## Facts

- The United States challenged Waste Management, Inc.’s (WMI) acquisition of EMW Ventures Inc. (EMW) under § 7 of the Clayton Act.
- Both firms had subsidiaries providing non-hazardous solid-waste collection in and around Dallas, Texas; EMW’s Dallas hauler (TIDI) became a WMI subsidiary after the transaction closed.
- The competitive dispute focused on the Dallas waste-collection market, including containerized and non-containerized collection services.
- At trial, the post-merger firm’s share of the relevant Dallas collection market was calculated at 48.8%.
- Evidence showed entry and expansion were comparatively easy: entrepreneurs could start hauling with modest capital, and nearby haulers (including from Fort Worth and surrounding areas) could expand into Dallas County in response to price increases.
- The district court treated the 48.8% share as prima facie evidence of illegality and concluded that ease of entry did not rebut the structural showing; it found a § 7 violation and ordered divestiture of TIDI.

## Issues

1. Whether the acquisition may substantially lessen competition or tend to create a monopoly in violation of § 7 of the Clayton Act when the merged firm held a large market share but entry and expansion were easy.
2. Whether evidence of low barriers to entry and potential competition can rebut a prima facie § 7 case based on market share and concentration.

## Decision

- The Second Circuit reversed the judgment finding a § 7 violation and vacated the divestiture order.
- The court accepted that high market share and concentration can establish a prima facie case, shifting the burden of production to defendants.
- The court held that the prima facie inference was rebutted because entry and expansion into the relevant market were easy and would constrain prices.
- The court faulted the district court for giving insufficient weight to potential competition from new entrants and from existing haulers capable of expanding into Dallas County.

## Legal Principles

- Under § 7 of the Clayton Act, structural evidence (market share and concentration) may establish a prima facie inference that a merger may substantially lessen competition.
- The prima facie inference is rebuttable; defendants may defeat it by showing that market conditions make durable market power unlikely.
- Substantial evidence of low barriers to entry and timely, likely entry or expansion by competitors can rebut a structural presumption of anticompetitive effect.
- In markets where basic inputs are readily available and firms can enter or expand with modest capital, potential competition may prevent supracompetitive pricing even when a merged firm has a large share.

## Conclusion

The Second Circuit held that despite a high post-merger market share, the government failed to prove a likely substantial lessening of competition because easy entry and expansion by actual and potential competitors would constrain the merged firm’s ability to exercise market power, requiring reversal of liability and divestiture.


United States v. Waste Management, Inc., 743 F.2d 976 (2d Cir. 1984)