## Facts

- Heinz agreed to acquire Milnot Holding Corp., the parent of Beech-Nut Nutrition Corp., for about $185 million.
- The relevant product and geographic market was the U.S. market for jarred baby food.
- The market was dominated by three firms: Gerber (~65%), Heinz (~17.4%), and Beech-Nut (~15.4%).
- Heinz and Beech-Nut were the principal rivals competing for the “second slot” on supermarket shelves, behind Gerber’s dominant position.
- The transaction would reduce the market from three significant competitors to two, leaving Gerber and a combined Heinz/Beech-Nut.
- The merging parties asserted that combining operations would generate efficiencies, including improved utilization of Heinz’s modern plant (then operating at roughly 40% capacity), and would strengthen competition against Gerber.
- The FTC filed an administrative complaint and sought a preliminary injunction in federal district court under FTC Act § 13(b) pending completion of the administrative proceeding.
- The district court denied preliminary relief, crediting claimed efficiencies and potential procompetitive effects.
- The FTC appealed.

## Issues

1. Whether the FTC showed a likelihood of success that the merger would substantially lessen competition in violation of Clayton Act § 7.
2. Whether strong structural evidence in a highly concentrated three-firm market established a prima facie case of anticompetitive effect.
3. Whether claimed efficiencies and innovation benefits were sufficiently merger-specific and verifiable to rebut the FTC’s prima facie case at the preliminary-injunction stage.
4. Whether the equities and public interest favored preliminary injunctive relief under FTC Act § 13(b).

## Decision

- The D.C. Circuit reversed the denial of a preliminary injunction and remanded with instructions to enter an injunction pending the FTC’s administrative proceedings.
- The court held the FTC made the required showing under § 13(b), including a likelihood of success on the merits.
- The court found the merger’s 3-to-2 consolidation in a highly concentrated market created a strong presumption of anticompetitive harm.
- The court concluded entry barriers (brand loyalty, shelf-space constraints, and marketing costs) made it unlikely that new entry would replace the lost rivalry between Heinz and Beech-Nut.
- The court held the defendants’ efficiencies evidence did not adequately rebut the FTC’s prima facie case because it was insufficiently substantiated and not shown to be merger-specific.
- The court rejected the claim that the merger was necessary for innovation on the record presented.
- After the appellate ruling, the parties abandoned the transaction.

## Legal Principles

- For a preliminary injunction under FTC Act § 13(b), the FTC must show a likelihood of ultimate success on the merits and that the equities favor relief, with substantial weight given to the public interest in enforcing the antitrust laws.
- A merger that significantly increases concentration in an already highly concentrated market can establish a strong prima facie case that the transaction is likely to lessen competition under Clayton Act § 7.
- In evaluating efficiencies offered to rebut a prima facie § 7 case, courts may require a showing that efficiencies are merger-specific, verifiable, and sufficient in magnitude to counter the predicted competitive harm.
- High barriers to entry strengthen the inference that lost head-to-head rivalry will not be replaced by timely and effective new competition.
- In merger cases, preliminary relief is favored where consummation risks irreversible integration that would be difficult to unwind during administrative review.

## Conclusion

The D.C. Circuit held that a proposed Heinz–Beech-Nut merger in the U.S. jarred baby-food market likely would lessen competition by eliminating the primary rivalry for the second supermarket-shelf position, and that asserted efficiencies and innovation claims were too uncertain and not shown to be merger-specific to overcome the FTC’s strong structural case; it therefore ordered entry of a preliminary injunction pending administrative proceedings.


F.T.C. v. H.J. Heinz Co., 246 F.3d 708 (D.C. Cir. 2001)