Fruehauf Corporation v. Federal Trade Commission
United States Court of Appeals for the Second Circuit
603 F.2d 345 (1979)
Fruehauf Corporation (Fruehauf) (defendant) was the largest manufacturer of truck trailers in the United States. As part of the truck-trailer manufacturing process, Fruehauf purchased 5.8 percent of all truck wheels in the truck-wheel market. Kelsey manufactured 15 percent of the truck wheels in the truck-wheel market. Fruehauf acquired Kelsey. The Federal Trade Commission (FTC) (plaintiff) sued Fruehauf, arguing the Kelsey acquisition violated § 7 of the Clayton Act by reducing competition in two markets. In the wheel-purchasing market, the FTC alleged that if a wheel shortage occurred, Kelsey would sell wheels primarily to its parent company Fruehauf and withhold wheels from Fruehauf’s competitors. However, during a wheel shortage shortly after the merger, Kelsey had sold wheels evenly to all customers. In the wheel-selling market, the FTC argued Fruehauf would buy all its wheels from Kelsey rather than Kelsey’s competitors. The FTC argued this business would give Kelsey economic efficiencies that would further increase barriers to entry for other wheel sellers. The FTC found the merger violated § 7 of the Clayton Act. Fruehauf appealed.
Rule of Law
Holding and Reasoning (Mansfield, J.)
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