United States v. Baker Hughes Inc.

Tamrock AG (Tamrock) manufactured and sold hardrock hydraulic underground drilling rigs (HHUDRs). Tamrock proposed to acquire Eimco Secoma, S.A. (Secoma), also a manufacturer of HHUDRs. The United States government (plaintiff) brought suit against Baker Hughes, Inc. (defendant), Secoma’s parent company. The government alleged that the proposed acquisition violated Section 7 of the Clayton Act and presented evidence that the merger would increase market concentration in the HHUDR market. The district court found that although the government had presented prima facie evidence of the proposed merger’s anticompetitive effect, Secoma had rebutted that presumption. First, Secoma presented evidence that the HHUDR market in the United States was very small and that high concentration was therefore normal. Between 1986 and 1988, only four companies sold HHUDRs and on average only 27 HHUDRs were sold each year. Despite this small market and high concentration, prices and product quality were stable. Further, Secoma presented evidence that the buyers of HHUDRs were extremely sophisticated, carefully examining the devices before spending hundreds of thousands of dollars on them. Finally, Secoma presented evidence that two competitors entered the HHUDR market in 1989. As the government did not produce any additional evidence, it failed to carry its overall burden of persuasion. The government appealed, arguing that to rebut the government’s prima facie case, Secoma was required to make a clear showing that entry into the HHUDR market could be accomplished quickly and effectively.