With the country in the midst of what economic historians call the fourth major wave of corporate mergers over the past century, competitors of the companies contemplating getting together have just won important new powers to stop the deals from going through.
The latest ruling on the issue, handed down April 23, came in a bid by the country's fifth-largest beef packer to stop the number two and three in the industry from getting together. The decision that a plaintiff has the right to seek an injunction against a merger is the third such ruling from a U.S. Court of Appeals this year, marking a clear trend.
In the beef case, Monfort v. Cargill, the plaintiff argued that if massive Cargill were allowed to add to its Excel Corp. subsidiary the beef packing business of Land O' Lakes Inc., the emerging firm would have the power to boost the prices it pays to cattlemen and at the same time lower the prices charged institutional buyers for the boxed beef. Other competitors, caught in that price squeeze, would be forced out of business, Monfort claimed.
The U.S. Supreme Court in 1977 laid down rules on when a business hurt by a competitor's policies can sue for damages under the antitrust laws -- rules that generally have made it harder for companies to bring such cases.
But the judges at the U.S. Court of Appeals in Denver, hearing the beef case, explained that those tougher standards do not apply when a company is trying to stop a merger, rather than collect monetary damages later. That's because a plaintiff in an after-the-fact suit for damages has to show actual injury stemming from the merger, while a company trying to stop a merger from taking place has to show only a hypothetical chain of events that could lead to competitive harm.
Traditionally, there have been few cases in which a competitor tries to stop a merger.
"Horizontal competitors generally do not mind seeing one of their rivals swallowed up," suggests Judge James K. Logan, who wrote the Monfort decision. But the recent rash of decisions suggest not only that companies are more worried about the changing structures of their industry, but that such cases will become even more numerous.
Lawyers worry that by allowing such cases, the courts give competitors the power to throw a monkey wrench into lucrative deals. But Logan suggests that all a judge need do to prevent that is to move the case quickly to trial: Even though the new rulings make it easier for competitors to try to stop a merger, they make it no easier for them to actually prove the kind of illegality that would persuade a judge to actually issue an injunction.
In other cases, courts ruled that:
An employe trying to establish a prima facie case that illegal discrimination prevented his promotion need not show that he was the best applicant for the job. All the plaintiff has to show is that he was qualified for the job, the U.S. Court of Appeals here in Washington ruled. It is then up to the company to prove that bias had no role in the selection process because the person the job went to was in fact more qualified. Any other procedure, the judges reasoned, is unfair to the worker who feels that race or sex affected the job decision, because the company has the data that can most easily show which applicant had the better credentials for the post. (Mitchell v. Baldrige, April 5)
Governments have no legal duty to do a good job of their safety inspections. The Florida Supreme Court, tossing out a ruling by the trial court, said that buyers of defective condominium units cannot sue the local government for not catching the problems in their normal building inspections. In a ruling that will snuff out all kinds of potential damage suits against local governments in the Sunshine State, the justices said that in enforcing laws and issuing permits, governments do not owe their citizens what the lawyers call a "duty of care," and so the citizens have no basis to sue if the bureaucrats fall down on the job. The ruling appears to go back on a 1979 decision of the state Supreme Court that opened the way for such suits. (Trianon Park v. Hialeah, April 4)
Companies that take problems to the International Trade Commission cannot take those same complaints into federal district courts. The U.S. Court of Appeals in Manhattan turned back a bid by a company that thought a foreign manufacturer was unfairly infringing on its trademark to sue over the matter, after the ITC found little merit in the complaints. To allow the suit "would undermine the legitimacy of the ITC proceeding," the appellate judges decided. Companies unhappy with an ITC decision can still take the matter to the U.S. Court of Appeals for the Federal Circuit, but the judges there will not take a fresh look at the controversy. They only decide whether the commission had enough evidence to support its finding. (Union Manufacturing v. Han Baek Trading, April 4)
Courts have no power to order a lawyer to represent, without pay, an indigent party in a civil suit. Although such appointments are not uncommon, the new Missouri Supreme Court ruling comes in the first case a lawyer has decided to fight all the way through that state's judicial system. The model ethics code for lawyers tells them they have a duty to represent the poor, but the Missouri justices found that more a moral goal than a legal handle to force lawyers to give away the skills they make a living by selling. At least in civil cases, they reasoned, there are legal aid groups and law school clinics to help the poor, and -- when there is a chance of getting monetary damages -- lawyers will work for a slice of any winnings. (State v. Roper, April 2)