Four of those firms, including respondent, shared 81.3 percent of the total market.52 Thus, the KCMA portland cement market was characterized as a highly concentrated oligopoly. Moreover, the Fordyce and Lee's Summit acquisitions were part of a marked trend toward forward integration into the ready-mixed market. Thus, in 1963, a year after Ash Grove's initial investiment in Lee's Summit, the Mississippi River Corporation 53 acquired Stewart Sand & Gravel Company, the largest ready-mixer in the KCMA at the time, consuming some 23.5 percent of all portland cement shipments in the market.54 The following year, Ash Grove made its initial 50 percent investment in Fordyce, the third largest ready mixer. In 1965, Missouri Portland Cement Company, the long-standing market leader, acquired Botsford Ready Mix Company, the second largest consumer of portland cement among ready-mixers with 12.7 percent of total shipments in the market.55 In 1968, the Lone Star Cement Corporation, long a leading firm in the portland cement market, integrated by internal expansion into the ready-mixed market at a cost of some $500,000. In short, the Fordyce and Lee's Summit acquisitions took place in the concentrated oligopoly of portland cement manufacture and supply in the KCMA, a market in the process of integrating forward into the manufacture and sale of ready-mixed concrete, the business of its principal customer. Once the Fordyce and Lee's Summit operations had been fully taken over by Ash Grove, integrated suppliers in the market controlled some 58.5 percent of ready-mixed concrete sales in the KCMA 56 and had, by vertical integration, "captured" over 40 percent of the total portland cement market.57

In this context, we conclude that Ash Grove's two ready-mixed acquisitions, in the long run, can have none other than an effect on competition proscribed by Section 7 of the Clayton Act.

We must, however, take a different view of the "Union Quarries” transaction. In 1966, "Union Quarries" was in the business, inter alia, of producing and selling portland cement treated base rock. This required making certain purchases of portland cement; and, of course, the extent of those purchases constituted some foreclosure of the overall portland cement market. As pointed out above, the record indicates 1965

32 The record reflects that while there had been some slight decrease in four-firm concentration in the years preceding the acquisitions, there was an increase between 1965 and 1966 (CX 93); moreover, at no time in the five year period prior to the acquisitions could the market be characterized as less than "highly concentrated.” (CX 94).

While Mississippi River Corp. was not a factor in the supply market prior to the Stewart acquisition, by 1966, having entered as an integrated firm, it ranked among the top four (CX 93).

CX 85. This figure amounted to 31 percent of all purchases by ready-mixers. 3CX 86. This was 17.3 percent of total ready-mixer consumption.

34 CX 82.

37 CX 86.

purchases by "Union Quarries" of some 17,890 barrels. This amounts to less than 0.9 percent foreclosure.58 While we do not rule that such a small percentage will be in all cases insignificant,59 the record here fails to demonstrate that in this particular situation any effect on competition, in any market, would be other than de minimis.60 We therefore reject the administrative law judge's conclusion that "[t]he acquisition of the assets used in the operation of Union Quarries by Ash Grove Cement Co. violates Section 5 of the Federal Trade Commission Act, as amended."61 The order will be modified accordingly.

IV

In the notice of contemplated relief issued with the complaint in this matter, the Commission sought to provide for divestiture of the challenged acquisitions, together with the imposition of a limitedduration ban on any further acquisitions of ready-mixers by respondent. The administrative law judge, in rendering his initial decision, augmented these provisions with: (i) a post-divestiture limitation on respondent's sales of portland cement to the divested firms; 62 (ii) a moratorium on ready-mixed concrete sales or deliveries by respondent into the KCMA; 63 and (iii) a ban on respondent internally expanding, or in any sense operating, as a competitor in the ready-mixed market in the KCMA for at least two years after divestiture. On appeal, respondent has objected to the inclusion of these three provisions in any final order we may issue here.65

64

0.

s Indeed, incomplete data for 1967 suggest a far smaller amount purchased in the year after the acquisition. CX 8

We note that in Brown Shoe Co. v. United States, 370 U.S. 294 (1962), one of the product lines in which a violation was found to have occurred involved only 1 percent foreclosure.

6 Unlike the portland cement and ready-mixed concrete markets, in which “Union Quarries" has no discernible effect, there is no "portland cement treated base rock" market described in these proceedings; nor is there sufficient data to analyze "Union Quarries" in terms of backward integration by a ready-mixer into aggregates supply.

"Because of our disposition of this acquisition on the merits, it is unnecessary to pass on respondent's jurisdictional contentions. We note, however, that the Commission's power to challenge noncorporate acquisitions under Section 5 is well-settled. Dean Foods Co., 70 F.T.C. 1146 (1966); National Tea Company, 69 F.T.C. 226 (1966); Beatrice Foods Co., 67 F.T.C. 473 (1965); Foremost Dairies, Inc., 52 F.T.C. 1480 (1956). Its Section 5 power to order divestiture is equally clear. L. G. Balfour Co. v. FTC, 442 F.2d 1 (7th Cir. 1971); Golden Grain Macaroni Co. v. FTC, 472 F.2d 882 (9th Cir. 1972), cert. denied, 412 U.S. 918 (1973).

* Initial Decision at 31 (Par. V).

63Id. at 32 (Par. VI). The law judge would order that this restriction, as well as that contained in Par. V, be maintained for two years after divestiture, or so long as respondent retains a security interest in the divested property, whichever is longer.

" Id. (Par. VII).

63 Respondent has also challenged that portion of paragraph I of the law judge's order which would require divestiture of the "Union Quarries" assets. In light of our disposition of that aspect of this case, supra, respondent's objection to paragraph I is moot. That portion of paragraph I relating to “Union Quarries" is not made a part of our final order.

We are unable to find an adequate basis in this record to justify these additional provisions.6

66

In support of limiting respondent's sales to Fordyce and Lee's Summit for a period following divestiture, counsel supporting the complaint argue that there has been a prolonged "block-out of competitive effort"67 in portland cement sales to the acquired readymixers. Simple divestiture will not be sufficient, so the argument runs, to eliminate the foreclosures which have long been maintained, and reinforced, by trading habit as well as corporate structure. This argument is not unreasonable on its face; and, indeed, it may be compelling in other market contexts - or on a stronger record demonstration of necessity. We think, however, in the case of a homogeneous product such as portland cement, in a market admitted to manifest price competition, there appears little reason to foreclose respondent from any segment of that market. In this context, customers, even those newly severed from a parent, can be expected to buy from the supplier making the best price and offering the best service. Without a clear showing that this is not likely to occur in absence of the proposed competitive restriction, we are unwilling to order it here.

The argument advanced for keeping respondent out of the KCMA ready-mixed market for a time is equally unpersuasive. When asked during oral argument to cite record evidence justifying the competitive prohibitions of Paragraph VI and VII of the law judge's order, counsel supporting the complaint could allude only to testimony of readymixers to the effect that a vertically integrated competitor puts an "independent" at a competitive disadvantage. While we receive such testimony as credible, we fail to see how it renders the order provisions in question in any way related to the offenses found. More importantly, we are simply at a loss to discern what relationship these provisions could bear to restoring the state of competitive vigor the market might have enjoyed but for the illegal acquisitions.

In the instant case we conclude that paragraphs V, VI and VII of the administrative law judge's order, on the record before us, have not been demonstrated as necessary to effectuate relief in this matter. Accordingly, these provisions are not made a part of our final order.

V

It remains for us to dispose of respondent's contention that the

In Papercraft Corp. v. FTC, 472 F.2d 927 (7th Cir. 1973) the Court of Appeals pointed out that while ** divestiture orders have included special provisions designed to insure the survival of the divested business, * * it is "essential" that such orders be based upon supporting findings which demonstrate "** the need for a special protective provision.” (citation omitted) Id. at 931-32. We are unable to glean such findings from the record before us. 7 Transcript of Oral Argument at 54.

issues in this case were prejudged by the Commission in "an unauthorized trade regulation rule proceeding." In what must be considered a gross misconstruction of the Commission's involvement in the cement industry,68 respondent raises the question of prejudgment for our consideration yet a third time. Respondent puts forth no new argument to convince us that the Commission erred in deciding "prejudgment" in its Interlocutory Opinion and Order in this matter, Oct. 14, 1969.69 Nor has any reason been suggested for abandoning the Commission's subsequent determination in response to respondent reraising the issue, along with its ill-conceived "ultra vires" argument, Dec. 5, 1972.70 Finally, there is absolutely no indication that the current Commission, or any of its membership, has prejudged any issue in this case or shown bias in any way since the issue was last resolved. In short, the respondent's contentions as to prejudgment and Commission bias were baseless when previously adjudicated, and they are baseless

now.

FINAL ORDER

This matter having been heard by the Commission upon the appeal of respondent's counsel from the initial decision, and upon briefs and oral argument in support thereof and in opposition thereto, and the Commission, for the reasons stated in the accompanying opinion, having denied, in part, and granted, in part, the appeal; accordingly,

I

It is ordered, That respondent, Ash Grove Cement Company, a corporation, and its officers, directors, agents, representatives, employees, subsidiaries, affiliates, successors and assigns, within one (1) year from the date of this order becomes final, divest, absolutely, subject to the approval of the Federal Trade Commission, all stock, assets, properties, rights and privileges, tangible and intangible, including, but not limited to, all plants, equipment, machinery, inventory, customer lists, trade names, trademarks and goodwill, acquired by respondent, as a result of the acquisitions of the stock of Fordyce Concrete, Inc. and Lee's Summit Ready-Mix Concrete & Materials Company, together with all additions and improvements thereto and replacements thereof of whatever description, so as to assure that there is established one or more separate and viable competitors engaged in the business of producing and selling ready-mixed concrete.

See, eg, Respondent's Brief on Appeal at 47-52, passim. "Ash Grove Cement Company, 76 F.T.C. 1076 (1969). 10 Ash Grove Cement Company, 81 F.T.C. 1051 (1972).

It is further ordered, That pending such divestitures respondent shall not make or permit any deterioration or changes in any of the plants, machinery, equipment, buildings, or other property or assets to be divested which would impair their present capacity or market value.

III

It is further ordered, That none of the stock, assets, properties, rights or privileges required to be divested be transferred, directly or indirectly, to any person who is at the time of the divestiture an officer, director, employee, or agent of, or under the control or direction of, Ash Grove Cement Company, or any of its subsidiaries or affiliates or who owns or controls, directly or indirectly, more than one (1) percent of the outstanding shares of voting stock of Ash Grove Cement Company, or any of its subsidiaries or affiliates.

IV

It is further ordered, That with respect to the divestitures required herein, nothing in this order shall be deemed to prohibit respondent from accepting consideration which is not entirely cash and from accepting and enforcing a loan, mortgage, deed or trust or other security interest for the purpose of securing to respondent full payment of the price, with interest, received by respondent in connection with such divestitures; provided, however, that should respondent by enforcement of such security interest, or for any other reason, regain direct or indirect ownership or control of any of the divested plants, land or equipment, said ownership or control shall be redivested subject to the provisions of this order, within one year from the date of reacquisition.

V

It is further ordered, That for a period of ten (10) years from the date this order becomes final, respondent shall cease and desist from acquiring, directly or indirectly, without the prior approval of the Federal Trade Commission, the whole or any part of the share capital or other assets of any corporation engaged in the sale of ready-mixed concrete or concrete products within respondent's present or future marketing area for portland cement or which purchased in excess of 10,000 barrels or 1,880 tons of portland cement in any of the five (5) years preceding the merger.