## Facts

- Material Service Corp., a deep-mining coal producer, acquired a controlling interest in United Electric Coal Companies, a strip-mining producer, through stock purchases completed by 1959.
- General Dynamics Corp. later acquired Material Service, thereby obtaining control of United Electric.
- The United States sued under § 7 of the Clayton Act, alleging the acquisition would substantially lessen competition in specified coal markets.
- The Government relied mainly on historical production and market-share statistics showing increased concentration and a higher combined share for the acquiring firm.
- The district court accepted the accuracy of the statistics but found they overstated United Electric’s competitive importance because:
  - United Electric’s proved coal reserves were extremely low.
  - Virtually all proved reserves were depleted or committed to long-term contracts.
  - In coal markets characterized by long-term requirements contracts, uncommitted reserves were necessary to compete for future business and affect prices.
- The district court entered judgment for the defendants, finding no § 7 violation; the Government appealed directly to the Supreme Court.

## Issues

1. Whether an acquisition violates § 7 of the Clayton Act when concentration and market-share statistics suggest increased market power, but the acquired firm’s reserves and contract commitments indicate limited future ability to compete.
2. Whether, and for what purposes, a court may consider post-acquisition evidence in predicting an acquisition’s probable future competitive effects.

## Decision

- The Supreme Court affirmed the judgment for General Dynamics.
- The Court held the Government failed to prove the acquisition was likely to substantially lessen competition in the relevant markets.
- The Court approved the district court’s focus on the acquired firm’s probable future competitive ability, not merely its past production levels.
- The Court held the district court could consider post-acquisition evidence that illuminated industry structure and the acquired firm’s reserve position as part of predicting future competitive effects.

## Legal Principles

- § 7 merger analysis is prospective; the central question is the acquisition’s probable effect on future competition.
- Market-share and concentration statistics are probative but not conclusive when they do not reflect a firm’s actual future competitive strength in the industry.
- Industry-specific measures of competitive capacity (here, uncommitted coal reserves necessary to win long-term contracts) may outweigh historic output data in assessing likely competitive effects.
- Post-acquisition evidence may be considered when it bears on the prediction of future competitive impact by clarifying relevant structural or capacity facts, rather than merely showing that competition did not in fact decline.

## Conclusion

The Court upheld the acquisition because the acquired coal producer’s depleted and contract-committed reserves meant it was not likely to be a significant future competitive constraint, so structural market-share evidence alone did not establish a probable substantial lessening of competition under § 7.


United States v. Gen. Dynamics Corp., 415 U.S. 486 (1974)