## Facts

- Consolidated Foods Corp. (Consolidated), a diversified food company, acquired Gentry, Inc. (Gentry), a manufacturer of dehydrated onion and garlic, in 1951.
- Before the acquisition, Gentry held about 32% of dehydrated onion and garlic sales; Gentry and its principal competitor together accounted for about 90% of industry sales.
- By 1958, Gentry’s share rose to about 35%, while the combined share of Gentry and its principal competitor remained about 90% in an expanding market.
- Consolidated was a substantial purchaser from food processors who also purchased dehydrated onion and garlic for use in their products.
- The FTC found that, after the acquisition, Consolidated used its purchasing power to encourage suppliers to buy Gentry’s products through reciprocal dealing, creating the power to foreclose rivals from a substantial share of the dehydrated onion and garlic market.

## Issues

1. Whether reciprocal buying enabled by an adjacent/vertical acquisition is an anticompetitive effect cognizable under § 7 of the Clayton Act.
2. Whether post-acquisition market experience can defeat a showing that a merger is likely to substantially lessen competition under § 7.
3. Whether substantial evidence supported the FTC’s finding that the acquisition created a probability of substantial lessening of competition through reciprocal dealing.

## Decision

- The Supreme Court reversed the Seventh Circuit and reinstated the FTC’s order requiring divestiture and related relief.
- The Court held that reciprocity made possible by such an acquisition is among the anticompetitive practices targeted by the antitrust laws and can support a § 7 violation.
- The Court ruled that post-acquisition evidence is relevant but not controlling; it cannot be given conclusive weight or allowed to override otherwise strong probabilities of competitive harm.
- The Court concluded the FTC’s findings were supported by substantial evidence that the merger created a probability of reciprocal dealing that may substantially lessen competition.

## Legal Principles

- Section 7 prohibits acquisitions whose effect “may be substantially to lessen competition,” applying a forward-looking standard focused on probability rather than certainty or proven injury.
- Reciprocal buying can be anticompetitive because it injects a non-merit factor into purchasing decisions and can foreclose rivals by conditioning business on related purchasing.
- In evaluating a § 7 challenge, structural conditions and incentives to engage in exclusionary conduct may justify condemnation even if post-merger data shows limited observable short-term market change.
- Reviewing courts must uphold the FTC’s predictive findings where supported by substantial evidence, including evidence of the acquiring firm’s ability and incentive to use purchasing power to induce reciprocal dealing.

## Conclusion

The Court held that § 7 reaches mergers that likely facilitate anticompetitive reciprocal dealing, and that post-merger performance evidence cannot outweigh substantial evidence and structural probabilities showing the acquisition may substantially lessen competition; the FTC’s divestiture order was reinstated.


Fed. Trade Comm'n v. Consol. Foods Corp., 380 U.S. 592 (1965)