The opinion of the court was delivered by: GESELL
GERHARD A. GESELL, UNITED STATES DISTRICT JUDGE
The United States, invoking Section 7 of the Clayton Act, 15 U.S.C. § 18, seeks by its complaint to enjoin a proposed acquisition on the ground that it may substantially lessen competition in hardrock hydraulic underground drilling rigs. The proposed acquisition has been postponed pending this decision on the merits, which is now before the Court after two days of hearings and the filing of proposed findings of fact. The record consists of numerous exhibits with significant portions highlighted by the parties, affidavits and live testimony from four witnesses. The issues have been fully briefed and argued.
Jurisdiction and venue are conceded. This Memorandum constitutes the Court's findings of fact and conclusions of law as to Count One of the complaint.
The proposed transaction involves two foreign corporations which supply hardrock hydraulic underground drilling rigs to customers in the United States and elsewhere in the world operating out of Finland and France, respectively. By an agreement dated July 29, 1989, Oy Tampella AB, a Finnish corporation, will acquire Eimco Secoma, S.A. (Secoma), a French corporation, which is owned by Baker Hughes Incorporated of Houston, Texas. Oy Tampella's Tamrock division and Secoma are each major industrial concerns doing business in a variety of mining products. They compete with each other and other concerns in various countries around the world.
Each company has a separately incorporated small U.S. sales and service subsidiary (Tamrock, Inc. and Secoma, U.S., Inc.) to aid its U.S. sales of the rigs, which Tamrock manufactures and assembles in Finland, and Secoma assembles, primarily from parts made by others, in France.
There are three primary types of hardrock hydraulic underground mining rigs: face drills (often called "jumbos"), roof bolters and long hole drills. These rigs perform different functions in an underground mine or tunnel where hardrock is encountered. Jumbos drill horizontally into the face of the mine tunnel. Roof bolters drill holes vertically into the floor or roof of the tunnel; a bolt is then inserted into the hole and later a brace. Long hole ("production") drills are used to reach into and open up ore bodies. "Hardrock" is rock that requires a drill force of approximately 20,000 pounds per square inch for penetration.
The Contentions of the Parties
This proposed horizontal acquisition combines two major companies now directly competing in the United States for hardrock hydraulic underground drilling rigs. Tamrock, the acquiring company, has in recent years had the largest share of this country's business in these rigs.
The United States asserts it has met its burden under Section 7 of the Clayton Act because the proposed acquisition will increase the already dominant position of Tamrock, which has accounted for about 40 percent of U.S. sales in recent years. Applying traditional antitrust doctrine, see, e.g., United States v. Philadelphia National Bank, 374 U.S. 321, 363, 83 S. Ct. 1715, 10 L. Ed. 2d 915 (1963), against what it considers this decisive circumstance, the United States contends that it is reasonably likely that the proposed acquisition will substantially lessen competition in the sale of hardrock hydraulic underground drilling rigs in a distinct market, i.e. the United States.
Vigorously contesting these premises as overly simplistic, the defendants contend that factors unique to the hardrock drilling equipment business make the conclusions drawn by the Department of Justice inappropriate and the authorities relied on inapplicable. This opposition is not an idle one. It is supported by a factual showing that requires close analysis to determine whether given the nature of this particular industry permanent injunctive relief is in fact required to sustain the objectives of the Clayton Act. The United States has the ultimate burden of proving a Section 7 violation by a preponderance of the evidence.
The Appropriate Geographic Market
The proof has focused on two markets, the United States and the entire world. Most of the evidence concerns the United States market, for obvious reasons.
References to competition throughout the world were pertinent because, as will be discussed below, some competitors of Tamrock and Secoma based abroad may successfully enter the United States market in the future. Market sales in 1988 of hydraulic rigs throughout the world are noted below.
WORLD MARKET SALES 1988
Jumbos Longhole Bolting Scaling Total
Tamrock 128(10) 36(3) 21(2) 20 205
Atlas-Copco 77(3) 13 11 101
Secoma 36 2 19 57
Furukawa 49 49
Montabert 12 2 14
Gardner-Denver 8 8
PTT 2 2
Bohler 4 4
Sig 2 1 3
AMV 1 1
Boart 5 1 1 1 8
Toyo 12 12
Fletcher 1 ...