In 1975, Tenneco, Inc., was the 15th-largest industrial corporation in America. Tenneco's Walker Manufacturing Division produced and distributed a wide variety of automotive parts, the most important of which were exhaust system parts. Walker was the nation's leading seller of exhaust system parts in 1975 and 1976. Tenneco acquired control of Monroe Auto Equipment Company, a leading manufacturer of automotive shock absorbers. Monroe was the number two firm in the national market for replacement shock absorbers. Monroe and Gabriel, the industry leader, accounted for over 77 percent of replacement shock absorber sales in 1976. General Motors and Questor Corporation, the third- and fourth-largest firms, controlled another 15 percent of the market. The replacement shock absorber market exhibited significant barriers to the entry of new competitors. Economies of scale in the industry dictated manufacturing plants of substantial size. Furthermore, the nature of the industry required would-be entrants to acquire significant new technologies and marketing skills unique to the industry. The Federal Trade Commission (Commission) concluded that Tenneco's acquisition of Monroe violated § 7 of the Clayton Act by eliminating both perceived and actual potential competition in the replacement shock absorber market.
The Commission therefore ordered Tenneco to divest itself of Monroe. Tenneco appealed. Was the Commission's decision correct?