## Facts

- Tamrock AG, a subsidiary of Oy Tampella AB, manufactured and sold hardrock hydraulic underground drilling rigs (HHUDRs) in the United States.
- Baker Hughes Inc., through its French subsidiary Eimco Secoma, S.A. (Secoma), also competed in the HHUDR business.
- Tamrock proposed acquiring Secoma, which would combine two HHUDR sellers in the United States.
- The HHUDR market in the United States was small and concentrated; during 1986–1988, four firms sold HHUDRs, with an average of about 27 units sold per year.
- Despite concentration, prices and product quality were found to be stable.
- HHUDR purchasers were sophisticated buyers who evaluated expensive equipment carefully before purchasing.
- Before trial, two additional firms entered the U.S. HHUDR market, suggesting entry was feasible.

## Issues

1. Whether the proposed acquisition likely would substantially lessen competition in the U.S. HHUDR market in violation of § 7 of the Clayton Act.
2. After the government establishes a prima facie case through concentration statistics, what burden defendants bear to rebut the resulting presumption of illegality.
3. Whether rebuttal in a concentrated-market § 7 case requires a “clear showing” that entry will be “quick and effective.”

## Decision

- The D.C. Circuit affirmed the judgment for defendants and upheld denial of a permanent injunction.
- The court held defendants rebutted the government’s prima facie case by producing evidence that cast doubt on concentration statistics as a reliable predictor of competitive harm in this market.
- The court rejected a rule requiring defendants, as the sole means of rebuttal, to prove entry would be “quick and effective.”
- The court held the government retained the ultimate burden of persuasion and failed to prove the merger was likely to substantially lessen competition.

## Legal Principles

- In a § 7 horizontal merger case, market share and concentration statistics can create a rebuttable presumption that a transaction will substantially lessen competition.
- After a prima facie showing, defendants bear a burden of production (not persuasion) to present evidence that the structural case does not accurately predict the transaction’s probable competitive effects.
- Concentration statistics are a starting point, not dispositive; courts must consider other market facts, including buyer characteristics, market conditions, and entry conditions.
- Rebuttal is not confined to any single type of evidence, and § 7 analysis requires a fact-specific inquiry based on the totality of the circumstances.
- The government always bears the ultimate burden of persuasion to show likely anticompetitive effects.

## Conclusion

The court held that defendants may rebut a concentration-based § 7 presumption by producing evidence that undermines the predictive value of the government’s structural proof, and that the government must still prove likely competitive harm; on this record, it did not.


United States v. Baker Hughes Inc., 908 F.2d 981 (D.C. Cir. 1990)