Midcon Corp. v. Freeport-McMoran, Inc.

Freeport-McMoran, Inc. and other producers of natural gas (defendants) made a tender offer to purchase all of the outstanding common stock of Midcon Corp. (plaintiff), which owned natural-gas pipelines. In addition to running its pipeline business, Midcon had two subsidiaries that were themselves producers of natural gas, in amounts nearly equal to the amounts of gas produced by defendants. Midcon filed for a preliminary injunction in a federal district court against defendants’ acquisition, contending that it would violate the Clayton Act. The Clayton Act prohibited one company from acquiring another in the same line of commerce where the acquisition might operate to substantially reduce competition or create a monopoly. Midcon alleged that once defendants acquired its pipelines, they would favor their own supply of gas and would raise the price of such supply so as to harm the market for natural gas. The court received live testimony, affidavits, and depositions for and against the issuance of an injunction. Witnesses for Midcon testified (1) that if the acquisition proceeded, defendants would have the opportunity to push higher gas prices through Midcon’s pipelines and (2) that pipeline companies and gas producers should be kept separate because of conflicting incentives. Midcon did not present any evidence that defendants ever made or tried to make contracts to sell their gas at above-market rates. The court considered the matter.