## Facts

- Swedish Match North America, Inc. was the largest U.S. producer of loose-leaf chewing tobacco, with roughly a 42% share in 1999; its major brands included Red Man and related premium products.
- National Tobacco Company, L.P. was the third-largest U.S. producer of loose-leaf chewing tobacco, with roughly an 18% share in 1999; its major brands included Beech-Nut and Beech-Nut Wintergreen.
- Swedish Match agreed to acquire National’s loose-leaf chewing-tobacco business.
- The Federal Trade Commission alleged the deal would combine two of the three leading producers in a highly concentrated market, increasing Swedish Match’s share to about 60% and eliminating a close, price-constraining rival.
- Defendants contended that declining demand, excess capacity, regulation, and competition from other tobacco products reduced any risk of anticompetitive effects.
- The FTC sought a preliminary injunction under FTC Act §13(b) to block closing pending completion of the FTC’s administrative adjudication on whether the acquisition violated Clayton Act §7 and FTC Act §5.

## Issues

1. Whether loose-leaf chewing tobacco is a distinct relevant product market for merger analysis.
2. Whether the relevant geographic market is the United States.
3. Whether the acquisition was likely to substantially lessen competition, including through unilateral price effects from loss of head-to-head competition.
4. Whether preliminary injunctive relief under FTC Act §13(b) was warranted based on likelihood of success and the public interest.

## Decision

- The court granted the FTC’s motion for a preliminary injunction and enjoined the transaction pending completion of the FTC administrative proceeding.
- The court found the relevant product market was loose-leaf chewing tobacco, rejecting a broader market including other smokeless or smoking tobacco products.
- The court found the relevant geographic market was the United States.
- The court concluded the FTC showed a reasonable probability of proving a Clayton Act §7 violation because the merger would significantly increase concentration and remove National as Swedish Match’s closest competitive constraint, likely enabling higher prices.
- The court held the balance of equities and public interest favored preserving the status quo to prevent potentially irreversible competitive harm and to maintain effective final relief.

## Legal Principles

- Under FTC Act §13(b), a court may grant preliminary injunctive relief when the FTC shows reason to believe a violation is occurring or imminent and demonstrates that an injunction is in the public interest; this includes assessing the FTC’s likelihood of ultimate success on the merits.
- A Clayton Act §7 claim requires showing that the effect of an acquisition “may be substantially to lessen competition,” which may be established through market definition, concentration evidence, and proof of likely anticompetitive effects.
- Relevant product markets are determined by reasonable interchangeability and cross-elasticity of demand, including evidence of product characteristics, customer perceptions, and pricing patterns.
- A merger that materially increases concentration in an already concentrated market can support a presumption of likely competitive harm, which defendants must rebut with persuasive evidence.
- Unilateral effects may be shown where elimination of a close competitor removes a significant pricing constraint, giving the merged firm the incentive and ability to raise prices.
- Claimed efficiencies carry limited weight unless verifiable and merger-specific and must be sufficient to rebut the showing of likely competitive harm.

## Conclusion

The court preliminarily enjoined Swedish Match’s acquisition of National’s loose-leaf chewing-tobacco business after finding a likely §7 violation in a distinct U.S. loose-leaf market, where the merger would substantially increase concentration and eliminate a key price-constraining rival, and where the public interest favored preserving effective antitrust remedies.


F.T.C. v. Swedish Match N. Am., Inc., 131 F. Supp. 2d 151 (D.D.C. 2000)