial drop in its sales of cement in the NYMA, from 780 970 barrels in 1962 to 405 530 barrels in 1964. This drop of over 375 000 barrels was due largcly to a decline in sales to its principal customer, Colonial Sand & Stone Co. , Inc. , from 404 027 barrels in 1962 to 87 621 barrels in 1964. Colonial, which was not originally in the cement business, erected its first cement plant in 1959 and, as a result of a doubling of its productive capacity in 1963, had become three-fourths self-suftcient by 1964. During the period 1962- , Marquette also sustained a substantial loss of sales to another large customer, Certified Industries, Inc. , which was acquired by Universal Atlas Cement Initial Decision Division of United States Steel Corporation in early 1964. Marquette s sales to Certified declined from a peak of 145 884 barrels in 1962 to 5 830 barrels in 1964 (CX 21; Stip. , par. 90, 94, 109; Tr. 107-108, 113).

11. Since it felt that its loss of market position was due in large part to the growth of vertical integration in the NYMA particularly on the part of Colonial Sand & Stone Co. , Inc. Marquette decided to enter the ready-mixed concrete business itself. Its first effort in this direction was the formation of Lawrence Concrete Corporation in .June 1964. As the successor of a bankrupt ready-mixed concrete producer, Lawrence was a very minor consumer of cement, purchasing only 24 000 barrels of cement during the period from August to December 1964. Consequently, when Marquette learned that the Cooney organization s ready-mixed concrete business might be for sale, it authorized Lawrence to enter into negotiations with the Cooney representatives (Tr. 503-505; CX 20- , H , 1). 12. The Cooney organization consisted of six or seven separate corporations, of which three were in the ready-mixed concrete business and the balance were in such other businesses as the manufacture of concrete blocks, the operation of asphalt producing plants, asphalt pavement contracting, and the installation , gas maim storm of underground electric and telephone lines drains, and water mains. The founder and principal owner of these operations, Frank D. Cooney, died on March 2, 1964. Due to the lesser profitability of the ready-mixed concrete operations as compared to the balance of their business, financial pressures stemming from estate taxes and other estate financial needs labor problems in the ready-mix operations, lack of suffcient executive personnel, and concern with their ability to compete with the larger, vertically integrated ready-mixed concrete producers, the Cooney family was interested in disposing of the ready-mixed concrete portion of their business (CX 25 C- RX 1).

B. The Cooney Acquisition 13. Negotiations for the acquisition of the Cooney family ready-mixed concrete interests were begun on or about August , 1964, and was concluded on November 16, 1964, with the sale of certain of the assets of Cooney Bros. , Inc. , Plaza Concrete Corporation, Mamaroneck Stone Corp. , and several other Cooney-controlled corporations which owned or leased trucks Initial Decision 15 F.T.C.

and other equipment devoted to the ready-mixed concrete business. The transfer involved the Cooney family’s interest in the seven ready-mix plants previously referred to and in a number of motor vehicles, including 92 ready-mix trucks owned or leased by the Cooneys. The total consideration paid was $2,155,948, of which $805,948 involved a cash payment advanced to Lawrence by Marquette, and the balance of $1,350,000 was represented by notes of Lawrence, for which Marquette made the necessary financing arrangements. The transaction also involved the employment of several members of the Cooney family by Lawrence in an executive capacity for a period of three to five years (CX 20 B-C, 33, 34, 36, 39, 40, 79, 80).

14. Following the acquisition of the Cooney ready-mixed concrete interests by Lawrence, the three Cooney companies, Cooney Bros., Inc., Plaza Concrete Corporation, and Mamaroneck Stone Corp. ceased to operate as separate corporate entities and became part of Lawrence Concrete Corporation. In addition to its own plant at Whitestone (Corona), Lawrence took over the operation of the former Cooney plants at Newburgh, Tarrytown, Verplanck, and Mamaroneck. It ceased operation of the latter plant in May 1967, when it sold the site to the city of Mamaroneck. Lawrence never put into operation four former Cooney portable plants located at Stilesville, Pellets Island and Peekskill (CX 20 C-B, 22-B; Tr. 517).

III. Market Conditions A. The Product Markets 1. Portland Cement 15. “Portland Cement” is a material which in the presence of water binds aggregates, such as sand and gravel, into concrete. For purposes of this proceeding, it includes Types I through V of “portland cement,” as specified by the American Society for Testing Materials. It does not include masonry or white cement. Portland cement is an essential ingredient in the manufacture of ready-mixed concrete. There is no practical substitute for portland cement in the manufacture of concrete (Adm., Ans., par. 1, 11; PHO No. 1, par. 1, 11).

2. Ready-Mixed Concrete 16. “Ready-Mixed Concrete” is a material which is processed from portland cement and aggregates, and is delivered to purchasers in a plastic and unhardened state. It includes central- Initial Decision mixed concrete, shrink-mixed concrete and transit-mixed concrete (Adm., Ans., par. 1; PRO No. , par. 1). B. The lndustrie.

1. Portland Cement Customers 17. Portland cement is sold to (a) producers of ready-mixed concrete, (b) manufacturers of concrete products, (c) building material dealers and (d) construction contractors. Cement companies, as a rule, depend on a large number of such customers as outlets for the production of their manufacturing plants (Stip. , par. 61; Tr. 98).

18. Firms engaged in the production of ready-mixed concrete are the principal customers for portland cement. In 1964, readymixed concrete producers consumed over 215 million barrels of portland cement and accounted for approximately 59 % of total industry shipments. In 1965, ready-mixed concrete producers consumed about 221 milion barrels of portland cement and accounted for approximately 59.1 % of total industry shipments. In the Northeastern part of the United States (which includes plants in the area from New York State to Maine), shipments to ready-mixed concrete customers accounted for over 65 % of the total shipments from that area (Stip. , par. 62; Tr. 98). Structure 19. In 1964, the portland cement industry in the United States consisted of 51 companies operating 181 manufacturing plants. In that year, total shipments of portland ccment by such plants amounted to 366 304 000 barrels, having a value of approximately $1.2 bilion. In 1965, thc portland cement industry s 181 manufacturing plants shipped a total of 374 086 000 barrels valued at about $1.2 bilion. Imports of foreign cement into the United States amounted to 3 633 000 and 5 505 000 barrels in 1964 and 1965, respectively (Stip., par. 63; Tr. 98-99; CX 14, pp. 1 , 17). 20. In recent years, the cement industry has operated with substantial excess capacity. In the years 1963 to 1965, the percent of capacity utilized by cement companies in the United States was 73.8%, 76. 9%, and 77'10 respectively (Stip. , par. 64; Tr. 99; CX 14, p. 7).

21. While the degree of concentration in the cement industry in the United States is substantial, it does not appear to be excessively high in comparison to other manufacturing industries. Although the degree of concentration increased somewhat j).

FEDERAL TRADE COMMISSION m CISIONS Initial Decision 75 F.'l. between 1947 and 1958, there was a decline in concentration in 1%3 (the latest year for which there are data available in the record), in terms of the four largest and eight largest companies. Set forth below is a table reflecting concentration ratios in the United States for the years 1947, 1958, and 1963 (CX 98): COTI entrab:on Ratios in Cement Indu-try Pcrce.nt of vurue of IIhipments accounted fot by- IUT'7/Jllt largellt laTflest c01nl!anic$ c()npani". compa,nic81947 30 451958 32 501963 22. In recent years there29have been a49substantial number of mergers or acquisitions in the cement industry. During the period from 1956 to 1963, there were 25 acquisitions of cement companies by other companies, most of the acquiring companies being cement producers. During the same period only 10 new companies entered the cement industry. Since 1963, there have been six additional entrants into the industry. In 1963, there were 55 cement manufacturing companies in the United States as compared to 62 in 1958, G7 in 1954, and 73 in 1947 (CX 100 101, H8; I,X 25).

23. Prior to 1959 there were relatively few ready-mixed concrete companies which were affliated with cement companies. Only four ready-mixed concrete producers had been acquired by a cement company prior to 1959. During the period from 1959 to 1965, there were over 30 acquisitions of ready-mix firms by cement companies in the United States (Stip. , par. 67; Tr. 99). Marlcet Clwracteristics 24. The effective marketing area of a cement manufacturer is generally limited to a regional area around its cement plant or distribution terminal. This is dictated by such factors as the homogeneous nature of the product, transportation costs, and the necessity of providing prompt delivery service (Stip. , par. 68; Tr. 9 25. Portland cement is a fairly standardized product for which consumers wil not generally pay a higher price than the lowest price prevailing at a given destination. Although varying prices are sometimes quoted by cement companies, based on a mii1 price plus freight charges to the destination, most companies reservc the right to meet the lowest delivered price of any cement supplier, and delivered prices in a given area tend to be uniform. %.

Initial Decision This frequently requires a manufacturer to absorb all or part of transportation costs (Stip. , par. 69; Tr. 99-100, 160, 234, 366). 26. Where price and qualiy are equal, consumers of portland cement tend to favor suppliers which provide the most prompt delivery service. This has resulted in the increased use of truck delivery for cement shipments. Shipments by truck accounted for , as68. 65'0 of cement shipments in 1965 and 65.9% in 1964 compared to 47. 1 % in 1960 (Stip., par. 70; Tr. 100). 27. The growth of truck delivery has been accompanied by an increase in the use of distribution terminals to serve heavily populated local areas and enable cement suppliers to provide the required rapid delivery. The number of distribution terminals has increased from approximately 175 in 1963 to approximately 235 in 1965 (Stip., par. 71; Tr. 1(0).

2. Ready-Mixed Conerete Cu.,tomers 28. Ready-mixed concrete is sold principally to construction contractors and subcontractors for use in the construction of commercial buildings, schools, residential structures, foundations sidewalks, sewers, bridges and roads (Stip. , par. 72; Tr. 100). Structure 29. In 1963, the ready-mixed concrete industry in the United States ccnsisted of approximately 4 600 establishments. Most of these were small establishments with less than 20 employees. There were 1 020 ready-mixed concrete cstablishments with 20 or more employees in 1963, as compared to 944 such estahlishments in 1958 (Stip., par. 73; Tr. 100-101).

30. As the above figures suggest, the ready-mixed concretc industry in the United States is highly fragmented. In 1958, the four largest firms accounted for only 25'0 of total industry shipments, while the 20 largest firms accounted for only 6 %' and the 50 largest accounted for 11 %. In J 963, the four largest firms accounted for 4 % of total industry shipments while the 20 largest firms accounted for 135'0 and the 50 largest firms accounted for 21 However, in certain large metropolitan areas the four largest firms accounted for between ,345'0 to 1005'0 total shipments in the various areas for which data are available in the record (Stip., par. 74; Tr. 101; RX 28; CX 99). Of selected metropolitan areas for which concentration data are available for the years 1958, 1963 or 1964, the median of the market share controlled by the four largest ready-mixed concrete prod ucers was 56 % (RX 28).

, :

Initial Decision 75 F.

Market Characteristics 31. The marketing area of ready-mixed concrete is limited to an area within a relatively narrow radius of the ready-mix batching plant, due to the nature of the product. Ready-mixed concrete wii set or harden within a relatively short time, and it is relatively cxpensive to transport it for any considerable distance (Stip., par. 75; Tr. 101).

32. Ready-mixed concrete is generally priced on an individual quotation basis. Among the principal factors determining the price are the size of the job, the strength of the concrete required, and the distance of the job from the batching plant. A small differential on a large job may cause a purchaser to favor one ready-mix supplier over another (Stip., par. 76; Tr. 101). However, there are occasions when a builder or contractor will specify a particular ready-mix producer s concrete for a job because of satisfaction with the producer s product or services or a long standing relationship with him (Tr. 288-289 , 430, 464). C. Conditions in the Relevant Markets 1. Portland Cement a. The N oTtheastern United States Dimensions and Str-ucture 33. The New York City metropolitan area is served principally by cement companies with manufacturing plants located in the Hudson River Valley of New York, and the Lehigh Valley of Pennsylvania. In 1964 and 1966 there were, respectively, 18 and 17 cement-producing companies serving the New York City metropolitan area from plants located in either the Hudson River six ofValley or the Lehigh Valley, or in both areas." In 1964, these companies also maintained distribution terminals within the New York City metropolitan area. In 1966, 10 of the cementproducing companies had distribution terminals from which cement was shipped into the New York City metropolitan area. In addition to these cement manufacturing companies, there are several distributors of imported cement who sell or have sold in the New York City metropolian area from terminals located in or near the area (Stip., par. 77; Tr. 1(2). 31. Plants located in the Lehigh Valley distribute their cement principally in southeastern New York, eastern Pennsylvania, The reduction in the number of cumpanies between 1!J64 and 1966 is accounted for by the fact that one of th", cement companies, Nazareth Cenwnt Co., became a subsidiary of Cuplay Cement Manufacturing Co. , un Dcc('mber 10, l%S. Initial Decision New .Jersey, lower Connecticut, Delaware and part of Maryland. Plants located in the Hudson River Valley distribute their cement principally in eastern New York, eastern Pennsylvania, northern New Jersey and lower New England, including Connecticut Rhode Island, Massachusetts southern New Hampshire and Vermont. Distributors of imported cement supplying the New York City metropolitan area sell such cement principally in the New York City metropolitan area and adjacent areas in lower Connecticut (Stip. , par. 78; Tr. 102-103, 157-158 , 206 233-234) .

35. Total shipments of portland cement by all cement plants servin!! the New York City metropolitan area and by the principal distributors of imported cement serving the area were as follows for the years 1960 through 1966 (Stip., par. 79; Tr. 103; 102 A-B):

BarTcl8 (OOn) 320 1960 - 39 986 206 1961 39 355 1962 44 549 1963 48 0'42 1964 48 873 1965 54 36. The1966extent of concentration, and the52trend thereof, in the northeastern section of the United States may be gauged by comparing the shipments of the top four companies with the total shipments of all northeastern cement plants and the principal distributors serving the NYMA. The percentage of shipments accounted for by the top four companies in the Northeast serving the NYMA was 36. 9ro in 1960 and increased to 42. in 1964 and to 44. ro in 1966 (CX 102). 37. At no time from 1960 to 1966 did respondent rank among the top four northeastern companies which ship cement into the NYMA. In 1960, it was the seventh ranking company, with 6.1 % of shipments. By 19(;4, it had dropped to tenth ranking, with 4.0 % of shipments. In 1965 and 1966, its position improved somewhat to the eighth and ninth ranking company, respectively, and it accounted for 4.R% and 4. 2%, of shipments respectively (CX 102).

b. The NYMA Dimensions and Structure 38. The New York City metropolitan area (referred to herein Initial Decision 75 F.

as the NYMA) includes the five counties comprising New York City (New York, Bronx, Queens, Kings and Richmond), plus the Long Island counties of Nassau and Suffolk to the east of New York City and Westchestcr County to the north. At least eight of the cement companies supplying this area maintain or have maintained scparate distribution terminals within this geographic area. In 1966, 10 cement producing companies each maintained a distribution terminal serving the NYMA and one importer, Cilco Cement Corp. , shipped cement into the area from two distribution terminals. It has been stipulated, and the examiner finds, that the NYMA is a distinct market or submarket for cement (Stip., par. 82; Tr. 103-104). 39. Between 1960 and I J66, cement shipments into the NYMA by most companies serving thc area represented between 200/0 and 30 % of the total shipments of their plants serving the area (Stip. , par. 83; Tr. 104). Marquette s shipments into the area represented the following percentages of the total shipments from its Catskill, New York plant (RX 19): 1962 ;)0. 196;) 25. 1964 24. 1965 17. 1966 20. 40. In HJ64, the NYMA was served by approximately 19 suppliers of portland cement from 24 cement plants and seven distribution terminals. In 1966, the NYMA was served by approximately 18 suppliers of portland cement from 23 cement plants and 12 distribution terminals. ' (Stip. , par. 85; Tr. 104- 105; ex 102.

41. In terms of the share of the NYMA market accounted for by the larger cement shippers, the degree of concentration is moderately high, and the share of the market accounted for by such companies has increased between 1962 and 1!J66. Set forth below is a table reflecting the share of the NYMA cement market accounted for by the four largest and eight largest shippers into the area (CX 103):

t The decline in number of suppliers of cement between HI64 and 1966 is due to the acquisition of Naza.reth Cement Co. on December 10, 1965, by l..play O:ment Manufacturing Company, another shivpcr into the NYMA. Initial Decision Concentration Rntios Among Cement Companies Serving NYMA (1962-1966) Percent of ship.menu! accm.nted for /)11largest la1"gcst companics companies 1962 44. 67. 1963 48. 71.0 1964 53.1 70. 1965 56. 75. 1966 59. 778 42. The top ranking company in the sale of cement in the NYMA from 1960 to 1966 was Colonial Sand & Stone Co. , Inc. a vertically integrated ready-mixed concrete and cement company. Between 1960 and 1966 , Colonial accounted for from 21 ')0 to 36')0 of cement shipments into the area (Stip., par. 89; Tr. 105). During the period from 1960 to 1963, Colonial's share of the market was fairly stable, ranging between 21 % and 23 ')0. However, following the expansion of its Hudson, New York plant its share increased substantially, to 31 % in 1964 and 36%, in 1966 (CX 103).

43. During the period from 1960 to 19f6, respondent Marquette did not rank among the top four companies in the sale of cement in the NYMA except for 1961 , but it did rank among the top eight companies (out of approximately 19 cement suppliers) in each year other than 1964. However, its sales represepted a relatively small fraction of the total cement sales in " the NYMA, and its relative market position was a declining one during most of the period. Set forth below is a table reflecting Marquette s market share and relative rank, as a shipper of cement into the NYMA, between 1960 and 1966 (CX 103): Market Position of Marquette in Cement Shipnwnts in NYMA (19(O 966) Percent of shipments Helr,tiv,- (percent) Tauh 1964 3 c 44. Prior to 1959, there were no cement companies in the NYMA which were affliated with a ready-mixed concrete company or other consumer of cement. The first instance of a cementready-mixed concrete, vertically integrated operation in the Initial Dp.cision 75 F. NYMA occurred in November 1958, when Colonial Sand & Stone Co. erected its own cement-producing facilities at Kingston, New York, in the Hudson River Valley. Colonial was, and is, the largest consumer of cement in the NYMA. As a result of prior acquisitions, it then enjoyed partial vertical integration, having its own aggregate-producing and towing facilities. With the erection of its own cement plant under the name of Hudson Cement Company, it became a fully integrated company, although it continued to purchase substantial quantities of cement from other cement producers for several years (Stip. , par. 90; Tr. 105-106). During 1966, Colonial became further integrated vertically, by acquiring the assets of a manufacturer of concrete pipe in the NYMA (RX 31, p. 3).

45. The next instance of cement-ready-mixed concrete, vertical integration to occur in the NYMA, and the first to come about through acquisition, took place in .J anuary 1%0, when American Cement Corporation acquired M. F. Hickey Company, Inc. , of Brooklyn, New York. The Federal Trade Commission thereafter issued a complaint against American Cement, charging it with having violated Section 7 of the Clayton Act by virtue of the M. F. Hickey acquisition. Rased on a consent agreement entered into with American Cement, the Commission issued its decision and order on January 20, 1964, under which American Cement was ordered to divest itself of Hickey. Hickey s plant and assets were sold on June 30, 1964, to Ajax Block Corporation, which continued the Hickey operation under the same name. In 1964 the present Hickey Company purchased 91 % of its cement requirements from Hercules Cement Division of American Cement, to which it is indebted under a purchase money mortgage of $3.2 milion. In 1966 , Hickey purchased 790/0 of its cement requirements from the Hercules Cement Division of American Cement (Stip. , par. 91; Tr. 106).

46. The next cement company to become vertically integrated with a ready-mixed concrete company was National Portland Cement Company, which acquired the Ryan Ready-Mixed Concrete Corp. and N. Ryan Company in September 1963. As of December 31 , 1966, National Portland Cement Company voluntarily divested itself of the Ryan companies by selling the companies back to the Ryan family (Stip. , par. 92; Tr. 106-107). In 1964, National Portland Cement Company was the sixth largest shipper of portland cement into the NYMA. In 1966, it was the ninth largest shipper of portland cement into the MARQUETTE CEMENT MFG. CO. 53 82 Initial Decision NYMA (CX 103). Ryan Ready-Mixed Concrete Corporation was the fourth largest ready-mixed concrete operator in the NYMA in both 1964 and 1966 (CX 105—A).

47. The next instance of vertical integration between a cement manufacturer and a ready-mixed concrete company was the U.S. Steel (UAC)-Certified Industries, Inc., combination, which took place in April 1964 (Stip., par. 92; Tr. 107). In 1964, the Universal Atlas Cement Division of U.S. Steel Corp. was the second largest shipper of portland cement into the NYMA. In 1965 and 1966, it was the third ranking shipper of portland cement into the NYMA (CX 103). Certified Industries, Inc., was the second largest ready-mixed concrete operator in the NYMA in both 1964 and 1966 (CX 105-A). United States Steel Corp. continues to own and operate Certified Industries, although a Federal Trade Commission action for divestiture is now pending. 48. The latest instance of vertical integration in the NYMA between a cement manufacturer and a ready-mix producer involves the establishment of Lawrence Concrete Corporation by respondent in June 1964, and the latter’s acquisition of the Cooney interests in November 1964 (Stip., par. 93; Tr. 107). There have been no further instances of vertical integration between a cement manufacturer and a ready-mix producer since November 1964 and the close of the record in this proceeding (Tr. 529-530).

Recent Market Conditions and Trends 49, As previously found, the cement industry, nationally, has operated with substantial excess capacity. This condition has been particularly pronounced among the northeastern producers supplying the NYMA. In the late 1950’s and early 1960’s, the cement companies supplying the NYMA experienced substantial competition from distributors importing foreign cement. Despite foreign competition, an increase in the demand for cement in the NYMA during the early 1960’s made it possible for cement companies to maintain prices at a level sufficient to enable them to operate profitably. However, beginning around the latter part of 1962, the demand for cement, particularly from ready- mixed concrete companies, began to slacken, and this condition has continued to the present. Thus, shipments of cement into the NYMA declined from a peak of 13.6 million barrels in 1962 to 10.3 million barrels in 1966, and consumption of cement Initial Decision 75 F.

by ready-mix firms declined from 9.5 million barrels to 7.2 milion barrels during the same period. This decline in cement consumption was aggravated by the fact that Colonial Sand & Stone which consumed between 30% and 40% of the cement in the area, and was an important outlet for the cement of a number byof cement producers, had become vertically integrated and, 1964, was producing over three-fourths of its cement needs. Also affecting the situation was the entry into the market of a new and aggressive cement company, Atlantic Cement Company, late in 1962, which, within two years after entering the market became the largest cement supplier in the northeastern market , par. 94; Tr.and an important supplier in the NYMA (Stip. 107-108, 365; CX 102, 103).

50. The decline in the demand for cement resulted in considerable pressure on cement prices, as cement companies began to compete aggressively for the available business. This resulted in the decline or prices in the New York City area from approxi- , to around $3.09 inmately $3.85-$4.00 a barrel in 1961-1962 1965. Price competition among cement companies resulted in prices in the NYMA which were the lowest in the northeast despite the fact that transportation costs to the area were higher than to certain other areas served by these cement companies. As a result, the profits of some of the cement companies began to decline around 1962 , and at least one of the smaller ones began to operate at a loss (Stip., par. 95; Tr. 108). During 1967 there was some improvement in conditions, as prices increased to about $3.40 a barrel in New York City and slightly higher in the suburban counties (Tr. 161-162, 189, 208, 235-236, 366, 382, 492).

51. Accompanying the increase in price competition in the NYMA was an increase in the extension of credit by cement companies to ready-mix companies. Normally, customers are expected to pay for their cement purchases within 30 days and if they desire to avail themselves of the normal 20-cents-per barrel "cash" discount, they have to do so by the tenth of the month following delivery. However, beginning around 1962 cement companies began extending long-term credits to their ready-mix customers and permitting them to avail themselves of the cash discount on current purchases. This practice was more prevalent in the NYMA than in other areas of the northeast (Stip. , par. 96; Tr. 109).

Initial Decision 52. Cement prices within the NYMA are, and have been fairly uniform, despite the differing production and transportation costs of the cement companies supplying the area. There have been a number of price reductions in the area since 1962. Within a relatively short period, a price reduction initiated by one company has been met by other companies serving the area. Prices in the NYMA are generally lower than those charged by cement companies in other areas of the northeast, despite the fact that transportation costs to the NYMA are higher than to certain other portions of the northeast (Stip. , par. 84; Tr. 104). Cement prices prevailng in the counties falling within the City of New York are somewhat lower than those in the other counties lying within the NYMA. Thus, in early 1967 the standard delivered price in New York City was $3.40 per barrel while in Nassau, Suffolk, and Westchester Counties it ranged from $3. 50 to $3. , depending on the distance from New York City (Tr. 161-162, 300, 347, 366, 407-408, 433). c. Westehrste,. County St,.uctUTe 53. Westchester County is served by substantially the same group of cement companies as serves the NYMA as a whole. During the period from 1963 to 1966, the cement shipments of such companies entering the Westchester County area ranged from 1.570 to 170 of the total shipments of their plants serving the NYMA , and from 870 to 8.8 %' of their shipments into the NYMA (CX 102-104).

54. In 1963, prior to the acquisition of the Cooney companies, Marquette s shipments of cement into Westchester County represented 2.5 % of its total shipments in the northeastern United States, and 9.8 % of its shipments into the NYMA. In 1965 and 1966, following the acquisition of the Cooney companies, its shipments of cement into Westchester County increased to 11.5% and 10.9%, respectively, of its total northeastern shipments, and to 67.2% and 54.1 %, respectively, of its NYMA shipments (CX 102-104).

5ii. In 1963 and 1964, Marquette was the fifth and fourth rank- Complaint counsel have proposed certain findings with respect to Westchester County, as an appropriate roarket 01' submarket separate and apart from the NYMA as a whole. Respondent Questions the proIJrit'y of this effort since the r.complaint makes no allegation that Westchester CoUJlty is a relevant market. The examiner wi1 reserve the resolution of this legal issue for the portion of this decision entitled "CONCLUSIONS." However, he wil at this poiI1t make appropriate findings as to competitive conditions in \Vestchester County, for such bearing as they may have on the resolution of the fa tual issues in this pro eedin!!. Initial Decision 75 F.

ing shipper of cement into Westchester County, with 8. 1 '10 and 2'10, respectively, of total shipments into the county. In 1965 it became the first ranking shipper with 34.0 % of total cement shipments into the county. However, in 1966, it dropped to second rank, with 27.6% of total shipments into the county (CX 104). 56. Colonial Sand & Stone Co. , Inc. , was the second ranking shipper of cement into Westchester County in the years 1963 and 1965, and the first ranking shipper in both 1964 and 1966. Its share of total cement shipments into the county increased from 10. 9'10 in 1963 to 34.0% in 1964. In 1965, its share of the market declined to 28.8%, but increased in 1966 to 42.9% (CX 104). It should be noted that the foregoing figures do not fully reflect Colonial's position as a supplier of cement which is ultimately used in Westchester County, since they do not include substantial shipments by Colonial to its nearby Bronx plants where they are eonverted into ready-mixed concrete and then shipped into Westchester County (RX 33-A; CX 24; Tr. 287). Competitive Conditions 57. Competitive conditions in Westchester County have pretty much paralleled those prevailng elsewhere in the NYMA, except that in the NYMA as a whole cement shipments and construction activity began to dccline in 1963, whereas in Westchester County the decline occurred after 1964. Likewise, while the decline in construction activity was fairly general throughout the NYMA in Westchestcr County it was more pronounced in the lower portion of the county than in the upper portion (CX 103, 104; Tr. 2f;g 270, 277, 323-325).

58. As the demand for cement lessened, cement prices began to decline. Prices charged for cement in Westchester County have closely parag1eled those in the NYMA as a whole, except that they have tended to be about 10 higher, per barrel, due to additional transportation costs. Cement prices in Westchester County have moved in a fairly fixed ratio to the rise and decline of prices in the NYMA as a whole. When prices in the NYMA which had dropped to as low as $3. 17 a barrel, increased to $3.40 a barrel in early 1967, those in Westchester County increased to about $3.50 a barrel. Such prices are subject to the usual 20 per-harrel cash discount which has prevailed throughout the area (Tr. 161-162, 188-189, 208 , 2:,5 , 366, 408, 433). Initial Dccision 2. Ready-M1:xed Concrete a. The NYMA Market Dimensions and Structure 59. The parties are in agreement that the eight-county New Yark City metropolitan area, heretofore found to be an appropriate geographic market for portland cement, is also an appropriate geographic market for ready-mixed concrete (CPF No. 69; RPF No. 78). The prices paid by ready-mix producers for their cement, and the prices charged by them for ready-mixed concrete, are fairly uniform throughout the area (Stip. , par. 84 103-104; Tr. 104, 110-111).

60. The NYMA is served by over 50 ready-mixed concrete producers. The great bulk of these are small producers, who operate a single batch plant and serve a relatively narrow geographic area of 15 to 20 miles from their plant. However there are six or seven larger companies with multiple plants which serve all or large portions of thc NYMA. In addition to the regular ready-mixed concrete producers, there are a number of small distributors of ready-mixed concrete referred to in the industry as "gypsies," who purchase their ready-mixed concrete from other produccrs. They generally operate a single truck and serve the smaller construction projects. There are a considerable number of these operators serving the Long Island counties (Stip. , par. 97; Tr. 109).

61. While the record contains no overall data on. sales of concrete by ready-mix producers in the NYMA, it does contain data on the cement purchases of the principal ready-mix producers in the area (CX 105). Since substantially all of the cement purchased by such firms is used in the production of ready-mixed concrete, the cement-consumption data in the record provides a reliable basis for computing concentration ratios and market shares in the NYMA. It should be noted that any comparisons which may be made are limited to the ready-mix producers since the record contains no data on other categories of cement consumers. However, since ready-mix producers are the principal users of cement, accounting for about 70 % of cement consumed in the NYMA (Tr. 209, 237, 367), the data for such category of users provide a meaningful basis for comparing concentration ratios and market shares in the NYMA.

62. The extent of conccntration in the NYMA is reflected in Initial Dccision 75 F.

the two tables set forth below, showing the proportion of the cement consumed in the NYMA which is accounted for by the two, four and six largest ready-mix companies. In the first table the shares of the larger ready-mix firms are computed as a percentage of the cement consumed by all users of cement in the area. In the second table, the shares of the larger firms are computed as a percentage of cement consumption by ready-mix firms only.' As indicated in the tables, there is a significant degree of concentration among ready-mix firms, but the extent thereof has declined between 196:, and I!J66 (CX 103, 105). Concentration Ratios Among Ready-M'lx Firms, NYMA, in Terms of Total Cement Consumption (percent) 2 IrLrfle, lrtrgelJt Ii l.arge8t 1963 39. 53.4 58.4 1964 38. 47. 51.4 1965 35. 44. 50. 1966 35.4 44. 49. Concentration Ratios Amung Ready-Mix Firms, NYMA , in Terrns of Total Consumption by Ready-Mix Firms (percent) 53 1(L1.ge. largest. fj larrJe8t 1963 57. 76. 83. 1964 54.4 68. 73.4 1965 50. 63. 72. 1966 50. 62. 71.3 63. The parties are in disagreement as co the most meaningful way to determine and compare the market shares of individual ready-mix firms in the NYMA. Respondent contends that market shares should be determined by comparing the cement consumption of the individual companies with the total consumption of all cement users in the area. Complaint counsel contend that the consumption of the individual firms should he compared with the total consumption of ready-mix firms only. In the opinion of the examiner both of the methods suggested are proper, depending on the purpose for which the figures are used whether they are used to show probable injury at the cement-producing level or at the ready-mix level. At the cement-producing level, the theory of the complaint is that competitors of the acquiring company, Marquette, are being deprived of access to a segment 8 The recurd cont,dns no actual fig-tires of total cement ('unsnmption by all ready mix finns. The universe figure for such firms, un which the shares of the larger firms have been computed, has been derived by multiplying- the figures uf total cement consumption in the NYMA (CX 103), by the cRtimated pcrcentap;e of consumption by ready-mix firms 11iz 70% (Tr. 209, 2:17, 367).

Initial Decision of the market for cement (Complaint, par. 17a. ). Any injury to cement producers which may occur wi1! result from their loss of access to a substantial portion of the entire cement market, irregpective of the class of customer involved, since the primary concern of cement producers is to dispose of a certain se1!portion of their cement within the market, rather than to any given percentage to a particular class of customer. Consequently, the most meaningful figures, for purposes of determining competitive impact at the cement-producer level, are the market shares of the ready-mix customers as a percentage of total cement consumption within the market. On the other hand, at the cement-consuming levcl, where the a1!eged injury is among the ready-mix firms who compete with the acquired companies, rather than with all cement consumers, the shares of the market held by the individual companics, as a percentage of the readymix market, are the more meaningful fig-ures. 64. Set forth helow are two tables reflecting the market shares and relative positions of the principal ready-mix firms in the NYMA. In the first table, market shares have been computed by comparing the cement consumption of the individual firms with the total consumption of cement in the NYMA by a1! users. In the second table the market shares of the individual companies have been computed by comparing- each company s cement consumption with the estimated consumption of all ready-mix firms (CX 103, 105)' Market Shnres of Principal Re(tdy Mix Firms, NYMA in Terms of Tafnl Cement Consumption (percent) 1!)(j, 'iI;), 1%' 1.'1(;(; Colonial Sand Stone :n. aI. 28. 28. Certified Industries Transit Mix Concrete f). Ryan Ready-Mixed Concrete Hickey 3,4 'As in the ease of the second tabl.: showing concentration j"atios amonr. ready-mix finns (par. 62 supra), the universe fig-ure used in the second table above has been derivcr by appJyin! the pereentar:e, 70, to the total fir;ures of cement consumption in the NYMA. It may be note.1 that, while most cement company witnesses estimate.l that rcady-mi" firms accounted for at least 70% of their sales (Tr. 20!J, 2:\7, 3E;7), one witness fixed this fif!\lre at about 60'ro ('11'. 197). However, the actual fi"TllleS vf cement CCI1surnption by :'12 out of over 50 ready-mb: firms in the NYMA (CX 105) reveal that such firms f1ceounted for between li2% and 68% of the total cement consumed in the NYMA between 1!J6:1 and 1966. It seems reasonable to assum"" t.herefor"" that 70% is a reasonably accurate fi!;ule for the proportion of cement consumed by all ready-mix firms in the NYMA . Of course, to the extent that the actual percentag-e is less than 70%, the above market share fi,cuJ"es would be somewhat undcrstated Initial Decision 75 F.T.C.

1968 1964 1965 1966 Cooney Plants*® .__.._....._.-- 1.6 1.8 2.4 2.6 Acme Conerete ______....._..-- 8 1.2 1.6 2.0 Principe-Danna ._......_.._... 1.1 1.3 1.8 1.2 Market Shares of Principal Ready-Mia Firms, NYMA, in Terms of Cement Consumption by Ready-Mix Producers (percent) 1968 1964 1965 1966 Colonial Sand & Stone _.____.- 45.2 44,7 41.0 41.3 Certified Industries _._....__... 11.8 9.7 9.3 9.3 Transit Mix Concrete __.._...._- 10.5 7.2 8.5 7.0 Ryan Ready-Mixed Concrete _.. 8.8 6.4 4.6 5.3 M. F. Hickey __.__.._._._-_..- 4.9 1.3 3.5 3.2 Cooney Plants® ._..._.._.._.-.- 2.3 2.5 3.5 8.7 Acme Concrete _...._..._..-..- 1.1 1.7 2.3 2.8 Principe-Danna _.............- 1.6 1.8 2.5 1.7 Market Conditions 65. Like cement companies, for which they are the principal customers, ready-mix firms have suffered from a declining demand for their product beginning around the end of 1962 or early 1968, and continuing at least through 1965. Prior to that period, there was a fairly brisk demand for concrete due to, (a) an increase in building construction and modification activity within New York City in anticipation of certain changes in the New York City building code, (b) the demands of the World’s Fair, and (¢c) construction activity on Long Island. However, construction activity in the NYMA began to decline around the end of 1962, with a resultant decline in the demand for ready-mixed concrete and for cement, as already noted (par. 49, supra). The figures of cement consumption by the principal ready-mix companies provide a reliable indicator of the extent of the decline in the demand for concrete during this period. Thus, cement purchases by the principal ready-mix companies declined by about 26% between 1963 and 1965, from 8.6 million barrels to 6.4 million barrels (Stip., par. 102; Tr. 109-110). 66. The declining demand for concrete and the resultant increase in competition among ready-mix companies for the avail- 8 The above figures for Cooney do not include the original Lawrence plant in Queens. If the cement consumption by this plant were included, the plants controlled by respondent would account for 2.2%, 3.6%, and 3.6% of the cement consumed in the NYMA in 1964, 1965, and 1966, respectively.

® The above figures for Cooney do not include the original Lawrence plant in Queens. If the cement consumption by this plant were included, the plants controlled by respondent would account for 3.2%, 5.1%, and 5.1% of cement consumed by ready-mix firms in the NYMA in 1964, 1965, and 1966, respectively.

Injtial Decision able business, brought about a substantial drop in the prices of ready-mixed concrete. Ilustrative of the decline is the price charged for concrete of 3 000 p. i. quality (i. concrete with a strength suffcient to withstand a pressure of 3 000 pounds per square inch). The price on such concrete declined from about $16.00 per cubic yard in 1962 to $14. 50 in 1963 and then to $13.00 in 1961-65. The price charged for the lowest quality concrete used in construction, 2 000 p.s.!., declined from about $14.00 in 1962 to a general range of $10.00 to $12.75 in 1964 with some concrete being sold as low as $9.50 a cubic yard. While cement prices also declined during this period, the drop was not suffcient to offset the decline in the prices of ready-mixed concrete (Stip. , par. 10;); Tr. 110-111). There has been some firming of ready-mixed concrete prices during the past year (Tr. 302-303, 437).

67. The decline in construction activity in the NYMA was accompanied by an increasing slowness on the part of building contractors and subcontractors in meeting their payments to suppliers, including those owing to suppliers of ready-mixed concrete. Whereas it had been customary for customers to make payment for concrete by the tenth of the month following delivery, competitive conditions forced a gradual liberalization in crcdit terms, with the time for payment being gradually extended to ;;0 days, then to 45-60 days, and in some instances to JO days or longcr (Stip. , par. 104; Tr. 111). 68. The decline in ready-mixed concrete prices and the problems in collection of accounts receivable have subjected readymix orms to a cost-price squeeze and adversely affected the profits of many ready-mixcd concrete firms in thc NYMA. A number of ready-mix orms in the NYMA have been operating at a loss for the past few years (Stip., par. 105; Tr. 111). 69. Unfavorable economic conditions in the construction industry in the NYMA during the past few years have been responsible for a number of ready-mix firms going out of business. While there have been some new entrants into the market, a number of these firms merely took over the facilities of departing operators. Lawrence was one of the new entrants into the readymix cd concrete market, taking over the facilities of a bankrupt operator, and consuming 113 725 barrels of cement in 1965 and 102 665 barrels of cement in I!J66 at its Whitestone (Corona) plant (CX 32). However, for the most part, thc new entrants were small, fringe operators. Many of them were so-called Initial Decision 75 F.

operating one gypsies one-man, non-union organizations, or two trucks. A number of ready-mix operators still in business have cut down substantially on the number of trucks operated by them in an effort to retrench (Stip. , par. 106; Tr. 111-112). 70. Some of the ready-mix companies have sought to improve their abiliy to compete and to survive by affliating with a cement company. Several of the cement companies, facing similar problems at their level, have sought to afliliatc with a ready-mix company in order to insure themselves of a regular outlet for supra), the carlytheir cement. As previously noted (par. 45- 1960' s saw the following cement-ready-mix combinations come into being in the NYMA: American-Hickey, National-Ryan S. Steel (UAC)-Certified, and Marquette-Lawrence (Cooney). Other cement companies have given considerations to becoming affliated with a ready-mix firm (Stip., par. 107; Tr. 112). 71. Preceding these combinations was that previously alluded to (par. 44 supra): Colonial-Hudson, which was established by internal expansion around the cnd of 1958. Colonial is one of the few ready-mix operators in the NYMA which has been able to consistently operate at a pl"fit. Its sales increased from $42 milion in 1958 to approximately $52 million in 1964, and its net income increased from $1.4 milion to $3. 8 milion in the same period. During 1965 Colonial's sales and net income declined to , its sales in-$43 milion and $3.6 milion, respectively. In 1966 creased to $46 million, but its earnings declined to $1 milion. Colonial is far and away the largest ready-mix firm in the NYMA, operating a fleet of 472 transit-mix trucks in 1966. No other ready-mix firm operated more than (;5 trucks in 1966. andNo other ready-mix firm operated more than (,5 trucks, most operated less than 25 trucks (Stip., par. 108; Tr. 112-113; RX 30, 31).

72. Prior to the crection of its own ccmcnt plant, Colonial was an important customer for a number of the cement companics supplying the NYMA. Its purchases from outside sources declined significantly beginning around 1960 and, by 1964, they reached a small fraction of their former volume. Its plant at Kingston was initially insuflcient in size to supply all of Colonial' s cement needs but, by 1964, the capacity of its plant was doubled and Colonial sharply reduccd its outside purchases of cement. Thus, its purchases of ccment declined from approximately 2. 1 milion barrels in 1960 to 657 111 harrels in 1966. Initial Decision Colonial' s total consumption of cement in 1966 was 3.6 milion barrels (Stip. , par. 109; Tr. 113).

b. W c8tche8ter' County W 73. There are only seven ready-mix companies with plants located in Westchester County. Of these only two, Cooney and Colonial, operate multiple plants with locations in more than one section of the county. The plants of the remaining five ready-mix producers are dispersed throughout the county. Two of them are Jocated in the southern portion of the county, within a short distance of Bronx County, and two are located in the extreme northern section of the county adjacent to Putnam County. The plant of the remaining company is located in the eastcrn portion of the county, near the Connecticut State line. The companies whose plants are located in the lower part of Westchestcr County sell a portion of their ready-mixed concretc in Bronx County, and there are ready-mix companies with plants in Bronx County or elsewhere in the NYMA which sell concrete in Westchester. There is also some competition between the concrete companies located in northern and eastern Westchester County, with concrete companies in Putnam County and in Connecticut (CX 2a-25; Tr. 262, 271, 278, 297, 313, 335, 344). 74. The evidence in the record as to competitive conditions in the Westchester County area involves mainly the ready-mix companies whose plants are located in the lower portion of the county near Bronx County. Such companies compete with one another and with ready-mix companies whose plants are located in Bronx County. The two largest ready-mix companies serving Westchester County are Colonial and Cooney (now Lawrence). Colonial operates three plants in Westchester County (located in the central and northcrn part of the county), and three in Bronx County, one of the latter being located near the Westchester County line a short distance from the plant of one of the two Westchester County ready-mix producers who testified in this proceeding. Cooney operated four plants in Westchester County in 1961, but one of these (Mamaroneck) is now closed. Of the remaining two Westchester producers as to which there is evidence in the record, onc operates two plants in Mt. Vernon to As in the case of the cement produr.t line, complaint counsel contend that V.'eslr.hcster County is a relevant submarket for rcady-mixed concrete, while rn;pondent contends this isslJe may not he properly raised under the pleading-s Resolution of the JcgaJ question involv('d wil be !"t:sprved for ill( "CONCLUSIONS" portion of this decision. At this point the examiner wiJ consid..,. only the factIJal aspects of the mattel" Initial Decision 7G F.'f. and the other operates a single plant in New Rochelle, both of these communities being located a short distance from the Bronx County line (Tr. 262, 278, 281 , 2g7, 313; CX 23-24). 75. There is no reliable statistical evidence in the record as to the respective market shares and relative positions of the various ready-mix companies operating in the Westchester area. The only reliable statistical evidence in the record indicative of the market position of ready-mixed concrete firms is in terms cement consumption by ready-mix firms in the NYMA as a whole. However, based on such data, and data as to the amount of cement sold in Westchester County by cement companies, plus a series of estimates as to the amount of cement consumed in Westchester County by ready-mixed firms, complaint counsel have sought to extrapolate the market shares of the individual readymix firms. Aside from the dubious nature of a number of the assumptions and estimates made by complaint counsel, the figures used by them suITer from the fatal infirmity of failng to make proper adjustments in the figures of the largest consumer in Westchester County, Colonial Sand & Stone, in that they have failed to include in the Westchester County universe figure and in the figures of cement consumption by Colonial, (a) Colonial's cement purchases from cement companies other than its affliate Hudson, and (b) cement delivered to Colonial's Bronx plants which was later sold in Westchester County after being converted into ready-mixed concrete. There is every reason to believe that the omissions from the data used by complaint counsel involve substantial quantities of cement." The unrealistic nature of the statistics proposed by complaint counsel is made apparent by the fact that they purport to disclose Cooney to be, by far, the largest consumer of cement in West.chester County, whereas the testi- 11 RX 3:-\, which contains the cement cOTlsumption fi",'"Jres of Colonial used by complaint couDseI, states that the tabulation therein refl'.'Ctecl, for the various counties of the NY-" shows the total amount of Portland cement produced 1"1 Colonial ami ship!)e.! into each of the rd.-vant counties" (emphasis supplied). The same exhibit also indicates that " liJn ar1(Jjtiun to the Portlavd cemevt referred tu above, all of which emavated from the Hudsov Division plant of ColOIlial litJ purchased Portland cement from other sources. " Th", exhibit does not indicat.e the amount of such purchased cemevt which was covsumed iv Westchester Couvty. However it does indicate that the amount of such cement consumed within the NYMA, as a whole ranged from 1.i mililon barrels in 1963 to 557,000 barrels in 1%6. The same exhibit show!1 shipmevts of cemevt ivto Brovx County by Hmlson, rang-ing from 400,000 to .500 000 barrels in each year but one. Since Colonial's Wesh'hestel' County ready-mix IJlants were located in the cevtral and northern sections of the couvty, it seems l'vident that it must have served the more populous lower pint of the county from one or more of its Bronx IJJants (one of which wa. located just south of the county line). The testimony of the privcipaJ ready-mix witnesses from Westchester County indicates that they were in sl1bstavtiaJ competition with Culunial operatin" from its Bron;. plant (Tr. 187- 2Rfi, i1, :Hf') Initial Decision many of their own witnesses and the statistical evidence of cement shipments offered in evidence by them indicate that Colonial was by far, the largest consumer and shipper of cement in the area (CX 104; Tr. 248, 285, 318)." While it seems evident that Colonial and Cooney were the two largest ready-mix firms operating in Westchester County, the record contains no adequate basis for determining the market shares and ranking of the various Westchester County producers.

76. The record indicates that market and competitive conditions in Westchester County are similar to those in the NYMA generally. There has been a decline in construction activity in the lower portion of the county, particularly in the field of residential construction. This decline was accompanied by a softening of concrete prices and a liberalization in the practice of extending credit by cement suppliers. During the past year there has been some improvement in ready-mix concrete prices and some increase in construction activity, particularly in commercial construction (Tr. 269-270, 277 , :025-326; CX 104). 77. Complaint counsel suggest that the price structure in Westchester is different "from that in other areas of the NYMA" because the prices of concrete tend to be higher (CPF No. 80). While there is some evidence that the price of ready-mixed concrete in Westchester County is between 501 and $1.00 higher than in other areas of the NYMA , this is due largely to the additional cost of cement (the principal ingredient of concrete), and to additional transportation costs. However, the trend in the movement of concrete prices has tended to follow that in the rest of the NYMA (Tr. 139, 442, 4(5).

IV. The AIIeged Competitive Impact A. Cement. Company Level 1. F01'eclD.Hae 78. In 1%3, the last full year in which they were under independent ownership, the Cooney companies were the sixth Accordjn to the fij.nJres prujlosed hy complaint COlIISd, Cooney s cement consumption in Westchester County was approxhnateJy 50u;" greater than Colonial's iil HJ66 viz 40.4% V,'1' 8US 2A. 2%. However, the statistical exhibit which they olTered in evidence, Rhowing adual shipments into WestcheRtcr County by the" various c.ement companies, indicateR that (',olonial' shiIJment were 50% greater than those of respondent, vi;: 42.9% ven;u 27.6% (CX 1().j)- 1t is reasonable to infer that thl' bulk of the cement consumed by Cooncy and Colonial, in the form of eonCl-et", in Y..lestcheRter County. was ma,)e from cement supplied hy their cement affliateR since the l"CCO)'u establishes that Colonial purchasf',j over 80';1" of its cement in the NYMA from its affliate Hudson in 18(;(;, and UW,t Cooney purchased over 116'% of its cement from reh))lmdent in 1 )(i6 (RX 26).

j?, Initial Decision 75 :F' largest consumer of cement among ready-mix firms in the NYMA. In 1964, they became the fifth ranking company as a result of a decline in the relative position of M. F. Hickey Company, following that company s divestiture by American Cement Company in June 1961. Hickey and the former Cooney plants alternated as the fifth and sixth ranking consumers of cement in the NYMA in the years IB65 and 1\)66 (CX 105). 79. The Cooney plants' consumption of cement in the NYMA declined from approximately 235 000 barrels in 1962 , to 207 000 and 208 000 barrels in 19G3 and 1964, respectively. Following their acquisition by respondent in late 1964, the consumption of the Cooney plants increased somewhat to 245 000 in 1965 and 268 000 barrels in 19G6 (CX 105, 29-32). During the years 1963 and 1964 , the Cooney plants accounted for 1.670 and 1.870, respectively, of the cement consumed in the NYMA by all users of cement. In 1965 and 1966, the purchases of the former Cooney plants increased to 2.170 and 2. 70 of the cement consumed by all users in the NYMA. In terms of the cement consumed by readymix companies, the purchases of the Cooney plants represented 370 and 570 of such purchases in 1963 and 1964 , respectively. In 1965 and 1966, their purchases amounted to 570 and of the cement purchased by ready-mix firms in the NYMA. In terms of the broader northeastern market served by the cement companies supplying the NYMA, the purchases of the Cooney plants represented 0.4370 in both 1963 and 1B61 , and 0.4570 and 5070 in 1965 and 1%6, respectively (CX 102 , 103 , 105 , 2!J- 30- , 31- , and 32).

80. At the time of the acquisition of the Cooney plants in late 1964 , three vertically integrated ready-mix companies Colonial, Certified and Ryan, accounted for 42. 670 of the cement consumption in the NYMA , with Colonial alone accounting for 31.370 of such purchases. In 1965, the cement purchases of these three vertically integrated companies represented 38.4 r" of the total cement consumed in the NYMA, with Colonial accounting for 28. 770 of this amount. Adding the purchases of the Cooney plants in these two years would increase the share of vertically integrated companies by 1.870 in 1964 , and 2.470 in 1%5, to a total of 44.4 70 and 40.870 respectively. In 196G, the share of total cement consumption in the NYMA accounted for by vertically integrated ready-mix companies was 41.770, of which 28.9 'Y, represented purchases by Colonial. At the end of that year Initial Dccision Ryan, which accounted for 770 of the market, was voluntarily divested by its cemcnt affliate.

81. A vertically integrated ready-mix firm tends to buy the bulk of its cement from the cement company with which it is afliiated. To the extent it makes a small portion of its purchases from other cement companies, it does so because a. particular contractor-customer has specified another company s cement or because its affliated company does not make a particular type of cement used by the ready-mix firm for a portion of its production. Non-integrated ready-mix firms, on the other hand generally purchase their cement from multiple suppliers. While they enjoy relatively long-term relationships with some of their suppliers, the proportion of their purchases from anyone supplier rarely approaches the proportion to total purchases which exists between vertically integrated companies. Moreover the non-affliated cement companies must eternally satisfy their customers as to price, quality, and service if they hope to continue the existing relationship. This is obviously not true where a captive" relationship exists (Stip. , par. 117; Tr. 113- 114 , 264 107 433).

82. While vertical integration affords a cement company a captive" market which is not subject to challenge hy competing cement companies on the basis of the usual competitive inducements of price, quality and service, such a relationship also has certain disadvantages. There are a number of ready-mix firms which will not purchase cement from a vertically integrated cement company because they "prefer not to give business to a company that (they) have to compete with" (Tr. R47 , 408). Other ready-mix companies have no objection to purchasing from integrated companies (Tr. 281, 334, 433, 456). 83. During the period from 1964 to 1966, Colonial purchased approximately 8570 of its ccment from its affliated company, Hudson. During the same period Universal Atlas Division of U. S. Steel supplied between 85 %; and 9470 of the cemcnt requircments of its affliate, Certified, and National Portland supplied between 78%, and 85%; of the cement requirements of its affliate, Ryan. Despite its divestiture of Hickey in June 1964 American Cement supplied around 8070 of Hickey s cement requirements in 1965 and 1966 (RX 26).

84. During 1962 and 1963, thc four largest suppliers of cement to the Cooney plants were Lone Star, Lehigh, Universal Atlas and Marquette s suhsidiary, North American. To a lesser degree, Initial Decision 75 F.

the Cooney organization purchased cement from 15 other cement companies serving the area. In 1964, the largest supplier to the Cooney plants was Colonial's affliate, Hudson Cement, from orwhich the Cooney organization purchased 208,636 barrels, 77. 2'10 of its cement requirements, with the balance being supplied by nine other cement companies (CX 29, 30, 31; RX 3). 85. In the years 1962 , 1963, and 1964 , the Cooney organization purchased the following percentages of its cement requirements from respondent' s subsidiary, North American Cement Company: 9'10 , 7. 6'f and 7.2%; , respectively. In the years 1965 and 1966, respondent's subsidiary supplied the following percentages of the cement requirements of the former Cooney plants: 99. 95"0 and 83. 7'f. The only other supplier to the Cooney plants in 1965 was Universal Atlas Cement Division of U.S. Steel and the only other supplier in 1966 was Colonial's Hudson Cement Division (CX 29-32; RX 3).

2. Barriers to Entry, and Decline in Selling Activity by Existing Companies 86. The only evidence in the record as to the cost of entry by a cement company into the NYMA is the testimony of an to the offcial of a cement company called by complaint counsel, effect that it would cost approximately $Hi milion to build a two-milion barrel cement plant to serve the NYMA, and an additional $16 milion to "acquire enough ready-mix facilities to use this two million barrels, and successfully compete in this market" (Tr. 251). The testimony cited by complaint counsel cost of cannot be deemed to support their position that "the entry has doubled as a result of the NYMA' s vertical integration" (CPF No. 106). The witness' testimony must be interpreted as relating to a plant which wil serve the entire northeastern area, and not merely the NYMA, since none of the plants as to which there is evidence in the record serves only the NYMA and, except for Colonial, none of them sells as much as two milion barrels in the NYMA (CX 102-103). Furthermore the witness' testimony is based on the assumption that in order to enter the market it will be necessary to control ready-mix facilities suflicient to consume the entire output of the cement plant. This assumption is apparently based on the same witness testimony that "roughly 75 percent, 70 percent, perhaps, of the cement consumed (in the NYMAJ is consumed by ready-mix " leaving only 25 '10 companies that are vertically integrated Initial Decision 30 %' of the market for the remaining companies to compete for (Tr. 244). However, the record does not support this assumption Rince at the end of 1966 the four vertically integrated ready-mix companies (including the now divested Ryan) accounted for 41.7;10 and not 70%, to 75% of the cement consumed in the NYMA. Furthermore, in terms of the whole northeastern market served by cement companies selling in the NYMA, the four vertically integrated ready-mix companies accounted for only 3 %, and not 70 % to 75 %' of the market. 87. The only new ccment company to enter the NYMA recent years (aside from the Hudson Cement Division of Colonial) has been Atlantic Cement Company. Atlantic s plant was constructed in the Hudson River Valley between 1960 and 1962. At the time it undertook to construct its plant, the only vertically integrated companies were Colonial and American, Colonial's cement plant having started production in 1959 and American having acquired Hickey in January 1960. While Atlantic, which had conducted feasibility studies prior to proceeding with erection of its plant, was somewhat concerned with the growth of vertical integration, it nevertheless decided to procced with its plans to enter the NYMA. In order to facilitate its entry into the market, it entered into a contract in the Jail of 1962 with Triangle Cement Company, an established distributor of imported cement, whcrcby the latter became Atlantic exclusive distributor in the NYMA (Stip., par. 120; Tr. 114-115). 88. In J 9(;2, Triangle was the second largest shipper of cement into the NYMA, accounting for 1.08 million barrels, compared to 96 million barrels hy Colonial (the largest shipper), and 1.03 million barrels by Lonc Star Cement (the third largest shipper). In 1963, thc first full year in which it operated under thc contract with Atlantic, Triangle s shipments into the NYMA amounted to 1.5 million barrels, making it the second largest shipper after Colonial, which accounted for 2.7 million. In 1964 during which the Atlantic-Triangle contract was terminated in June, Triangle s cement shipments into the NYMA were 291 000 barrels and Atlantic s own shipments were 354 000. Their combined shipments of 615 000 barrels made them the third largest Rhipper after Colonial, with 3. 6 million barrels, and Univcrsal Atlas Cement Company, with 1.3 milion barrels. In J966, Atlantic shipped J 70 000 barrels into the NYMA (Stip. , par. 121; Tr. 115). While Atlantic dropped from the ranks of the top companies serving the NYMA in 1 %6, it retained second rank Initial Decision 75 F.T.C.

within the northeastern market as a whole, with 7.25 million barrels shipped, compared to 7.55 million barrels shipped by the top ranking company, Universal Atlas (CX 102). 89. Several cement companies have undertaken modernization and expansion of existing plants serving the NYMA. Marquette began a construction program in 1965 to increase the capacity of the former North American Catskill plant from 1.6 million barrels to 3.3 million barrels. Whitehall Cement Company undertook a modernization program for its Lehigh Valley plant in 1964, in an effort to lower its production costs and put itself in a better position to compete in a declining market (Stip., par. 122; Tr. 115-116).

90. Several of the companies distributing cement in the NYMA have curtailed their operations or ceased selling in the area. Thus, in October 1964, Alpha Portland Cement Company closed its terminal at Port Washington, Long Island, from which it had previously distributed, in portions of the NYMA, cement manufactured at its plant in the Hudson River Valley. This terminal was closed because the decline in Alpha’s volume in the NYMA, resulting from the loss of one of its largest customers in the area, Certified, no longer justified the expense of maintaining a terminal. Triangle Cement Corporation, which, as previously noted, had been a substantial distributor of cement (both imported and Atlantic’s), closed its terminal at Brooklyn, New York, when its contract with Atlantic was terminated in June 1964. It leased the terminal to Atlantic and ceased to distribute cement in the NYMA. Triangle was Certified’s third largest supplier in 1968, but sold it no cement in 1964 (Stip., par. 123: Tr. 116-117).

91. Complaint counsel suggest that vertical integration of cement companies with ready-mix firms has been a major factor in discouraging new entrants into the NYMA and in causing a number of the existing cement companies to withdraw from, or lessen their activity within, the NYMA. In support of their position, complaint counsel cite the opinions expressed by several cement company officials, including that of the witness previously referred to (par. 86, supra), who gave as the reason for his opinion that the NYMA was a “[vJery unattractive” market, the fact that 70 to 75% of the cement in the market was consumed by vertically integrated companies (Tr. 244). As previously noted, the share of the NYMA accounted for by vertically integrated ready-mix companies in 1966 was 41.7% and not MARQUETTE CEMENT MFG. CO. 713 32 Initial Decision the vertically-integrated portion of the market of Cooney’s 1.8% share of cement consumption, was hardly a factor of such magnitude as to adversely affect the decisions of Marquette’s actual or potential competitors in the NYMA. 96. It is clear from the testimony of the four cement company officials on whom complaint counsel rely to support their position, that any problems which these companies may have had as a result of vertical integration in the NYMA cannot be attributed to the Cooney acquisition. Two of the companies, Whitehall and Giant, had never been substantial suppliers to Cooney prior to its acquisition (Tr. 170, 186, 215; RX 3). Both of them specifically attributed their decline in sales in the NYMA to the vertical integration of Colonial, which had been one of their more substantial customers (Tr. 183-184, 220-221). While a third cement company, Alpha, had been a somewhat larger supplier to Cooney (selling it between 19,000 and 25,000 barrels in 1963 and 1964), its decision to close its distributional terminal in New York occurred prior to the Cooney acquisition and was due to Alpha’s loss of one of its largest customers, Certified (Stip., par. 123; Tr. 116). Moreover, while Alpha’s sales in the NYMA as a whole declined between 1963 and 1965, its ‘sales in the Westchester County area served by Cooney increased during the same period (CX 108, 104). The fourth cement company, Atlantic, whose representative attributed his company’s decline in sales to vertical integration, had never been a substantial supplier to Cooney (RX 3). It is also clear from his testimony that the decline in cement consumption of approximately 3 million barrels of cement, accompanied by the softening of cement prices, were the major factors in his company’s decision to withdraw from the NYMA (Tr. 380-382, 396, 402-— 403).

B. Ready-Mix Level 97. Complaint counsel contend that a vertically integrated ready-mix company has a competitive advantage over non-integrated companies, in that the former are able to offer lower prices and extend better credit terms than their non-integrated competitors. Counsel suggest that the use of such competitive practices by Lawrence since the acquisition of the former Cooney plants has placed non-integrated competitors at a competitive disadvantage (CPF Nos. 114, 117).

98. Of the five ready-mix firms whose representatives were 7A FEDERAL TRADE COMMISSION DECISIONS Initial Decision 75 FTC.

called as witnesses by complaint counsel, only three competed directly with the former Cooney plants, viz, Petrillo Builders, Frost Sand & Gravel, and Airway Transit-Mix. Of these three firms, only the first two were in competition with the Cooney plants in their main area of operation, Westchester County. The third firm, Airway, is located in the Bronx and its competition with the Cooney plants involves principally that portion of its business (approximately. one-fourth) which ‘consists of sales in Westchester County (Tr. 441, 458). 99. While Cooney’s competitors claimed that they had lost some jobs to Cooney because of lower prices or the extension of liberal credit terms, the record is lacking in reliable and substantial evidence that the decline in sales by these companies was due, in any significant degree, to price cutting or overly liberal extension of credit by Cooney or its successor, Lawrence. In fact, with one exception, the record is lacking in reliable evidence as to the prices at which Cooney was able to obtain business and as to what credit terms, if any, it granted to customers.

100. Petrillo Builders attributed.the loss of only one job to: Cooney, and did not know the price at which Cooney obtained the job (Tr. 271-272). Its representative conceded that the concrete subcontractor to whom the cement was sold by Cooney was one which Cooney had been serving at a number of other locations (Tr. 290). It is significant that the major decline in Petrillo’s sales occurred between 1963 and 1964, prior to respondent’s acquisition of Cooney (CX 105-B). It is clear from the testimony of the Petrillo representative that the major factor in the loss of sales by his company has been the decline of construction activity in the lower Westchester County area which it serves. His testimony also reveals that his company only competes in a limited way with the larger companies, such as Colonial and Cooney, since it is unable to handle the larger jobs (Tr. 270).

101. The representative of Frost Sand & Gravel testified that price was “the all-important thing’ in obtaining ready-mix business, and attributed his company’s loss of four jobs in early 1966 to Cooney’s lower prices. However, in only one instance was there any evidence that the Cooney price was actually lower than the bid submitted by Frost (Tr. 306, 307). While price may have played a part in some of Frost’s loss of business to Cooney, the major factor appears to have been that after Cooney’s MARQUETTE CEMENT MFG. CO. 75 82 Initial Decision acquisition by Lawrence, the latter put a number of additional salesmen into the territory and began to compete aggressively for business in an area of Westchester County where it had previously been less active (Tr. 313-314). With the closing of the former Cooney plant at Mamaroneck, Lawrence has been less active as a competitor of Frost (Tr. 316). Even during the earlier period when Cooney was more active in the area, Frost’s principal competition was Colonial (Tr. 318). 102. The representative of Airway, whose principal sales area is the Bronx rather than Westchester County, attributed the loss _of a single job to Cooney’s successor, Lawrence, due to a lower price bid by the latter. However, the record contains no reliable evidence as to Lawrence’s price on this job (Tr. 443). It may be noted that Airway’s business, as reflected in its cement purchases, doubled between 1963 and 1964, and while there was some decline in 1965 and 1966, such decline was commensurate with the decline experienced by most of the major companies in the NYMA (CX 105 A-B).

103. The principal advantage attributed to integrated readymix companies by some of their non-integrated competitors was the fact that they were able to buy their cement cheaper and could thus underbid their non-integrated competitors for readymix jobs (Tr. 274, 417, 447). However, according to the uncontradicted and credited testimony of the president of Lawrence’s principal supplier, Marquette, Lawrence paid the going market price for its cement and received mo special discounts which were not available to ready-mix firms generally (Tr. 508, 514, 538). Insofar as the liberality in the extension of credit is concerned, such practice by Lawrence was limited to the area served by its Queens plant and involved mainly the period when it was trying to gain entree into the ready-mix business in 1964 and 1965 (Tr. 509, 516). 104. The record contains no reliable evidence as to what barriers, if any, exist to the entry of new ready-mix firms into the NYMA. Complaint counsel cite the testimony of representatives of two of the cement companies, to the effect that they did not regard the NYMA as an attractive market for potential entrants into the ready-mix business (Tr. 245, 375). However, these officials were not shown to have any expertise concerning the financial requirements for entry into the ready-mix business, and there was no evidence adduced on this subject through the Initial Decision 75 F.T.C.

representatives of five ready-mix companies who testified in this proceeding.

CONCLUSIONS I. Interstate Commerce A. The Acquiring Companies 1. The complaint alleges, the answer admits, and the record establishes that respondent Marquette is, and has been for many years, engaged in the shipment of portland cement across State lines. It is clear, therefore, that by reason of such shipment of portland cement across State lines respondent Marquette is, and was at all times material herein, engaged in “commerce” within the meaning of the Clayton Act.

2. Respondent, while not disputing Marquette’s engagement in commerce, contends that the Commission has no jurisdiction over it since the acquisition here involved was not made by it but by Lawrence which is not a party to this proceeding. Despite the fact that the latter was a wholly owned subsidiary, respondent contends that it was not a mere. “alter ego” of Marquette, but must be deemed to be an independent company whose acts cannot be attributed to Marquette (RPF, at 54; RB, at 12-13). 3. As heretofore found, Lawrence was formed by Marquette in June 1964 as a vehicle for the latter’s entry into the readymix business, and was wholly owned by Marquette. The decision to acquire the Cooney interests, through Lawrence, was made by Marquette, and the latter supplied the financial assistance which made the acquisition possible. Lawrence’s activities in the conduct of the ready-mix business were financed by Marquette (Tr. 505, 510). Two of Lawrence’s three directors at the time of the Cooney acquisition were also directors of Marquette (CX 17, p. 24, CX 20-C). Under these circumstances, it is the conclusion and finding of the examiner that the acquisition of the Cooney interests by Lawrence may, in contemplation of law, be regarded as having been made by Marquette. Since Lawrence itself, at the time of the acquisition of the Cooney interests, purchased substantial quantities of cement from cement companies with plants located in Pennsylvania (CX 20—-E), it too may be regarded as having been engaged in commerce, within the meaning of the Clayton Act.

Initial Decision B. The Acqu-in,d Company-ies 4. The record establishes that the Cooney companies purchased cement from cement companies with plants located outside of New York State prior to the time of the acquisition. During I J62 and 19(;3, such purchases of out-of-State cement were very substantial. However, during 1964, the year in which the acquisition was made, such out-of-State purchases declined to approximately 500 barrels because Cooney purchased most of , re-its cement from Colonial's Hudson plant. For this reason spondent apparently contends there was no substantial engagement in commerce (RB , at 13). Considering the pattern of Cooney s purchases of cement during- the years prior to the acquisition, it is the conclusion and finding of the examiner that, despite a decline in out-of-State purchases in 1964 , the Cooney companies may be regarded as having been engaged commerce, within the meaning of the Clayton Act, at the time of their acquisition.

II. The Product Markets A. Por-tland Cement 5. Complaint counsel contend, respondent concedes, the record establishes, and the examiner concludes and finds, that portland cement, as hereinbefore defined (par. 15, FINDINGS SUPTfI), constitutes an appropriate product market for purposes of this proceeding, and is a relevant line of commerce within the meaning of Section 7 of the Clayton Act, as amended. U. Ready-M'ix Concrete 6. Complaint counsel contend, respondent concedes, the record establishes, and the examiner concludes and finds, that readymixed concrete, as hereinbefore defined (par. 16. FINDINGS supra), constitutes an appropriate product market for purposes of this proceeding, and is a relevant line of commerce within the meaning of Section 7 of the Clayton Act, as amended. III, The Geographic Markets A. Portland Cement The Northeaster-n Market 7. Complaint counsel contend, respondent concedes, the record establishes, and the examiner concludes and finds, that the northeastern section of the United States served by cement plants Initial Decision 75 F.T.C.

located in the Lehigh Valley of Pennsylvania and the Hudson River Valley of New York, as hereinbefore described (par. 34, FINDINGS, supra), constitutes a geographic market area for the sale of portland cement, and is an appropriate section of the country within the meaning of Section 7 of the Clayton Act, as amended.

The NYMA 8. Complaint counsel contend, respondent concedes, the record establishes, and the examiner concludes and finds, that the New York City metropolitan area, as hereinbefore defined (par. 38, FINDINGS, supra), constitutes a geographic market or submarket for the sale of portland cement, and is in an approprite section of the country within the meaning of Section 7 of the Clayton Act, as amended.

Westchester County 9. Complaint counsel contend that the Westchester County portion of the NYMA is also an appropriate section of the country, within which to determine the probable competitive impact of the Cooney acquisition (CPF, at 17-20; CB, at 9-10). Respondent opposes such contention on the grounds that (a) the complaint fails to allege that Westchester County is a separate geographic market area, and (b) the record fails to establish that it is an economically significant market for cement (RR, at 8, 27).

10. The smallest geographic area referred to in the complaint as a market area is the New York City metropolitan area. Paragraph One of the complaint, defining the relevant geographic areas and product lines, specifically describes the boundaries of the New York City metropolitan area. No reference is made therein to Westchester County as a separate market area. While Paragraph Eight of the complaint alleges that Cooney was engaged in business “principally” in Westchester County, it refers to the county as a “portion of the New York City Area.” Paragraph 15 of the complaint, alleging the trend toward vertical integration, refers to the market area in which this occurred as “the New York City Area,” and alleges that “the market for portland cement in the New York City Area has been potentially foreclosed as a result of vertical acquisitions.” Paragraph 17 of the complaint, the so-called “effects” allegation, describes the situs of the alleged adverse effect of the Cooney acquisition as Initial Decision being "the United States as a whole and various parts thereof, including the State of New York and the New York City Area. 11. No contention was made by complaint counsel during prehearing procedures that Westchester County was a proper market or submarket for cement. The smallest geographic area referred to in pretrial was the New York City metropolitan area (PRO No. , par. 1 15). A stipulation entered into by counsel during pretrial, and incorporated into the record, made reference to and described the northeastern geographic area served by the plants selling cement in the New York City metropolitan area and while not conceding that the broader area was a relevant market, it specifically stated, with reference to the N ew York City area that: "The NYMA is a distinct market or sub-market for cement" (Stip. , par. 82, 77-78; Tr. 102-104).

12. No reference to the Westchester County area as an appropriate geographic market having been made in the pleadings and no contention having been advanced during the prehearing phase of this proceeding or during the trial thereof, that the Westchester County area was an appropriate market area, it would, in the opinion of the examiner, be a denial of due process to allow complaint counsel to assert such a contention at this time.

13. Aside from the fact that the issue has not been timely raised in this proceeding, it is the opinion of the examiner that the record does not support the position of complaint counsel that Westchester County may be considered to be an appropriate market area for portland cement. The position of complaint counsel that Westchester County is an appropriate market area for cement is based on their contention that Westchester County, (a) is a "commercially significant market " (b) is considered to be a market by cement companies, and (c) has characteristics distinct" from the rest of the NYMA (CPF, at 17-20; CB at H). None of these contentions, in the opinion of thc examiner is sustained by the record.

14. The contention of complaint counsel that Westchester County is a "commercially significant market" is based on the fact that cement shipments into Westchester County represented between 870 and 8;70 of all cement shipped into the NYMA between 1963 and 1966 (CPF No. 57). The examiner finds it unnecessary to determine whether these are significant amounts of' cement since, in his opinion, the proper universe figure for comparing Westchester County shipments is the northeast as a Initial Decision 75 F.

whole, and not the NYMA. The essential charge in this proceeding, as far as the cement product line is concerned, is that cement produccrs have been foreclosed from a substantial part of their market. The primary market of these shippers, and the one which determines the economic feasibility of maintaining these plants is the northeastern section of the United States served by them. Complaint counsel have asserted, and corrcctly so, that the New York City metropolitan area is an important part of this primary market because, among other things, it accounts for around onefourth of the cement produced hy these plants. It may, therefore be regarded as an appropriate subdivision or submarket of the primary northcastern market. If the Westchester County area is also to be considered a proper submarket, it must be because among other things, it accounts for a substantial part of the cement sold in the primary market. A comparison on such a basis reveals that between 1963 and 1966 cement shipments into Westchester County represented between 1.5% and 1.7% of the total shipments of the northeastern plants, except for the year 1964 when they were 2. roo While these shipments cannot be said to be of de minimis proportions, they are not, in the opinion of the examiner, of such an order of magnitude as to justify characterizing Westchester County as a "commercially significant market" for the northeastern producers. 15. The contention of complaint counsel that W estchcster County is considered by cement companies to be a separate market for cement has not the slightest support in the record (CPF No. 59). The testimony of the four cement company ollcials relicd upon by complaint counsel was focused on whether they regarded the area as holding any future for cement companies, and not on whether they regarded it as economic market separate and distinct from the NYMA as a whole. To the extent that any of them may have used the word "market " in referring to Westchester County, they did so in the context of the question asked by complaint counsel: " (II) ow would you characterize Westchester County as a market for cement -in terms of potent-ial volume (emphasis supplied)" (Tr. 172 215 243, 371). However it is clear from their testimony as a whole that they did not intend, in responding to complaint counsel's question, to express any opinion as to whether Westchester County was a distinct economic market for cement. On the contrary, the testimony of several of the witnesses indicates that they regarded Westchester Initial Decision County as being a part of, and as being characterized by substantially similar conditions as, the rest of the NYMAY 16. The contention of complaint counsel that Westchester has distinct (markets characteristics" which distinguish it from the rest of the NYMA is based on the fact that, (a) prices for cement in Westchester are "slightly higher" than in other areas of the NYMA, and (b) there is a higher degree of vertical integration in Westchester County (CPF Nos. 60-62). Neither of the facts asserted, in the opinion of the examiner, establishes that market conditions in Westchester County differ essentially from those in the NYMA as a whole.

17. While the price of cement in Westchester County is usually about 101 a barrel higher than the price in New York City, this is not due to any basic difference in the price structure, but results from additional delivery costs to the suburban area. A similar differential exists in the Long Island suburban counties, with such differential graduating upward as the distance from the city increases. However, the basic price structure is essentially the same throughout the NYMA, and the prices in the suburbs move up and down in a fixed relationship to the New York City prices (Tr. 161-162, 188-18!J, 366).

18. Complaint counsel' s argument that Westchester County is distinct from the rest of the NYMA" because it is "dominated by the two integrated firms, Colonial and respondent" involves an exercise in bootstrap pulling. Certainly one cannot use the degree of economic integration resulting from an acquisition as an indicia of the fact that the geographic area where it occurred is a distinct market. If the extent of integration in a market were a proper factor to be considered in determining the geographic confines of the market, it would be more appropriate to determine the confines of the market as it existed in its pristine form, before it was disturhed by the acquisition. On this basis, complaint counsel's argument would be self-defeating, since there was only one integrated company in the Westchester County area prior to the Cooney acquisition, compared with four in the NYMA as a whole.

13 One of the witnesses tegtified that " construction activity in W(' tchester County pretty much holds pace with construction activity generally in the five boroughs fof New Yorks" (Tr. 178). Another testified that "Westchester rCounty) "vii have as good n future as any of the rest of the market " referring spcciJical1y to "New York City" ('fr. 877-378). The same witness, in responding to complaint counsel's question as to whether he would characterize Westchester County "as a J10tential market for cement" testified that "there is every reason to think that Westchester County wiJ continue to he as good 11 cement mark.,t as the immediate environment " obviously referring to New York City (Tr. 371). Initial pecision 75 F. 19. Aside from all other considerations, complaint counsel's contention that Westchester County is a separate market or submarket for cement is largely academic since the record contains no reliable or meaningful market share data, in terms of Westchester County. Complaint counsel's case, insofar as the cement product line is concerned, is based on the fact that the Cooney acquisition resulted in substantial foreclosure of access to a cement market by other cement companies. However, as previously noted (par. 75, FINDINGS supt' , the record contains no reliable data as to cement consumption by ready-mix firms within Westchester County.

B. Ready-Mixed Concrete The NYMA 20. Complaint counsel contend, respondent concedes, the record establishes, and the examiner concludes and finds, that the New York City metropolitan area, as hereinbefore defined (par. , 59, FINDINGS supra) , constitutes a geograpbic market for ready-mixed concrete, and is an appropriate section of the country within the meaning of Section 7 of the Clayton Act, as amended. Westchester County 21. As in the case of the cement product line, complaint counsel contend that Westchester County is a submarket of the NYMA and is, therefore, an appropriate section of the country for purposes of determining the competitive impact of the Cooney acquisition (CPF, at 25-29). Respondent opposes such contention for essentially the same reasons as it opposes complaint counsel's position that Westchester County is an appropriate submarket for cement viz (a) that the complaint failed to allcge that Westchester County was a separate geographic market, and (b) that the record fails to establish it is, in fact, an approrpiate market (RR, at 8- , 14-17).

22. The examiner finds it unnecessary to discuss the matter of the complaint's failure to allege that the Westchester County area is an appropriate market or submarket for ready-mixed concrete. The examiner s comments, heretofore made with respect to the complaint's failure to refer to Westchester County as a market or submarket for cement, are equally applicable with respect to the ready-mixed concrete product line. As noted there the smallest geographic area in which it is charged that the present acquisition wil have an adverse impact is the New York Initial Decision City metropolitan area. What has previously been stated with respect to compliant counsel's failure to assert, during the prehearing phase of this proceeding or during the trial thereof, that the Westehester County area is an appropriate submarket for cement is also appjicable to the ready-mixed concrete product line. 23. Aside from any failure to properly raise the issue prior to or during the trial, the position of complaint counsel as to why Westehester County should be considered "a relevant submarket for ready-mix concrete" is without merit. Complaint counsel' argument that Westchester County is an appropriate submarket is based, essentially, on the fact that, (a) ready-mixed concrete prices are higher in Westchester County than elsewhere in the NYMA, and (b) there are fewer and different companies competing in Westchester County, than in other parts of the NYMA. In the opinion of the examiner, none of the facts cited by the complaint counsel justifies considering thc Westchester County area a separate geographic submarket for ready-mixed concrete. 21. While there is some evidence that the price of concrete in Westchester County is between 50 cents and $1 a cubic yard higher than in other portions of the NYMA , this is due largely to the additional east of cement, and to additional transportation costs that may he involved (Tr. 412, 465). However, the differences in question are not of such magnitude as to suggest without more, that Westchester County is a market separate and distinct from the rest of the NYMA.

25. Complaint counsel's argument based on differences in the number and distribution oJ ready-mix firms is likewise unpersuasive. While there are only seven ready-mix firms in Westchester County, the record fails to establish that they regularly compete with each other, and not with other companies elsewhere in the NYMA. On the contrary, thc record indicates that there is little competition between the ready-mix companies in upper Westchester County with those in lower Wcstchester, and that the latter compete with ready-mix firms elsewhere in the NYMA particular'y those in the Bronx (Tr. 262 , 271 , 278 , 281 , 287 2B7, 313, 335, 352 , 432, 141 , 446, 158). The record establishes, as complaint counsel concede, that only two of the Westchester producers (both located in thc lower part of the county) compete to any significant extent with Cooney (CB at B). The situation is thus one in which complaint counsel, contrary to the intention of Congress, are seeking to establish a "community " as being Initial Decision 75 F.

a section of the country, and to protect competitors rather than competition" (Brown v. 870 U. S. 291, at 320). 26. Aside from all other considerations, complaint counsel's contention that Westchester County is a separate submarket for concrete is largely academic since, as previously noted, the record contains no reliable or meaningful market share data for readymix firms in Westchester County. The only reliable market share data for such firms which is in the record is for the NYMA as a whole.

IV. Competitive Impact A. Por' tland Cement 27. The position of complaint counsel that the instant acquisition is in violation of Section 7 of the Clayton Act is based, essentially, on their contention that it has, (a) occurred in the setting of a cement market which is highly concentrated, (b) resulted in substantial foreclosure of respondent's competitors particularly in the NYMA, (c) contributed to the "critically high" degree of foreclosure resulting from all vertical combinations in the NYMA, and (d) raised a further barrier to entry into the market by cement companies and caused a number of existing companies to curtail their operations within the market (CPF, at 29-40; CB, at 12-17). In the opinion of the examiner the record does not support complaint counsel's version of the facts, and none of thc facts of record, either separately or in combination, supports the conclusion that respondent's acquisition of the Cooney plants constitutes a violation of Section 7 of the Clayton Act.

28. Whether, as complaint counsel contend, it is proper to characterize the NYMA as "highly concentrated at the cement supply level" (with which characterization respondent strenuously disagrees), it cannot be gainsaid that a degree of concentration among the top four cement companies, of 44.5% in 1962 and 5!J.9% in 1966, cannot be regarded as insubstantial. However, more important than the bare figures themselves, is the allocation of the market shares between the various cement companies reflected in them. Thus, an analysis of the figures discloses that, (a) two of the top four ranking companies in 1962 were no longer among the top four ranking companies in 1966 (viz Alpha and Triangle), (b) two of the top four ranking companies in 1966 were not among the top four ranking companies in 1962 (viz Cisco and Universal Atlas), (c) the fourth Initial Decision ranking company in 1966 (Cisco) is a non-integrated importer of cement, (d) the second ranking company in 1966 (Lone Star) is also a nonintegrated producer in the NYMA, and (e) while tbe share of the top four companies in creased by approximately 150/0 between 1962 and 1966, this increase resulted almost entirely from the increase in the market share of one company, Colonial which managed to maintain first rank throughout the period. It is thus apparent that while the top four companies account for a substantial share of the NYMA and that this share has increased since 1962, there has been a considerable shifting in "ank among the companies doing business in the area, that non-integrated as well as integrated companies occupy top rank and that one company has consistently occupied first rank and its share in the market has been responsible for the apparent increase in the share of the top four companies. It is also worthy of note that the acquiring company (Marquette) was not among the top four companies in the market, except in 1961 , and that its market share has been a relatively small and declining one (from 5.5% in 1960 to 4.4% in 1966). The fact that it ranked seventh to ninth in the market, hardly makes it a leading company, considering that there were only 18 companies in the market and several of these were of insignificant size. 29. A similar picture is revealed by an analysis of the figures purporting to show the "critically high" degree of foreclosure by vcrtically integrated cement companies, Thus, of the 45. 30/0 of cement consumption in the NYMA accounted for by the five ready-mix firms which were vertically integrated with a cement company during all or part of 1964 viz Colonial, Certified, Ryan Hickey and Cooney, Colonial alone accounted for 31. 30/0 of the purported foreclosure. In 1966, four integrated companies Colonial, Certified, Ryan and Cooney accounted for 41.770 of the cement consumed in the NYMA, with Colonial alone accounting for 28. 90/0. Thus, the proportion of cement consumed by vertically integrated ready-n.ix firms actually declined between 1964 and HJ66. It may also be noted that their share was further reduced to 38 % at the end of 1966 as a result of Ryan s voluntary divestiture.

30. Even if the alleged foreclosure represented by the other acquisitions which occurred between the time of Colonial' s vertical integration and that of respondent's acquisition of Cooney, may be regarded as substantial, it is the opinion of the examiner that the latter acquisition cannot be regarded as resulting Initial Decision 75 F.

in any substantial additional foreclosure. While the cumulative effect of such acquisitions is, as counsel argue, a proper factor to be considered. an acquisition which in itself involves a very minor portion of the market, cannot be considered to be substantial merely because it comes at the end of a number of substantial acquisitions. In the opinion of the examiner, the amount of cement consumed by Cooney, representing between 1.670 and 1.870 of the cement consumed in the NYMA in 1963 and 1964 , and 0.4370 of the cement consumed in the northeast is of such minor proportions as not to justify the conclusion that its acquisition may result in substantial foreclosure of markets to other cement companies.

31. Complaint counsel suggest that, despite the relatively small proportion of the market involved, the acquit ion represented substantial amount of cement since the volume was large in comparison to that sold to any single customer by other cement companies. Thus, complaint counsel note that the annual cement purchases of Cooney s plants in the NYMA, amojlnting to around 200 000 barrels, involved a greater quantity of cement than that sold to any single customer by most of the cement companies whose olTcials testified in this proceeding (CPF No. 88). Complaint counsel's argument overlooks the fact that, with rare exceptions, nonintegrated ready-mix companies do not purchase all or substantially all of their cement from a single supplier. Consequently, in the normal course of events the individual cement suppliers would have access to only a fraction of Cooney total cement requirements. In any event, even considering Cooney s entire volume, the acquisition thereof cannot he considered as representing substantial foreclosure to other cement companies in the NYMA.

32. In terms of raising further barriers to entry or causing the withdrawal of other cement companies from the market, it is the opinion of the examiner that the record fails to establish that the Cooney acquisition has had or may have this impact. The principal factor raising any barrier to entry by new companies, or causing any withdrawal from the market by existing cement companies, has been the excess capacity and uninviting price structure resulting from the substantial decline in buDding activity. Aggravating this condition has been the escalation in the loss of access to the business of the largest ready-mix consumer in the market viz Colonial, which consumed almost oncthird of the cement sold in the NYMA. When the Cooney ac- Initial Decision quisition is considered in this light, it seems evident that it can hardly be considered to have been a significant factor in discouraging new entries or the withdrawal of existing cement companies.

B. Ready-Mixed Concrete 33. Complaint counsel' s position with respect to the ready-mix product line is, essentially, that (a) nonintegrated ready-mix firms are at a competitive disadvantage vis- vis their vertically integrated competitors, in terms of their ability to grant lower prices and extended credit terms, and (b) respondent' s acquisition of Cooney, in a market in which over half the volume was accounted for by vertically integrated ready-mix firms, was bound to adversely affect its competitors and discourage new entrants into the market (CPF Nos. 113-115). 31. The principal factor in causing lower prices and the extension of longer credit terms was the excess capacity in the market in relation to the demand, rather than any action of vertically integrated ready-mix companies. While it may be assumed that the better fmanced companies are able to offer lower prices or better credit terms, the record fails to establish that vertically integrated firms, as such, or that Cooney in particular have been responsible for lower prices and longer credit terms in the NYMA.

35. While the share of the NYMA ready-mix market accounted for by the three vertically integrated firms (Colonial Certified and Ryan) was high viz, 60.870 when the Cooney acquisition occurrcd, the bulk of this, 4570 was accounted for by Colonial alone, and the sharc of the Cooney plants, 2. rr" was hardly of such an order of magnitude as to justify any inference absent other persuasive evidence, that it may have an adverse impact on its competitors. The record fails to establish that the integrated ready-mix companies have a decisive advantage over nonintegrated companies. Indicative of the fact that vertical integration does not necessarily confer an undue advantage on a ready-mix company is the fact that the market shares of the top two vertically integrated companies, Colonial and Certified, had declined by 1966, and that at the end of 1966 one of the other integrated companies, Ryan, saw fit to divorce itself from the cement company with which it was formerly affliated. Thus, at the end of 1966 , the share of the market accounted for by , Initial Decision 75 F.

vertically integrated ready-mix firms had been red uced to 54.3%, of which Colonial alone accounted for 41.3%. C. Conclusions as to Impact 36. Complaint counsel' s case rests principally on, (a) statistical evidence as to the extent of concentration and vertical integration in the relevant markets, and (b) testimony of offcials of cement and ready-mix companies as to aUeged diffculties in competing with vertieaUy integrated competitors. The latter evidence involved largely complaints about problems aUegedly created by vertical integration in general, rather than competitive diffculties with respondent or Cooney as a result of the instant acquisition. While there was some testimony by readymix witnesses about diffculties in competing with Cooney after its acquisition, much of it was unreliable or insubstantial, and failed to establish that any decline in business sustained by these companies was due, in any substantial degree, to Cooney s vertical integration. With respect to the testimony of competitors complaining generaUy about vertical integration, it placed exaggerated emphasis on vertical integration as the cause of industry problems in the NYMA. The root cause of the industry problems (at both the cement and ready-mix levels) has been thc decline in construction activity, which has brought about serious price deflation. A recent increase in construction activity was soon reflected in an improved market outlook. To the extent vertical integration has aggravated the industry problems in the NYMA , it has resulted principaUy from the integration of the largest consumer in the market, Colonial Sand & Stone.

37. Vertical integration, by its very nature, involves some loss of access to a customer by competitors of the acquiring company. However, not every Joss of access is iUega1. In determining whether a particular acquisition wiu have the proscribed statutory effect on competition "an important consideration is the size of the market foreclosed" (Brown Shoe Co. v. 370 U. S. 294, at 328). It is recognized, of course, that except in cases where the quantities involved are 'I af monopoly or de minimis proportions, the percentage of the market foreclosed * " * cannot itself be decisive (Brown Shoe v. supra at 329). It thus becomes necessary to view the industry setting of the acquisition, including the extent and trend of concentration and of vertical integration in the market. However Initial Decision in considering the industry background sight must never he lost of the basic principle that the "statute prohibits a given merger only if the effect of that merger may be substantially to lessen v. , supra at 332). Conse-competition (Brown Shoe quently, the mere fact that concentration and vertical integration in a market may be high does not justify condemnation of all vertical combinations, no matter how insignificant. 38. While the degree of concentration and vertical integration in the NYMA is statistically substantial, the market structure revealed by the statistics is not a rigid one and, except for Colonial Sand & Stone, the vertically integrated companies do not occupy a position of market dominance. The acquiring- company here involved (Marquette), while a substantial company, is not and has not been a leading company in the market. The acquired company (Cooney), while larger than many of its competitors (most of which were miniscule in size), was a relatively small factor in the NYMA. The fact that it was the fifth or sixth ranking company means littc in terms of the issue of foreclosure since the percentage of cement consumed by it in the NYMA was small and, in the larger northeastern market served by the affectcd cement producers, it was almost negligible. 39. Complaint counsel suggest that Cooney s share of the cement consumption market at the time it was acquired 1.60/0 to 1.851" was of an order of magnitude comparable to that which the Court in Brown Shoe considered to involve substantial foreclosure viz 1.651, (CB, at 3). However, the situation in the two cases is hardly comparable. In Brown Shoe the Court was considering a national market, rather than a local one, and 1.6 of the market involved annual sales in excess of $42 milion, compared to Cooney sales within the NYMA of $3 milion in 1963 and cement purchases of $773 425 (CX 26-31). Furthermore, despite the relatively smail percentage involved in Brown the acquired company was the largest independent shoe retailer in the entire United States. Likewise, the acquiring company, Brown, was the fourth largest manufacturer in the national market. The acquisition was part of a national trend, in which Brown was a leading figure, to take over retail shoe outlets it would and, unless the challenged acquisition was stopped, encourage other acquisitions. Respondent here is not a leading factor in the NYMA or the northeast, and the acquisition of Cooney can hardly be deemed to encourage acquisitions elsewhere. As far as the NYMA is concerned, the trend appears to FICDERAL TRADE COMMISSION DECISIONS Initial Decision 75 F.

have run its course and there is no evidence that acquisitions in one local cement market lead to acquisitions in other markets. It must also be borne in mind that Brown Shoe also involved a horizontal aspect, with the two companies being in substantial competition in a number of local markets. 40. Considering, (a) that the problems of the NYMA have been caused largely by factors other than vertical integration (b) that to the extent vertical integration has been a factor in any competitive diflculties which may exist in the market, it has resulted chiefly from the vertical integration of Colonial Sand & Stone Co. , Inc. , (c) that respondent has occupied a relatively small and generally deelining position in the market, and made the present acquisition in an effort to maintain a viable position in the market, and (d) the fact that the Cooney companies were a relatively small factor in the NYMA and were themselves experiencing financial and competitive problems in the market it is the conclusion and finding of the examiner that complaint counsel have failed to sustain the burden of proving that the effect of respondent' s acquisition of certain assets of the Cooney companies may be substantially to lessen competition, or to tend to create a monopoly in the NYMA or in any other section of the country, in either the portland cement or ready-mixed concrete product lines.

FINAL CONCLUSIONS OF LA w 1. Itespondent Marquette Ccment Manufacturing Company, and Cooney Bros. , Inc., Plaza Concrete Corporation, and Mamaroneck Stone Corp. , were at all times material herein, corporations engaged in commerce, as "commerce" is defined in the Clayton Act, as amended.

2. Counsel supporting complaint have failed to sustain the burden of establishing, by substantial, reliable and probative evidence, that the acquisition of certain of the assets of Cooney Bros. , Inc., Plaza Concrete Corporation, and Mamaroneck Stone Corp., by respondent Marquette Cement Manufacturing Company was in violation of Section 7 of the Clayton Act, as amended, or of Section 5 of the Federal Trade Commission Act. ORDER It ordered That the complaint in the above-entitled proceeding be, and the same hereby is, dismissed. MARQUETTE CEMENT MFG. CO. 91 82 Opinion OPINION OF THE COMMISSION JANUARY 7, 1969 By ELMAN, Commissioner:

This matter is before the Commission on the appeal of complaint counsel from the initial decision of the hearing examiner, filed February 27, 1968. Respondent is charged with having violated Section 7 of the Clayton Act, as amended, by acquiring through its wholly owned subsidiary, Lawrence Concrete Corporation, the assets of a group of firms engaged in the production and sale of ready-mixed concrete. After five days of hearings and on the basis of a record much of which was stipulated, the hearing examiner entered an order dismissing the complaint, principally on the ground that the challenged merger would have little, if any, anticompetitive impact. I There is no substantial dispute concerning the basic evidentiary facts in this case. Except to the extent that they are inconsistent with this opinion, the findings of the hearing examiner are amply supported by the record and are adopted as the findings of the Commission. Respondent, an Illinois corporation, is primarily engaged in the manufacture of portland cement. Nationally it is the seventh or eighth largest cement manufacturing company, operating 12 manufacturing plants in the year of the merger and 20 distribution terminals in 18 different States.’ Marquette operated a cement manufacturing facility at Catskill, New York® and a distribution terminal at Flushing, New York. In the years 1960 through 1966, respondent shipped an average of 549,000 barrels of cement per year in the New York Metropolitan Area (NYMA) out of an average total shipment 1The companies whose assets were acquired were known as Cooney Bros., Inc., Plaza Concrete Corp., and Mamaroneck Stone Corp. Al] three firms were controlled by the Cooney family and they are hereinafter referred to collectively as “Cooney.” 2 By 1965, respondent distributed its products in 29 different States. Sales and net income from 1962-66 were as follows:

Year Net sales Net income 1962 $82,021,366 $9,560,592 1963 79,086,700 8,807,619 1964 79,972,832 7,303,553 1965 83,295,163 5,894,447 1966 83,832,126 2,851,307 (Initial decision p. 40 herein).

3A substantial modernization and expansion of the Catskill plant was begun in 1964 or 1965. Compare R. 115-16 with initial decision p. 40 and CX 22. Opinion 75 F.

of almost 11,470,000 barrels each year by all suppliers.' Measured by the number of barrels it shipped into the NYMA, Marquette was the fourth largest cement shipper into the NYMA in 1961 declined to a low of ninth in 1961, the year of the merger, and rose to eighth in 1965 and seventh in 1966. Its market share dropped from 5. 7 percent in 1962, to 3. 5 percent in 1964 but had grown to 1.4 percent by 1966.

In 1964 Marquette organized Lawrence Concrete Corporation a wholly owned subsidiary, to conduct business as a ready-mixed concrete producer. Lawrence began sellng concrete in August of that year. On November 16, 1964, acting on a decision made by Marquette and using that firm s financial resources to consummate the deal, Lawrence acquired the Cooney firms. We agree with the examiner that the evidence overwhelmingly supports the conclusion that this acquisition should, for purposes of Section 7, be regarded as having been made by Marquette. Cooney was at the time of the merger the fifth ranking readymixed company, measured by cement consumption, in the NYMA, and it was the second largest independent ready-mixed firm in that market- , unaffliated with any cement manufacturer. Cooney s purchases of cement in the years 1%2were as follows:

ota.l Purr:haser of Portland Cement 1J1I Purchases of Portland Cement All Cooney PlrLnt8 bu CooneJJ Plants in NYMA (in (loos of IJaTTelS) (in Goods of barrels) 295 2621962 235 2701963 208 3501964 234 4291965 245Prior1966to the merger, Cooney purchased cement from a number of 268 sources, including Marquette, with no one supplier dominating unti 1964, the year of the merger, when the Colonial Sand & Stone Co. , the leading firm in the market, supplied over 75 percent of Cooney s needs, the balance coming from nine smaller suppliers. In 1965 and 1966, after the merger, Marquette supplied 99. 9 percent and 83.7 percent of Cooney s requirements. The balance was supplied by a cement producing subsidiary of the United States Steel Corp. in 1965, and by Colonial in 1966. . Sf'e, C.rI. , ex lO:

Initial decision p. SL 7 InitialThe chartdecisionis basedP. 76.on ex 29, 30, 31, 32 10 . The Lawrence-Cooney comhinat.ion consumed 359 000 and a7l.000 uarrels of cement in the NYMA in 1%5 and H166. Initial decision p. (;8.

Opinion The examiner found, and the parties apparently agree, that the NYMA is the principal relevant geographic market in which the competitive effects of the Marquette-Cooney acquisition may be identified." It is perhaps the most important market for cement in the United States involving annual shipments with a value of from $30-50 milion. For purposes of measuring competition at the cement manufacturer level, the examiner also looked at the broader geographic area defined as the northeastern United States. There is sharp disagreement, however, as to whether there is a legally significant Westchester County submarket within the NYMA. Respondent argues, and the hearing examiner found, that the issue of a Westchester County submarket was not timely raised in this proceeding and that, in any event, the evidence does not show that Westchester is a commercially or legally significant market for cement or ready-mixed concrete. Under the broad test laid down by the Supreme Court in United States v. Pabst Brewing Co., the relevant "section of the country need not he delineated "by metes and bounds as a surveyor would layoff a plot of ground" and "proof of the section of the country where the anti competitive effect exists is entirely suhsidiary to the crucial question in this and every 7 case which is whether a mcrger may substantially lessen competition anywhere in the United States. However, because the question has become involved in a procedural snarl which it would serve little purpose to unravel and because, in the view we take of the case, it is unnecessary to examine the effects of the Marquette- Cooney merger in Westchester County, we see r'o need to consider the question whether Westchester County is a distinct and relevant submarket.

The structure of the NYMA cement and ready-mixed concrete markets is set out at length in the initial decision and only a few salient highlights need be repeated here. In 1961, the NYMA was served hy some 19 or 20 suppliers of portland cement operating approximately 24 cement plants and seven distribution terminals. n In 1966, the market was served by 1 R suppliers 9"here is no fJuestion that "portland cement" and "ready-mixed cuncrete" as defined in the initial decision (pp. 44, 45) arc the relevant product ma kets. 1038 S. 546, 549.50 (19fi6).

n Initial decision p. 50; ex 102. Where price and quality are equal, as is often th.. ('lise consumers of portland cement prefer the supplier which offers the promptest delivery service. This has led to an increased I1S€ of truck delivery for cement shipmeT\ts. The growthof tl1.1ck )jv!"ry has in turn led tu an increase in the use of distdhution terrn;nals to facilitate servke in heavny populated areas.

EDERAL TRADE COMMISSION DECISIONS Opinion 75 F.

with 23 plants and 12 distribution terminals." These figures however, give a misleading picture of the structure of the NYMA cement market.

In fact, the market is highly concentrated and concentration has increased steadily and markedly since 1962. The percent of shipments accounted for by the four largest firms increased from over 44 percent in 1962 to nearly 60 percent in 1966; the share of the eight largest firms moved from 67 percent to nearly 78 percent in the same years. 1 At the same time, concentration among ready-mixed firms declined slightly but remained extremely high. " Thus, in 1962 the two largest ready-mixed companies consumed 57 percent of all the cement consumed by such companies, the four largest consumed over 76 percent and the six largest over 83 percent; in 1966 the figures were 51 percent 63 percent and 71 percent.

The NYMA was therefore characterized by significant concentration at both the cement producer and ready-mix levels. At the same time, a trend to vertical integration, usually by merger, was developing. Until late in 1958 there was no cement company in the NYMA affliated with a concrete company or other cement consumer. In November 1958 Colonial Sand & Stone, the largest ready-mixed firm and the largest cement consumer in the NYMA, built its own cement producing facilities. Colonial continued to purchase some of its cement requirements from other producers for a few years but by 1966 it was shipping more cement into the NYMA than its ready-mixed plants consumed. lG In January 1960 the American Cement Corp. acquired M. F. Hickey, Inc. , in a transaction challenged by the Commission. Four years later, American Cement divested itself of Hickey. However, the reconstituted Hickey Company remains indebted under a purchase money mortgage to American Cement and purchased 91 percent of Hs cement requirements from American in 1964 and 70 percent in 1966. The fourth Jargest ready-mixed Ibid.

"H Ibid.Although approximately 50 ready-mixed firms were active ill the NYMA, six or seven large, multiplant cumpanies accounted,) for most of the ready-mixed shipments and consumed most uf the cement used in the NYMA.

Initial decision p. 58. Measured in terms of total cement consumption in the NYMA , by ready-mixers, construction contractors, building material dealers, and others, the amounts consumed by the two, four and six largest ready-mixers were 40, 53, and li8 percent of the total in 1962, and 35, 44, and o percent in 1966. Ibid. 16 Compare CX 103 with ex 105.

Opinion concrete operator in this market, Ryan, was acquired by N tional Portland Cement Company, the sixth largest shipper into the NYMA, in 1963. National voluntarily divested itself of Ryan in 1966.

In April 1964 United States Steel, through its Universal Atlas Cement subsidiary which was the second ranking firm in the NYMA, acquired Certified Industries, Inc. , the second largest ready-mixed company in the market. The Commission recently entered an order requiring Universal Atlas to divest Certified. Finally, the instant acquisition was consummated in June 1961. As of the date that the record in this proceeding was closed there had been no further movement toward vertical integration by merger in the NYMA.

III What was the probable competitive impact of this merger? The hearing examiner found that Cooney s purchases of cement represented only 1.6 to 1.8 percent of total cement consumption in the NYMA, that neither Marquette nor Cooney was an important factor in the NYMA, a;Jd that the percentage of the market foreclosed by this merger was relatively insubstantial. He concluded that while this percentage of the market was the same or slightly greater than that foreclosed by the merger in the Brown Shoe case " that decision involved different factual circumstances rendering it inapplicable here. We do not regard the Brown Shoe case as stating a per se rule of ilegality but we do find the facts concerning foreclosure in the instant case far more compellng than did the examiner. To view this merger in isolation, as a solitary occurrence, is to overlook or ignore the important structural changes that were taking place in the NYMA. As the Court said in Brown Shoe: Another important fador to consider is the trend toward com entration in the industry- It is true, of course, that the statule prohibits a given merger only jf the cffeet of that merger may be substantially to lessen competition. Rut the very wording of 97 requires a prognosis of the probable future effect of the merger.

The existence of a trend toward vertical integration, which the District Court found, is well substantiated by the record. Moreover, the court found a tendency of the acquiring manufacturers to become increasingly important sources of supply for their acquired outlets. The necessary corollary of these trends is the foreclosure of independent mar.ufacturers from markets otherwise open to them. And because these trends are not the product 17 Hrown Shoe Co. v. United States 370 U.S. 294 (1962). Opinion 75 F.

of accident but are rather the result of deliberate policies of Brown and other leading shoe manufacturers, account must be taken of these facts in order to predict the probable future consequences of this merger. In the present case, at the time of the merger over 42 percent of the cement shipped into the NYMA, a substantial and important market for cement, was consumed by integrated readymixed companies. I!! Existing independent cement manufacturers and potential new entrants had no real access to this portion of the market regardless of whether they lowered their prices improved their quality, or offered unusually prompt delivery. Nor is it necessary to speculate about this since here, as in Brown Shoe the record makes clear that integrated firms did in fact supply all or almost all their own cement requirements making few, if any, purchases on the open market. Assuming, moreover, that these tied ready-mixed companies might be wiling to entertain offers from other suppliers, outside suppliers would stil be at a disadvantage. The vertically integrated cement companies had placed thcmsclves in the desirable position of being able to "clinch a sale as long as they matched the best terms offered by anyone else (and maybe even if they did not)."" In effect the un integrated cement companies would be able to compete only for the remaining segment of the market which was itself subject to further shrinkage as the vertical merger movement proceeded. It is not unreasonable to expect JS 370 U. S. at :132-3:1; see, United Statea v. l\iml,crl.lI-Clarl. Corp. 26.1 1". Supp. 4'3D (N. Calif. 1!J67); c/. Standard Oil Co. v. United States 337 U. S. 2fJ (HJ49); Blake & ,Jones The GU(lls of .ltntit,ntst: A Ui'Llogue on Policy, 6" Colum. L. Rev. 363, 443-44 (l!J, Lockhart & Sacks The Rdovance of Economic FactoTB in V. termining Whdher Exclusive Arman Clements Viulate Section of the Clayton Act 6,; Harv. 1, Rev. 913, 924 (lt1:i2). 1" Initial decision pp. 59, 60 & n. 8. Since nun integrated cement manufacturers could sell to other sources besides r"ady-mixers- for example, construction contractors, building material dealers, and manufacturers of concrete products- it is necessary for purposes of determining the extent of the market from which manufacturers were for"closed to measure purchases by ready-mixers against total pu! cbases by all users of cement in the NYMA and not just against purchases by other' ready-mixers.

It should be noted that horn 1%4 to 1%6 the M . F, Hickey Company, although having been divested by tb,' American Cement t.company, remained ind(,btnl to that firm under a purchase money mortg-age and continued to purchase subshmtially all of it. cement requirements from American C..ment. If Hickey is considered as part uf the tied markd, the share of the total market for cement tied to particular producers \\ao; about ,Hi IIereent for the years 1964 to 1966. Ibid.

01' example, in 1965 Marquette supplied 99. 9 p"r(:ent uf Cooney s requirem"nts, Initial decio,iun p. 68. Other integrated companies supplied between approximately 80 and 94 percent uf their own cement weeds. Ibid. see RX 26. 21 Blake & Junes, supra note 18 , at 455; see United States v. Dupont Co. 353 U. S. 586 595 (1957); United States v. Dupont Co" 366 U. S. 316, 318-19 (1961), But ct. Liebeler Toward.- Con,mtner s Antitrust Law: The Federal T'rad.! Com1H! Si07' and Vertical MerqerB in the Cement Industry, L.A L. Rev. 11,,;1 , 1157-58 & n. 15 (t H;H); Dean & Gustus, Ve' rtiml Integration ami Set!tion, 40 N. . Rev. 672, 702 (Ihi, Opinion that some may have withdrawn from the NYMA, preferring to ship their cement to other adjacent markets where substantial foreclosure was less of a problem. Those that remained would have been marginal competitors at best, content for the most part to follow the competitive strategies and pricing policies set by the ruling oligopoly.

At the same time, the restraints imposed on the leading firms in the market by potential competitors would have been considerably diminished. After this merger, in excess of 42 percent of the market for cement was "captive." That this development had an adverse impact on entry barriers in the cement industry should be manifest. Any firm considering entering the NYMA as a cement supplier would now have to enter at two levels, both as supplier and consumer, in order to be sure of finding an outlet for its cement. The increased capital costs and the greater risks that entry at both levels would entail substantially increased barriers to entry in this market, a fact that was made clear by the testimony of cement company offcials to the effect that it was the total cumulative vertical integration in the NYMA that made the market an unattractive one. The Marquette-Cooney merger added momentum to this trend which, like the trend toward vertical integration in the Brown Shoe case, was "not the product of accident but was rather the result of deliberate policies" of respondent and other cement manufacturers. At the time of the merger, Cooney s purchases in the NYMA of some 234 000 barrels represented some 3.5 percent of the available-that is, unintegrated-market and made it the second largest unaffliated cement consumer in the NYMA. '" Had Cooney remained independent, its purchases in the NYMA, which were increasing in 1965 and 1966, would have constituted over four percent of the free market. Instead, however, Cooney purchases became part of the market foreclosed to new or independent suppliers and the segment of the market thus insulated from competition remained above 40 percent in those years. .. See, R. 177. 216-17; Blake & JODes UpT(I note 18 , at 461-63. C. Kaysen & D. F. Turner Antitrust Policy 120 (195D): cf. Wilk Vertical Int,)gratjon in Cement Rcvi.4ited: A Comment on Peck and McGowan 13 Antitrust Hull. 619 , 62!\-31. 642-45 (1968) : see p:encndly. J. Rain Barriers to New Competition ch. 3, 5 (1956). But see Peck & McGowan Vel"tical late.Qrution in Cement: A Critical Examination of the FTC Staff Report 12 Antitrust Bull. 505 526- 27 (1967).

Cooney made some additional purchases for consumption outside the NYMA. TheBe are not included in the 234 000 barrel fig-ure. 21 Cf. United State" v. Kimberly-Clark Corp. 2(;,! F. Supp. 439, 446-48, 463 (N. Calif. 1967). We find no m rit in the suggestion that 1,eca\1s ('AJoney had purchased must of its requin,mellts frurn Culonial, the Jeading- firm in the NYMA , in 1964 the merp;er in effect g., Opinion 75 F.

These percentages alone do not give an accurate picture Cooney s significance. Its purchases of cement would be enough to make it the principal customer or one of the principal customers of every firm in the NYMA and would alone be suffcient to sustain some of the smaller cement producers serving the NYMA. Cooney was one of the two largest remaining independent ready-mixed firms; only Transit Mix Concrete Corp. was larger. Excepting Transit Mix, no other acquisition would have involved as large a degree of foreclosure of cement suppliers as was accomplished by the purchase of Cooney. For the most part the remaining ready-mix outlets were far smaller than Cooney and Transit Mix and, since they were so fragmented and unable to compete for larger construction projects, they constituted inferior outlets for cement. 2:;

The purpose of this merger is clear. It was intended to guarantee Marquette an outlct for its cement, to secure a foothold for Marquette in the NYMA, where its market share had been declining." By merging, Marquette accomplished this purpose without hearing the greatcr capital costs and risks that internal expansion would have entailed, and without adding to the readymixed capacity in the NYMA. It may be, as the hearing examiner suggests, that the merger was defensive, a reaction to the trend toward vertical integration in the NYMA , that it was helpful in maintaining Marquette s market position, and that it aided Marquette in competing with its dominant rival, Colonial Sand & Stone Co. This explanation proves too much. It would justify almost any merger, vertical or horizontal, by any of the other firms in the market." There has been no showing that vertical forecloses only Colonial from obtaining Cooney us a eustUnl"". The f;'ds arc that Cooney reliance on Colonial in 1\164 was a marked chanr;c from it. prior policy of not Jlurchasing an overwhelming percentage of its requirements from any olle smu" , even in that year (',oOnt' dealt with several! other supplie s, and there is nothing in the record establishing that CAJoney reliance on Colonial would have continued indefmitely hut for the nwrr;n'". On the contrary, the record support!; the proposition that, until the. mer el", ('-ooney was part of the market for which unintegTated cement producers were free to comvete. 2" S , Staff Report to the Federal Trade Commission Meruers (Lnd Vertical Integration in the Cement Industry 104-05 (1966) (hereinafter cited as "Cement Report" See Wilk 8U1)7(1. note 22 , fit (j30;cf. Unit d States v. Kimberly-Clark Corp. 264 F. Supp, 4'3g (N. Calif. 1%7); United States v. J(ennecott Copper Corp. 2:n F. Supp. !H, g8 (S. Y. l(64), aff' d per curiam 381 U.S. 414 (1%5). 21 Compare United States v, Bethlehem Steel Corp. 16H F. Supp. ,,76 , 618 (S. Y. 1958); The merger offers an incilJient threat of setting- iIlto molion a chain reaction of fllrther merg-ers by the other but less powerful companies in the steel industry. If thee is log-ie to the defendants' cont.ention that their joinder is justified to enaule them, in their own JanbTUag-e, tv offer ' challenging competition to United States Steel * * * which exercises dominant influence over competitive conditions in the steel industry * * .o' then the remaining large producers in the ' Big: 12' could with €!lual logic urge that they, tol) be permitted join forces and Opinion integration by merger was a technological or economic necessity for survival in the NYMA. On the contrary, what little evidence there is on this issue points the other way. Asked about the attractiveness of the NYMA as a market for cement after Colonial's vertical expansion but before the burst of vertical merger activity in the early 1960' , one witness, the president of Atlantic Cement, testified:

We did recognize (that Colonial might increase its initial 2 million barrel cement producing capacity). We did consider the total size of the market, and we did assume that Colonial might at some point increase their initial capacity. I just don t recall the dates and how it tied into our planning, but we were aware of it. That left a great deal of the market, however, available to us.

It is an attractive market in the sense that it is close to our producing facility. I think, as I recall, we calculated the market at something in the neighborhood of twelve million barrels of consumption, of which Colonial perhaps represented around a third of it. So even discounting completely their cement requirements, there was stil a great deal of cement to be sold in the market at that time.

The hearing examiner s finding that the only vertical integration injurious to competition in the NYMA was Colonial' is therefore suspect, as is his conclusion that the decline in construction activity in the NYMA was the "root cause" of the industry s problems at both the cement and ready-mixed levels. We cannot find that declining demand rather than vertical integration was the "root cause" of the substantial foreclosure in this market making it unattractive from the point of view of prospective entrants and un integrated firms. Moreover, assuming for the moment that the examiner is correct in this fmding, he does not explain why the remedy for a temporary " dislocation in demand is the radical and permanent restructuring of the eoncentraw their economic resources in order to dve more effective competition to the enhanced ' Rig 2' ; and so we reach a point of more intense concentration in an industry already highly concentrate-indeed we head in the direction of triopoly. 2R R. 376. The hearing examiner dismissed this testimony as unimportant on the ground that Atlantic s decision to enter the market occurred before C..lonial had expanded its cement producing capacity and before the decline in cement consumption in the NYMA. It is clear from the cited testimony that Atlantic did take into account Colonial's potential expansion and nevertheless concluded that entry into the NYMA would be desirable. It was only the cumulative foreclosure that was caused by the subsequent vertical mergers in the NYMA that made the market unattractive. It is also clear that the decline in cement prices in the NYMA was not a permanent development as the examiner implies but was temporary. See note 30 infra.

2U Compare initial decision p. 88 with R. 244, 371-74. so That the diminution in demand was not permanent is implicit in the examiner s finding that "a recent increase in construction activity was soon reflected in an improved market outlook. Id. at 23. It is cleat, in any Iovent, that the condition was temporary and that demand for cement in the NYMA has again increased. g., Opinion 75 F.

market implicit in the vertical merger movement. If the vertical merger movement had been permitted to continue unchallenged when demand again increased, the market would have been dominated by a small oligopoly consisting of the few integrated producers-that is, those who had been able to acquire the substantial ready-mix firms in the market-barriers to entry would have been substantially increased since new entrants would have had to enter at two levels, an expensive and time-consuming proposition " and the prospect of restoring competition to one of the most important markets for cement in the United States would have been dim or nonexistent.

It has been argued that the impact of vertical integration need not have been so adverse, that vertical mergers in this industry permit cement companies to make selective price cuts not readily visible and not readily matched by unintegrated cement companies, which in fact benefit consumers. Unintegrated cement manufacturers wili frequently be unable to match price cuts by their integrated rivals at the concrete level because such a cut (in cement prices) would place greater downward pressure on prices in the general cement market than would result from a cut in the price of ready-mixed concrete. The threat of large revenue losses foliowing a general decline in cement prices wil inhibit cement price cuts more than cuts in the price of ready-mixed concrete." ", Curbing the vertical merger movement is, therefore, regarded as curtailing aggressive competition and not being in the best interests of the consumer. aa The likely impact of the vertical merger movement on COllsumers has been described as follows:

A short run response to foreclosure in a market might be more aggressive competitive tactics to preserve or expand sales to remaining customers and thereby compensate for any losses in sales due to integration. From the standpoint of the ultimate user of cement and concrete such a consequence might be desirable if this effect persisted. Whether it would persist is problematical however, because as the market shrinks with the extension of vertical integra- 31 See, R. 245. 251: Cement Report 105-06 (explaining- that even internal expansion by cement producers into ready mixed concrete is so costly and time-consuming as not to be attractive).

32 Liebeler supra note 21, at 1161.

33 See id., at 1160-67; cf. Dean & Gustus, supra note 21 , at 694-97. But aee Cement Report 108-09 hmggesting that the abilty of integrated manufacturers to make hidden price cuts not necessarily conducive to competition) ; Wilk supra note 23, at 645. Opinion tion, the risks associated with aggressive competition intensify. It is conceivabJe that a market could become so extensively tied through vertical integration that nonintegrated suppliers would simply withdraw on the grounds that the rewards to be gained from its cultivation are too small to justify the cost. In this instance, vertical integration may cause a diminution in the number of effective competitors seeking to supply the market and thereby reduce the intensity of competition. Since most suppliers serve a series of markets, they have the option of reducing or avoiding aggressive competitive efforts in those markets which have been suhstantiaJJy diminished by vertical integration. If they are inclined to pursue risky aggressive marketing strategies, they are more likely to pursue them in markets which are not already substantially foreclosed. Unintegrated eement eonsumers operating in markets that are to a significant extent integrated, for this reason may find suppliers reluctant to C'ngage in aggressive rivalry in serving' their needs.

Even if vertical integration had no other consequence than to facilitate selective price reductions, this result could be achieved by less drastic means not involving a permanent restructuring of the market. Be that as it may, the Marquette-Cooney merger was apparently not consummated with the idea of fostering price competition. The decline in demand in the NYMA had triggered intense price and service competition which forced cement profits down to more competitive levels. ,; There is evidence in the instant case that cement producers in the NYMA including Marquette, seized on vertical integration as a device for stabilizing prices and mitigating the downward pressure on prices generated by temporarily declining demand and, perhaps by ovcrcapacity.

In any event, it is clear that there are predictable anticompetitive consequences flowing from this merger, and from the vertical merger movement in the NYMA in general, which cause it to violate Section 7. We have already discussed the foreclosure of existing and prospective cement suppliers from an important segment of this market, the raising of entry barriers that such exclusion portends, and the likelihood that aggressive competition by cement manufacturers wil be lessened. It remains to consider the foreseeable effect of the merger on competition at the ready-mixed level.

:U Cement Report 107. It should also be noted that vertical mergers dimirdsh cumpetitive confrontation in the cement market by rep!acinr; the buying- and sellin:. of cement in an open market-with prices determined in bargaining- between suppliers and users-with closed intra-firm transactions, thus redur:nr the number of open-market transactions through which final prices tu consumers are determined. " Brudley, OI;qopol1J I'01le1' Under tlw Sherman and Clayton Acts-From .l!economic Theory to Leqal I'olicy, 19 Stan. L. Rev. 2f!5, 315 (1967). ." Initial decision p. S4.

. ., Opinion 75 F.

In this connection what is significant is the leverage enjoyed by the integrated firms which among themselves have tied up over 40 percent of the total market for cement and over 60 percent of the ready-mixed market.'" By narrowing the margin between the price at which they sell cement on the open market and the price at which they seIl ready-mixed concrete, the integrated firms can limit the profis and growth of the readymixed firm, many of which are smail, local companies operating only in the NYMA, or perhaps even drive them out of business." It is, of course, unlikely that the integrated companies would utilize their leverage to drive independent ready-mixed firms out of the market.'" This kind of overt exercise of market power is unnecessary; nor is it essential that ready-mixed firms be kept in a state of complete dependency. " AIl that is required is that unintegrated firms and prospective entrants be made aware of the ability of the integrated oligopoly group-whether acting collectively or simply in "follow-the-leader" fashion-to utilize its leverage. The net effect would be to keep any of the independents from competing too aggressively, to maintain prices above competitive levels, to keep out new entrants-in short, to permit the ready-mixed market to function as a highly concentrated oligopoly. - "" Inital decision Pp. 59, 60.

'See tJ. Kaysen & Turner upra note 22 , at 122; J. Bain Industrial Organization 360- (1968); Adelman Integration and Antitrllst Policy, 6a Harv. L. Rev. 27 45 (l!J40); Hearings un the Impact Upon SmaU Busine s of Dual Distribution and Related Vertical Integration, 88th Cong., 1st Scss. 50 (1963) (testimony of Prof. J. W. Markham) Lherl';naftcr cited as lU6: Hearinr;sJ : Cement Report lOff-IO. "See n., Adelman supra note 37. at 45; cf. Dean & Gustus lJra note 22, at 690; United StiLtes v. Kennecott Copper Corp. 231 F. Supp, % , 10:1-04 (S. . 19!i4), aff'd per curiam 381 U. S. 414 on6S): United States v. Alcoa 233 F. Supp. 71R , 727.-2R (E.D,1\Io. 1(64). 30 See Dain supra note 37 , at 361-62, It has been suggested that " Unintep;rated cement consumers, oI1erating- in markets that are to a si,,:nifi,,,,nt extent integ-rated. . . may find supplien; reludant to engage in a p;ressiv(' rivalry in serving their needs. Cement Report 107. '0 See il. Atildman S1LPT" note 37, at 45; Stider Mergers and Preventive. Antitrust. Poli'm, 101 U. Pa. L. Rev. 176 , 183 O!) 5); compare Blake & Jam' , snpr" note 18 , at 464-65: We g-rant that in moving- from our fully integrated' model to tbe conditions of real Life it is diffcult to know when an industry reaches that point of vertical integration at which th.. prosvective single-stage entrants begin to feel the whip. One may suppose that it is likely to be reached ,..hen competitive forces succumb to the aIlw'ements of oligopoly pricing, and all 01' most of the oligopoly "roup al c vel.tip-ally inte rated. At that st;j e tht, l,rice-ddermining- II!' OUIJ would find it worthwhile to see that their di tributing- or supplying subsidiaries forego or threaten to forego, whatever profits ftcel'ue from dealing- with any agg-ressive newcomers hanging- at the eJl'e of the market. And in such a situation it would ue advantageous to diseipline a;ly 'independent' outlets or distributors who prollosed to dcal \with a sinlde-Rt,q;e entrant, by cutting t.hem off from the major firms which comprise the olig-opoly group. This group has a market position to protect and can readily sustain short- term losses to achieve Jon! tenn ,!,"ins, Moreover, the lan!,e firm can 'Rjll"ead' the cost of one disciplinary measure to numerous other situations as ' educational.' As in the defense of certain classes of law uits, it makes good economic sense for a fnn faced with many prospective troublemakers to 'jnvest' more than the reasonable valu!' of victory in a ' disciplinary' tactic whose vi! or is well noted by the others. " (l"ootnotes omitted.

Opinion We readily concede that, if both the cement and ready-mixed concrete markets were relatively un concentrated, verUcal integration might not have these results; leverage or market power would be lacking. H It is also true that there is no yardstick for determining the precise point at which vertical integration becomes anti competitive and socially harmful, a vehicle for applying market power, and is therefore proscribed by Section 7 if accomplished by merger. 12 However, in the present case the evidence establishes that after this merger some 60 percent of the ready-mixed market was controlled by four integrated firms. In these circumstances it is reasonable to suppose both that the integrated firms had leverage vis- vis their unintegrated readymixed competitors, and that the anti competitive consequences attributable to such leverage would be to stimulate further vertical integration in the NYMA entrenching the market power of the integrated firms, '" to reduce the number of competitors and potential competitors in the NYMA or at least to encourage nonaggressive, follow-the-leader competitive tactics, and thus to aggravate the oligopoly structure of that market. " This opinion neither states nor applies a 1'"1' se rule of ilegality. Wc do not hold that any vertical merger involving a supplying firm having 3.5 or 4.8 percent of its market with a purchasing firm having 1.6 or 1.8 percent of its market is illegal. We recognize that vertical integration does not of itself create market power and ihat it may in some cases effect significant economies and eHiciencies. \\Thether a particular vertical merger is illegal H See Bradley, supra note :14, :: 317- 18; cj. Dean & Gustus lIpr(1 note 21 , at (inn So n 51.

'" See 1!J6:! Hearinp;s at 50.

n l.ompal'e Kaysen & Turner supra note 22 , at IZ2- , Blake & JUlies supra note 18, at 464- , Brurlley, supra note :H , at '31!J, \ViJk SUIJra nute 22, at 62D-:-n, 19(;:J Hearings at 40 51 , with Liehel.., supra note 21 . at 1166 (aclmu""lcdg-ing that further v,'rtieal integration would be likely but denying that consumel's would be injured). 11 Cf. United SI-ates v, j(imlJerly-Clark Corp" 264 F. Supp. 438 (N. Calif. 1%7): Unit'al States v. J(ennecoU COPl1er Corp.. 2:11 1". Supp. 95, J02-05 (S. Y. 19(4). aff' d per r;uriam 3H1 U. S. 414 (1965)- Compare Pfirmfln'ml. e Cemenl- Co. 'l. C. Docket No. 7!J39 , AIJriJ 24 1964 (footnote omitted) l65 l". C.

The extent to which vertical integration ma.y have eriou ly anti-compP.itivc consequencesdepends, in genet' , on the degree410,of market4921:power possessed by the inte, rated firms at one or another of the levels on which they operate. ' Except in empiric"lJy unimportant cnSN\ there 1s nu reason to expect that vertical integration has any monuf)olistic implications so long "-s every st,\! e of production is cumpetitive. (But) vertical integration loses .its innocence if there is an aP!lreciahle de ':rce of market cuntrol at even une stage uf the productiun process. It becomes a possible weapon for the exdusioJl of new l"vals by jncreasin the capital reljuin'ments fur entry into the combined integrated production pract"ses, or it becomes a possibk vehicle of price discrimination ' Stigler M"rgcrs and Preventive Antitrust. Policy, 10-1 U, 1'u. L. Rev, 176 , 183 (I!15:i). Order 75 F.

depends on the facts and the market setting in which it occurs. Section 7 does not require proof that the challenged merger wil lead inevitably and inexorably to a diminution of competition. Under the statute we are concerned with probabilities not certainties.

In the instant case, there has been no showing that the longrange impact of the vertical restructuring of the NYMA would be anything other than to raise entry barriers at both the cement producing and ready-mixed levels and facilitate oligopoly pricing. The Marquette-Cooney merger was not an isolated occurrence but was part of a broader movement that had insulated over 40 percent of the market for cement in the NYMA from competition and that had seen some 60 percent of all ready-mixers in the NYMA tie themselves to cement producers. What evidence there is suggests that this merger was intended to secure an outlet for Marquette s cement and was in fact a response to increased competition and declining prices in the cement market. It was thus in its essential nature and purpose anti competitive. In sum, the record amply supports the conclusion that the effect of the merger may be substantially to lessen competition. The best means for redressing the injury to competition is to restore Cooney as an effective competitor and cement consumer. Accordingly, our order requires Marquette to divest itself of its interest in Cooney, and that it be reconstituted as a going concern and an independent competitor in the NYMA. In view of the trend toward competitively injurious vertical mergers in the industry, and in view of respondent's participation in this movement, we are also ordering respondent not to make any other acquisitions of cement consumers, for a period of ten years, without the prior approval of the Commission. The appeal of complaint counsel is granted. The initial decision and order of the hearing examiner are vacated to the extent inconsistent with this opinion. An appropriate order wil be entered.

Commissioner MacIntyre did not participate in the foregoing action.

ORDER This matter has been heard by the Commission on the appeal of complaint counsel from the initial decision of the hearing examiner filed on February 27, 1968. The Commission has rendered its decision granting complaint counsel's appeal and adopting Order the findings of the hearing examiner to the extent consistent with the opinion accompanying this order. Other findings of fact and conclusions of law made by the Commission are contained in that opinion. For the reasons therein stated, the Commission has determined that the order entered by the hearing examiner should be vacated and a new order issued by the Commission as its final order. Accordingly, It is ordered That respondent, Marquette Cement Manufacturing Company, a corporation, and its subsidiaries, offcers, directors, agents, representatives, employees, affliates, successors and assigns, within one (1) year from the date that this order becomes final, shall divest absolutely and in good faith, all stock assets, properties, rights and privileges, tangible or intangible, including but not limited to all properties, plants, machinery, equipment, raw material reserves, trade names, contract rights trade-marks, and good wil acquired by Marquette Cement Manufacturing Company as a result of its acquisition of the stock and/or assets of Cooney Bros., Inc., Plaza Concrete Corporation and Mamaroneck Stone Corp. , together with ali plants, machinery, buildings, land, raw material reserves, improvement, equipment and other property of whatever description that have been added to or placed on the premises of the former Cooncy Bros. , Inc., Plaza Concrete Corporation, and Mamaroneck Stone Corp., so as to restore said companies as going concerns and effective competitors in the lines of commerce and geographic markets in which they were engaged at the time of the acquisitions. It is further ordered That pending divestiture, respondent shail not make any changes in any of the plants, machinery, buildings, equipment or other property of whatever description of the former Cooney Bros. , Inc., Plaza Concrete Corporation and Mamaroneck Stone Corp., which shail impair their present capacity for the production, sale and distribution of ready-mixed concrete, aggregates and concrete products, or other products produced, or their market value.

It is further ordered That in accomplishing such divestiture none of the assets, properties, rights, or privileges, described in paragraph 1 of this order, shall be sold or transferred directly or indirectly, to any person who is at the time of the divestiture an offcer, director, employee, or agent of, or under the control or direction, of Marquette Cement Manufacturing Company or any subsidiary or affliated corporations of Marquette Cement Manufacturing Company, or who owns or controls, directly or Syllabus 75 F.

indirectly, more than one (1) percent of the outstanding shares of common stock of Marquette Cement Manufacturing Company, or to any purchaser who is not approved in advance by the Federal Trade Commission.

It is further ordered That for a period of ten (10) years respondent shall cease and desist from acquiring, directly or indirectly, without the prior approval of the Federal Trade Commission, the whole or any part of the share capital or other assets of any corporation engaged in the sale of ready-mixed concrete or concrete products within respondent's present or future marketing area for portland cement or which purchased in excess of 10 000 barrels of portland cement in any of the five (5) years preceding the merger.

It is further ordered That Marquette Cement Manufacturing Company shall, within sixty (60) days from the date this order becomes final and every ninety (90) days thereafter until divestiture is fully effected, submit to the Commission a detailed written report of its actions, plans, and progress in complying with the provisions of this order and fulfilling its objectives. All reports shall include, among other things that will be from time to time required, a summary of all contracts and negotiations with potential purchasers of the stock and/or assets to be divested under this order, the identity of all such potential purchasers, and copies of all written communications to and from such potential purchasers.

Commissioner MacIntyre did not participate.