IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA

FEDERAL TRADE COMMISSION,
Plaintiff
v.
H.J. HEINZ, COMPANY, et al.,
Defendants.

Civil Action No. 1:00CV01688

MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF PLAINTIFF'S MOTION FOR INJUNCTION PENDING APPEAL

Plaintiff, Federal Trade Commission, moves, pursuant to Fed. R. Civ. P. 62(c), to enjoin the acquisition at issue in this case pending appeal of this Court's denial of the Commission's motion for preliminary injunction. Unless the Court issues an injunction pending appeal, defendant H. J. Heinz Company, or its affiliates, will be free to acquire at any time the stock or assets of Milnot Holding Company, or its affiliates. In the alternative, we ask the Court to enjoin the acquisition pending a determination by the Court of Appeals of an emergency application in that court by the Commission for an injunction pending appeal.

1. As the parties agreed, and this Court found, new entry into the baby food market is "difficult and improbable" (Op. at 11). Once Heinz and Milnot consummate their merger, American consumers will never again reap the benefits of competition among three baby food manufacturers. Defendants concede - and this Court's findings confirm that there is no dispute about - the relevant product market, the relevant geographic market, the presumptively illegal levels of concentration, the insurmountable barriers to entry, and the fact that both defendants are thriving businesses. Until now, no court has ever permitted a merger to duopoly in the presence of high entry barriers or where neither firm was failing. The Court's unprecedented approval of a merger in the circumstances of this case, raises important antitrust and public interest issues that warrant careful review by the Court of Appeals before the structure of the market is irrevocably altered by defendants' merger.

2. An injunction pending appeal is necessary and in the public interest here because, if the Court forecloses the Commission from obtaining appellate review here, the Commission will lose any chance at securing effective relief against the acquisition and the public interest will be permanently, and irreparably, injured.(1) As this Court found, once the acquisition is consummated, it cannot likely be undone:

[I]f the merger is allowed to proceed before the full-scale administrative proceedings contemplated by the Federal Trade Commission Act can be had, the outcome of such proceeding will not matter, because the Canajoharie plant will be closed, the Beech-Nut distribution channels will be closed, the new label and recipes will be in place, and it will be impossible as a practical matter to undo the transaction.

Op. at 23-24.

3. As this Court acknowledged in the closing argument (Tr. 5:5-6, 23-25; 6:1-6; (Sept. 21, 2000)) and expressly found in its opinion (pages 10, 11, 24), the Commission has presented a substantial prima facie case. Therefore, defendants had the burden of showing that the undisputed concentration levels "give an inaccurate prediction of the proposed acquisition's probable effect on competition." FTC v. Cardinal Health, 12 F. Supp. 2d 34, 54 (D.D.C. 1998). This Court's finding that defendants have rebutted the Commission's prima facie case raises very substantial issues for the Court of Appeals to resolve. As we demonstrated in our proposed findings and in our memoranda, defendants' arguments and evidence relating to efficiencies and supposed benefits of the merger do not meet the standards set by the Supreme Court in United States v. Philadelphia Nat'l Bank, 374 U.S. 321, 370 (1963); by this Court in Cardinal Health and in FTC v. PPG Indus., Inc., 628 F. Supp. 881 (D.D.C.), aff'd in part, 798 F.2d 1500 (D.C. Cir. 1986); or by the Eleventh Circuit in FTC v. University Health, 938 F.2d 1206 (11th Cir. 1991). Indeed, as this Court found: "Whether Heinz will use the considerable cost savings from the merger to mount a vigorous campaign against Gerber for shelf space and market share remains to be seen" (Op. at 20). An otherwise anticompetitive merger cannot be saved, based on conjecture about the future conduct of the merged entity. E.g., University Health.

Like this case, PPG involved an attempted merger in a highly concentrated market. There, this Court (per Judge Jackson) observed: "Experience teaches that without worthy rivals ready to exploit lapses in competitive intensity, incentives to develop better products, to keep prices at a minimum, and to provide efficient service over the long term are all diminished to the detriment of consumers." 628 F.2d at 885. Here, no worthy rivals will remain on the battlefield, once this transaction is consummated. We respectfully submit that this Court has misapplied the legal standards for granting, or denying, a preliminary injunction under Section 13(b) of the FTC Act, 15 U.S.C. § 53(b). In view of the serious legal questions raised by the Court's decision to allow defendants' merger, and in view of the grave potential for irreparable harm to the public if the transaction is consummated before there can be a full appellate consideration of the preliminary injunction, the Court should maintain the status quo until these important questions are resolved.

4. In any event, the Court should grant an injunction pending a decision by the Court of Appeals on an emergency application by the Commission to that court for an injunction pending appeal. As the D.C. Circuit indicated in FTC v. Weyerhaeuser Co., 665 F.2d 1072, 1076 (1981), it is "not consistent with the fair, effective administration of justice for the district judge to deny to a party, situated as [is] the FTC in this case, even a brief holding order affording time to apply to this court for provisional relief."

The Commission is amenable to an expedited appeal schedule from the D.C. Circuit. Accordingly, any incremental delay caused by an injunction pending an expedited appeal will cause little, if any, damage.(2) The substantial public interest in maintaining competitive markets far outweighs any small impact a short delay may have on defendants' plans.

Conclusion

The Court should grant an injunction pending the appeal of this Court's order denying plaintiff's motion for a preliminary injunction. Alternatively, the Court should grant a short

injunction pending the resolution by the Court of Appeals of an emergency motion by the Commission for an injunction pending appeal.

Respectfully submitted,

RICHARD B. DAGEN (DC Bar No. 388115)
DAVID C. SHONKA (DC Bar. No. 224576)

Attorneys for plaintiff
Federal Trade Commission
600 Pennsylvania Avenue, NW
Washington, D.C. 20580
(202) 326-2436
October 18, 2000


1. As this Court commented: "Appellate review of my decision in this case is thus, as a practical matter, available only if the motion for preliminary injunction is denied." (Op. at 24). Fully effective appellate review can only be had, if the parties are enjoined from consummating their merger pending appeal.

2. By way of illustration, the appeal in FTC v. University Health, Inc., 938 F.2d 1206 (11th Cir. 1991), took less than three weeks. The Eleventh Circuit granted the Commission's motion for an injunction pending appeal on April 17, 1991, heard oral argument on the appeal on May 6, 1991, and announced its decision the same day. The published opinion followed.