Mr. Justice White
delivered the opinion of the Court.
Alleging that Falstaff Brewing Corp.’s acquisition of the Narragansett Brewing Co. in 1965 violated § 7 of the Clayton Act, 38 Stat. 731, as amended, 15 U. S. C. § 18, the United States brought this antitrust suit under the theory that potential competition in the New England beer market may be substantially lessened by the acquisition. The District Court held to the contrary, 332 F. Supp. 970 (1971), and we noted probable jurisdiction to determine whether the trial court applied an erroneous legal standard in so deciding, 405 U. S. 952 (1972). We remand to the District Court for a proper assessment of Falstaff as a potential competitor.
As stipulated by the parties, the relevant product market is the production and sale of beer, and the six New England States compose the geographic market. While beer sales in New England increased approximately 9.5% in the four years preceding the acquisition, the eight largest sellers increased their share of these sales from approximately 74% to 81.2%. In 1960, approximately 50% of the sales were made by the four largest sellers; by 1964, their share of the market was 54%; and by 1965, the year of acquisition, their share was 61.3%. The number of brewers operating plants in the geographic market decreased from 32 in 1935, to 11 in 1957, to six in 1964.
Of the Nation’s 10 largest brewers in 1964, only Falstaff and two others did not sell beer in New England; Falstaff was the largest of the three and had the closest brewery. In relation to the New England market, Falstaff sold its product in western Ohio, to the west and in Washington, D. C., to the south.
The acquired firm, Narragansett, was the largest seller of beer in New England at the time of its acquisition, with approximately 20% of the market; had been the largest seller for the five preceding years; had constantly expanded its brewery capacity between 1960 and 1965; and had acquired either the assets or the trademarks of several smaller brewers in and around the geographic market.
The fourth largest producer of beer in the United States at the time of acquisition, Falstaff was a regional brewer with 5.9.% of the Nation’s production in 1964, having grown steadily since its beginning as a brewer in 1933 through acquisition and expansion of other breweries. As of January 1965, Falstaff sold beer in 32 States, but did not sell in the Northeast, an area composed of New England and States such as New York and New Jersey; the area being the highest beer consumption region in the United States. Between 1955 and 1966, the company’s net sales and net income almost doubled, and in 1964 it was planning a 10-year, $35 million program to expand its existing plants.
Falstaff met increasingly strong competition in the 1960’s from four brewers who sold in all of the significant markets. National brewers possess competitive advantages since they are able to advertise on a nationwide basis, their beers have greater prestige than regional or local beers, and they are less affected by the weather or labor problems in a particular region. Thus Falstaff concluded that it must convert from “regional” to “national” status, if it was to compete effectively with the national producers. For several years Falstaff publicly expressed its desire for national distribution and after making several efforts in the early 1960’s to enter the Northeast by acquisition, agreed to acquire Narragansett in 1965.
Before the acquisition was accomplished, the United States brought suit alleging that the acquisition would violate § 7 because its effect may be to substantially lessen competition in the production and sale of beer in the New England market. This contention was based on two grounds: because Falstaff was a potential entrant and because the acquisition eliminated competition that would have existed had Falstaff entered the market de novo or by acquisition and expansion of a smaller firm, a so-called “toe-hold” acquisition. The acquisition was completed after the Government's motions for injunctive relief were denied, and Falstaff agreed to operate Narragansett as a separate subsidiary until otherwise ordered by the court.
After a trial on the merits, the District Court found that the geographic market was highly competitive; that Falstaff was desirous of becoming a national brewer by entering the Northeast; that its management was committed against de novo entry; and that competition had not diminished since the acquisition. The District Court then held:
“The Government's contentions that Falstaff at the time of said acquisition was a potential entrant into said New England market, and that said acquisition deprived the New England market of additional competition are not supported by the evidence. On the contrary, the credible evidence establishes beyond a reasonable doubt that the executive management of Falstaff had consistently decided not to attempt to enter said market unless it could acquire a brewery with a strong and viable distribution system such as that possessed by Narragansett. Said executives had carefully considered such possible alternatives as (1) acquisition of a small brewery on the east coast, (2) the shipping of beer from its existing breweries, the nearest of which was located in Ft. Wayne, Indiana, (3) the building of a new brewery on the east coast and other possible alternatives, but concluded that none of said alternatives would have effected a reasonable probability of a profitable entry for it in said New England market. In my considered opinion the plaintiff has failed to establish by a fair preponderance of the evidence that Falstaff was a potential competitor in said New England market at the time it acquired Narragansett. The credible evidence establishes that it was not a potential entrant into said market by any means or way other than by said acquisition. Consequently it cannot be said that its acquisition of Narragansett eliminated it as a potential competitor therein.’' 332 F. Supp., at 972.
Also finding that the Government had failed to establish that the acquisition would result in a substantial lessening of competition, the District Court entered judgment for Falstaff and dismissed the complaint.
I
Section 7 of the Clayton Act forbids mergers in any line of commerce where the effect may be substantially to lessen competition or tend to create a monopoly. The section proscribes many mergers between competitors in a market, United States v. Continental Can Co., 378 U. S. 441 (1964); Brown Shoe Co. v. United States, 370 U. S. 294 (1962); it also bars certain acquisitions of a market competitor by a noncompetitor, such as a merger by an entrant who threatens to dominate the market or otherwise upset market conditions to the detriment of competition, FTC v. Procter & Gamble Co., 386 U. S. 568, 578-580 (1967). Suspect also is the acquisition by a company not competing in the market but so situated as to be a potential competitor and likely to exercise substantial influence on market behavior. Entry through merger by such a company, although its competitive conduct in the market may be the mirror image of that of the acquired company, may nevertheless violate § 7 because the entry eliminates a potential competitor exercising present influence on the market. Id., at 580-581; United States v. Penn-Olin Chemical Co., 378 U. S. 158, 173-174 (1964). As the Court stated in United States v. Penn-Olin Chemical Co., supra, at 174, “The existence of an aggressive, well equipped and well financed corporation engaged in the same or related lines of commerce waiting anxiously to enter an oligopolistic market would be a substantial incentive to competition which cannot be underestimated.' ’
In the case before us, Falstaff was not a competitor in the New England market, nor is it contended that its merger with Narragansett represented an entry by a dominant market force. It was urged, however, that Falstaff was a potential competitor so situated that its entry by merger rather than de novo violated § 7. The District Court, however, relying heavily on testimony of Falstaff officers, concluded that the company had no intent to enter the New England market except through acquisition and that it therefore could not be .considered a potential competitor in that market. Having put aside Falstaff as a potential de novo competitor, it followed for the District Court that entry by a merger would not adversely affect competition in New England.
The District Court erred as a matter of law. The error lay in the assumption that because Falstaff, as a matter of fact, would never have entered the market de novo, it could in no sense be considered a potential competitor. More specifically, the District Court failed to give separate consideration to whether Falstaff was a potential competitor in the sense that it was so positioned on the edge of the market that it exerted beneficial influence on competitive conditions in that market.
A similar error was committed by the Court of Appeals in FTC v. Procter & Gamble Co., supra, where one of the reasons for the Commission’s finding the acquisition in violation of § 7 was that the merger eliminated Procter as a potential entrant, not because Procter would have entered independently, but because the acquisition eliminated the procompetitive effect Procter exerted from the fringe of the market. Id., at 575. The Court of Appeals struck down this finding because there was no evidence that Procter ever intended de novo entry, but we held the Commission’s finding was “amply supported by the evidence,” id., at 581, because the evidence “clearly show[ed] that Procter was the most likely entrant,” id., at 580, and it was “clear that the existence of Procter at the edge of the industry exerted considerable influence on the market,” id., at 581. Thus, the fact that Falstaff and its management had no intent to enter de novo, and would not have done so, does not ipso facto dispose of the potential-competition issue.
The specific question with respect to this phase of the case is not what Falstaff’s internal company decisions were but whether, given its financial capabilities and conditions in the New England market, it would be reasonable to consider it a potential entrant into that market. Surely, it could not be said on this record that Falstaff’s general interest in the New England market was unknown; and if it would appear to rational beer merchants in New England that Falstaff might well build a new brewery to supply the northeastern market then its entry by merger becomes suspect under § 7. The District Court should therefore have appraised the economic facts about Falstaff and the New England market in order to determine whether in any realistic sense Falstaff could be said to be a potential competitor on the fringe of the market with likely influence on existing competition. This does not mean that the testimony of company officials about actual intentions of the company is irrelevant or is to be looked upon with suspicion; but it does mean that theirs is not necessarily the last word in arriving at a conclusion about how Falstaff should be considered in terms of its status as a potential entrant into the market in issue.
Since it appears that the District Court entertained too narrow a view of Falstaff as a potential competitor and since it appears that the District Court’s conclusion that the merger posed no probable threat to competition followed automatically from the finding that Falstaff had no intent to enter de novo, we remand this case for. the District Court to make the proper assessment of Falstaff as a potential competitor.
II
Because we remand for proper assessment of Falstaff as an on-the-fringe potential competitor, it is not necessary to reach the question of whether § 7 bars a market-extension merger by a company whose entry into the market would have no influence whatsoever on the present state of competition in the market — that is, the entrant will not be a dominant force in the market and has no current influence in the marketplace. We leave for another day the question of the applicability of § 7 to a merger that will leave competition in the marketplace exactly as it was, neither hurt nor helped, and that is challengeable under § 7 only on grounds that the company could, but did not, enter de novo or through “toe-hold” acquisition and that there is less competition than there would have been had entry been in such a manner. There are traces of this view in our cases, see Ford Motor Co. v. United States, 405 U. S. 562, 567 (1972); id., at 587 (Burger, C. J., concurring in part and dissenting in part); FTC v. Procter & Gamble Co., 386 U. S., at 580; id., at 586 (Harlan, J., concurring); United States v. Penn-Olin Chemical Co., 378 U. S., at 173, but the Court has not squarely faced the question, if for no other reason than because there has been no necessity to consider it. See Ford Motor Co. v. United States, supra; FTC v. Procter & Gamble Co., supra; United States v. Penn-Olin Chemical Co., supra; United States v. El Paso Natural Gas Co., 376 U. S. 651 (1964).
The judgment of the District Court dismissing the complaint against Falstaff is reversed, and the case is remanded for further proceedings consistent with this opinion.
So ordered.
Mr. Justice Brennan took no part in the decision of this case. Mr. Justice Powell took no part in the consideration or decision of this case.
Section 7 provides in relevant part:
“No corporation engaged in commerce shall acquire, directly or indirectly, the whole or any part of the stock or other share capital and no corporation subject to the jurisdiction of the Federal Trade Commission shall acquire the whole or any part of the assets of another corporation engaged also in commerce, where in any line of commerce in any section of the country, the effect of such acquisition may be substantially to lessen competition, or to tend to create a monopoly.” 15 U. S. C. § 18.
For the legislative history of the amendment in 1950 that greatly expanded the section’s scope, 64 Stat. 1125, see Brown Shoe Co. v. United States, 370 U. S. 294, 311-323 (1962).
Jurisdiction lies under §2 of the Expediting Act, 32 Stat. 823, as amended, 15 U. S. G. § 29.
Maine, New Hampshire, Vermont, Massachusetts, Connecticut, and Rhode Island.
Nationally, the number of brewers decreased from 663 in 1935 to 140 in 1965.
Of the three “top ten” brewers that were not selling in New England, Falstaff ranked fourth nationally, the other two ranking eighth and ninth. -From Boston, Massachusetts, the distance to Falstaff’s closest brewery was 844 miles, while the distance to the eighth and ninth largest sellers’ breweries was 1,385 and 2,000 miles respectively.
A “regional,” as contrasted with a “national” brewer, is one that is not selling in all the significant national markets.
In 1958, Falstaff commissioned a study of actions it should take to maximize profits. The study recommended, inter alia, that Falstaff become a national brewer by entering those areas where it was not then marketing its product, especially the Northeast, and that Falstaff should build a brewery on the East Coast rather than buy.
For example, Falstaff in several press releases and in the company publication expressed its desire for national distribution, and at a panel discussion in October 1964 the president of Falstaff, in response to a question as to Falstaff’s reaction to industry trends in beer sales, stated: “For long range planning we are aiming for national distribution. Naturally this involves coming East.” App. 82.
Suit was filed against both Falstaff and Narragansett, but as to the latter, the complaint was dismissed shortly after it was filed.
Hereinafter, reference to de novo entry includes “toe-hold” acquisition as well.
Over the objections of the Government, the District Court allowed post-acquisition evidence and noted in the opinion that the market share of Narragansett dropped from 21.5% in 1964 to 15.5% in 1969, while the shares of the two leading national brewers increased from 16.5% to 35.8%.
See n. 8, supra, and accompanying text.
In FTC v. Procter & Gamble Co., 386 U. S. 568, 581 (1967), we found the acquiring company at the edge of the market exerted “considerable influence” on the market because “market behavior . . . was influenced by each firm’s predictions of the market behavior of its competitors, actual and potential”; because “barriers to entry . . . were not significant” as to the acquiring company; because “the number of potential entrants was not so large that the elimination of one would be insignificant”; and because the acquiring firm was the most likely entrant.
It is suggested that the District Court failed to consider whether Falstaff was an on-the-fringe potential competitor with influence on existing competition because the Government never alleged in its complaint that Falstaff was exerting a present procompetitive influence, never proceeded under this theory, and further failed to introduce any evidence to support this view. But this position merely ascribes an arbitrary meaning to the language of the complaint. The Government in its complaint alleged that the acquisition violated § 7 because it eliminated potential competition; since potential competition may stimulate a present procompetitive influence, the allegation certainly encompassed the “on-the-fringe influence” that the District Court failed to consider, and the Government was not required to be more specific in its allegation.
The Government did not produce direct evidence of how members of the New England market reacted to potential competition from Falstaff, but circumstantial evidence is the lifeblood of antitrust law, see Zenith Radio Corp. v. Hazeltine Research, Inc., 395 U. S. 100 (1969); Interstate Circuit, Inc. v. United States, 306 U. S. 208, 221 (1939); Frey & Son, Inc. v. Cudahy Packing Co., 256 U. S. 208, 210 (1921), especially for § 7 which is concerned “with probabilities, not certainties,” Brown Shoe Co. v. United States, 370 U. S., at 323. As was stated in United States v. Penn-Olin Chemical Co., 378 U. S. 158, 174 (1964), “[p]otential competition cannot be put to a subjective test. It is not 'susceptible of a ready and precise answer.’ ”
Nor was there any lack of circumstantial evidence of Falstaff's on-the-fringe competitive impact. As the record shows, Falstaff was in the relevant line of commerce, was admittedly interested in entering the Northeast, and had, among other ways, see n. 8, supra, made its interest known by prior-acquisition discussions. Moreover, there were, as my Brother Marshall would put it, objective economic facts as to Falstaff’s capability to enter the New England market; and the same facts which he would have the District Court look to in determining whether the particular theory of potential competition we do not reach has been violated, would be probative of violation of § 7 through loss of a procompetitive on-the-fringe influence. See FTC v. Procter & Gamble Co., supra, at 580-581; United States v. Penn-Olin Chemical Co., supra, at 173-177; United States v. El Paso Natural Gas Co., 376 U. S. 651, 660 (1964).
And as for the contention that the Government did not proceed under this on-the-fringe influence view, the record is to the contrary. At one point in the trial, the Government informed the trial judge that a deposition was being introduced into evidence “to establish that Falstaff was a company that was on the wings or at the edge of the New England market. . . . What I mean by that is that Falstaff was capable and interested in entering the New England market and would be waiting for the opportunity to develop, but that Falstaff, over the long term, would eventually or could eventually or was a likely entrant into the New England market, to use the terminology in FTC v. Procter & Gamble Company.” App. 124. Further into its presentation of proof, the Government was introducing evidence of the trend toward concentration in the market, and stated: “It is this concentration, your Honor, which, as we attempted to point out in our pretrial brief, makes potential competition. . . . The concentration of sales within a small number of firms in New England. This is what makes the potential competition ... so very, very important to this market. ... In such a situation the potential entry of a fresh competitive factor is of extreme importance.” App. 170.
That the on-the-fringe influence theory was one of the theories the Government was proceeding under was apparent to Falstaff. In its opening statement, Falstaff stated:
“Now, the Government has a theory which is, so far as the judicial determinations on the point are concerned, comparatively new. You were handed the other day a portion of the record in FTC against Bendix-Fram Corporation, and you were handed at the same time a typed or otherwise reproduced copy of the opinion of Commissioner Elman of the FTC in that case.
“That opinion is not yet officially reported. The case is on its way to an appeal .... The Commissioner announced a theory upon which the Government relies and which they say lies within the ambit of this vague, undefined creature, potential competition. What that decision, on appeal as I say, what that decision announces is the doctrine which is called the toe-hold doctrine, and it goes like this:
“If a producer of Product A is standing in the wings, as the Commissioner says, outside the market, merely standing there, but in a position to move into the market if he chooses. He must remain there in the wings and forbear acquiring the producer of a like product within the market area.
“The Commissioner fancies that the mere presence of such a manufacturer or seller close to the market area had some effect which could fall within his ill-defined concept of potential competition. And he found in Bendix-Fram that Bendix was in such a position. He found that Bendix could have acquired a small company rather than Fram, a relatively larger one, beefed it up by expenditures of money which Bendix could afford, and develop it into a full-blown competitor within the market area. I do not know whether that notion will gain substantial acceptance in the theory of antitrust law. I do not know that it will have the approval of the Supreme Court if and when it ever reaches it. I do know, however, that that is an entirely different situation [than] we have here.
“If there is any sense to this total theory at all it must be that the acquiring company was in fact so closely located to the market served by the acquired company that its entrance into the market unilaterally, under its own steam, without motivation was a distinct threat to those who were competing in the market.” App. 182-183. (Emphasis added.)
Falstaff then proceeded to state why it felt that the on-the-fringe influence theory did not apply in this case.
During its proof, Falstaff had both its expert witness on economics, App. 257, and an officer of Narragansett, App. 376, testify as to whether Falstaff's presence had a procompetitive effect, both stating that it did not.
It is suggested that certain language in the Court’s opinion in United States v. Continental Can Co., 378 U. S. 441, 464 (1964), is to the contrary. But there the merger was held proved prima facie anticompetitive because the acquiring and acquired companies were engaged in the same overall line of commerce in the same geographic market. This notwithstanding, it is again only arbitrary to assume that the quoted language was not referring to the acquired company’s on-the-fringe influence as a potential competitor for certain end uses for containers.