## Facts

- Midcon Corp. (Midcon) owned a natural-gas pipeline system supplying, among other areas, the St. Louis and Chicago markets.
- Freeport-McMoran, Inc. and affiliated entities and individuals (defendants) owned or were affiliated with owners of substantial natural-gas producing properties in the United States.
- Midcon also had two subsidiaries that produced natural gas, in amounts roughly comparable to the amounts produced by defendants.
- On December 16, 1985, defendants announced a tender offer to acquire all outstanding shares of Midcon’s common stock.
- Midcon filed suit in federal district court and sought emergency preliminary injunctive relief to block the tender offer, alleging the acquisition would violate federal antitrust laws, including Clayton Act § 7 (and also invoking Sherman Act §§ 1–2).
- Midcon’s main theory was a vertical-combination concern: once defendants owned Midcon’s pipelines, defendants could favor their own gas, disadvantage rival producers’ access to pipeline transportation, and raise the price of gas shipped through Midcon’s system, harming competition in natural gas markets.
- The court held an expedited hearing (in part due to timing concerns related to financing and an anticipated Federal Reserve Board rule change) and received two days of live testimony, along with affidavits and depositions.
- Midcon presented witnesses who testified that the acquisition would give defendants the opportunity to push higher-priced gas through the pipelines and that keeping pipelines and gas production separate avoids conflicting incentives.
- Midcon did not present evidence that defendants previously made, or tried to make, sales contracts at above-market rates or engaged in the specific exclusionary conduct that Midcon predicted would follow the acquisition.

## Issues

1. Did Midcon satisfy the requirements for a preliminary injunction—particularly a reasonable probability of success on the merits, irreparable harm, favorable balance of harms, and consistency with the public interest—so as to justify stopping defendants’ tender offer?
2. Did Midcon make a sufficient preliminary showing under Clayton Act § 7 that defendants’ acquisition of Midcon “may be substantially to lessen competition, or to tend to create a monopoly,” where Midcon’s evidence centered on predicted post-acquisition discrimination and price effects?

## Decision

- The court denied Midcon’s motion for a preliminary injunction.
- The court concluded Midcon did not show a sufficient likelihood of success on the merits of its Clayton Act § 7 theory, because the alleged competitive harms were largely predictive and not supported by concrete evidence that defendants were likely to implement the feared conduct.
- With Midcon’s merits showing weak and the remaining equitable considerations not clearly favoring Midcon, the court declined to impose the extraordinary remedy of enjoining the tender offer at the preliminary stage.

## Legal Principles

- A preliminary injunction is an extraordinary remedy; the court weighs (1) irreparable harm and lack of an adequate remedy at law, (2) the balance of harms, (3) the plaintiff’s likelihood (or reasonable probability) of success on the merits, and (4) the public interest.
- Likelihood of success on the merits is a key consideration; where the plaintiff’s merits case is weak, the plaintiff must show that the remaining equitable factors strongly support interim relief.
- Clayton Act § 7 bars acquisitions whose effect “may be substantially to lessen competition, or to tend to create a monopoly,” but the plaintiff must present evidence-based support that anticompetitive effects are reasonably likely, not merely possible.
- In a vertical-acquisition challenge, showing that the combined firm would have an opportunity or incentive to discriminate (for example, by favoring affiliated supply through a pipeline) does not by itself establish a probability of a substantial lessening of competition without proof pointing to likely competitive harm.
- A court may deny preliminary injunctive relief when predicted anticompetitive effects are speculative on the existing record and the balance of harms and public interest do not clearly justify stopping the transaction pending a final merits determination.

## Conclusion

Midcon sought to block Freeport-McMoran and affiliates’ tender offer to acquire Midcon’s pipeline business, arguing the vertical combination would allow the acquirer to favor its own gas and raise prices in violation of Clayton Act § 7. After an expedited evidentiary hearing, the court found Midcon’s showing of likely anticompetitive harm too speculative—especially given the lack of concrete evidence that defendants had pursued above-market pricing or similar exclusionary conduct—and, because the equities did not clearly favor Midcon, denied a preliminary injunction and allowed the tender offer to proceed while the case continued.


Midcon Corp. v. Freeport-McMoran, Inc., 625 F. Supp. 1475 (1986)