The opinion of the court was delivered by: GESELL
By its complaint filed June 24, 1986, the Federal Trade Commission ("FTC") seeks a preliminary injunction pursuant to Section 13(b) of the Federal Trade Commission Act, 15 U.S.C. § 53(b), to enjoin The Coca-Cola Company from consummating its proposed acquisition of Dr. Pepper Company, which sponsors a carbonated soft drink called Dr. Pepper, pending FTC administrative hearings
to determine whether the acquisition violates Section 7 of the Clayton Act, 15 U.S.C. § 18.
Dr. Pepper Company is being offered for sale by DP Holdings, Inc., which owns and controls all its outstanding shares.
The Applicable Standard for Review
Section 7 of the Clayton Act prohibits any acquisition of the stock or assets of a company that may substantially lessen competition or tend to create a monopoly in any line of commerce in any section of the country. The FTC has statutory authority to investigate probable violations of that Section and to seek a preliminary injunction to hold a proposed acquisition in abeyance pending administrative enforcement proceedings.
Such a statutory preliminary injunction, when sought by the FTC, may only be granted if as a factual matter the Court is satisfied that the acquisition is likely to have a substantial anticompetitive effect and the Court concludes, in the exercise of its discretion, that a proposed acquisition presents "'questions going to the merits so serious, substantial, difficult and doubtful as to make them fair ground for thorough investigation, study, deliberation and determination by the FTC in the first instance . . . .'" FTC v. Beatrice Foods Co., 190 U.S. App. D.C. 328, 587 F.2d 1225, 1229 (D.C. Cir. 1978) (quoting FTC Brief, at 18-19). Conversely, it is important to emphasize that the Court is not asked to resolve the ultimate issues on the merits. While the Court must indicate in broad factual terms why there is ground to believe that a full hearing is appropriate to safeguard the status quo in the public interest, the Court need not resolve all disputes presented to it during the hearing nor make detailed evidentiary findings on all aspects.
It is, however, clear that the proof before the Court must be sufficient to support a finding that a challenged acquisition is reasonably likely to lessen competition substantially. This assessment is a matter of probability, not speculation, and the inquiry is necessarily factual. The FTC has the burden of proof.
The Coca-Cola Company is primarily a carbonated soft drink company. It is also a major producer and distributor of motion pictures and television programs and one of the world's largest citrus marketers. Founded a century ago, it operates throughout the United States and internationally. It reported in its most recent Letter to Shareholders that "one of every two colas and one of every three soft drinks consumed by the American public is a Coca-Cola branded product."
It is forming by acquisition and otherwise the world's largest bottling system in aid of its marketing strategies, thus increasing its power over the principal channel of distribution. It is an aggressive, flexible, creative marketer. It has been and is a highly successful, well-managed, profitable enterprise, with 1985 revenues of approximately $ 7.9 billion.
Coca-Cola Company was motivated by a variety of somewhat divergent considerations in agreeing to acquire Dr Pepper Company. As a strictly business matter, the acquisition would be profitable for Coca-Cola Company's shareholders. Essentially, Coca-Cola Company is buying the company for its trademark and existing market. It would give the Dr Pepper brand new life by absorbing it into its multiproduct line of carbonated soft drinks. Dr Pepper's debts would be paid off, expenses would be greatly reduced, and Coca-Cola Company's marketing skills, ...