# Denver & Rio Grande Western Railroad Company v. United States/Opinion of the Court

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United States Supreme Court
387 U.S. 485
Denver & Rio Grande Western Railroad Company v. United States
Argued: March 16, 1967. --- Decided: June 5, 1967
The question in this case is whether the Interstate Commerce Commission complied with its statutory responsibilities under § 20a of the Interstate Commerce Act when it approved without consideration of control or anticompetitive consequences the issuance to appellee Greyhound Corporation of 500,000 shares of the common stock of appellee Railway Express Agency, Inc. (REA).
REA provides railroad express service and is also a motor common carrier. The approximately 2,000,000 shares of REA common stock outstanding are entirely owned by railroads and no railroad stockholder may dispose of its shares without first offering them to the other railroad stockholders. REA also is authorized, however, to issue 500,000 additional shares of common stock without first offering them to its stockholders. Greyhound, which operates an express carrier service through its wholly owned subsidiary Greyhound Lines, Inc., a motor carrier of passengers and express subject to the Interstate Commerce Act, agreed to purchase these 500,000 shares. REA thereupon applied to the ICC for an order under § 20a approving the transaction. Minority railroad REA stockholders, motor bus competitors of Greyhound, motor carriers, and freight forwarders intervened in the proceeding to protest against approval of the transaction. They alleged, among other things, the necessity of a hearing on the questions whether Greyhound's acquisition of the stock was in the 'public interest' and for a 'lawful object' as those terms are used in § 20a. The ICC approved the acquisition without a hearing. A three-judge District Court for the District of Colorado sustained the ICC order. 255 F.Supp. 704. We noted probable jurisdiction. 385 U.S. 897, 87 S.Ct. 201, 17 L.Ed.2d 129. We reverse with direction to the District Court to enter a new judgment remanding the case to the ICC for further proceedings consistent with this opinion.
REA was organized in 1929 and until 1961 operated on a nonprofit basis under a pooling agreement with the railroads. See Securities and Acquisition of Control of Railway Express Agency, Inc., 150 I.C.C. 423. Financial difficulties forced abandonment of the nonprofit operation and REA was converted to a profit and loss basis in order to effect more efficient and economic operation. See Express Contract, 1959, 308 I.C.C. 545, 549-550. In addition, REA was released from restrictions against use of carriers other than railroads. In 1963 REA's by-laws were amended to eliminate a limitation against stock ownership except by railroads; the disposition of shares by a railroad, however, was made subject to the right of first refusal of the other railroad stockholders. The issuance of 500,000 additional shares not subject to the right of first refusal was also authorized, but only upon the consent of two-thirds of the railroad stockholders.
Greyhound, principally a passenger carrier, became interested in expanding its growing express business. In January 1964 Greyhound offered to purchase, subject to ICC approval, at least 67% of REA's stock, of which Greyhound intended to offer 16% to major airlines. Greyhound also agreed to finance part of REA's capital requirements as part of a plan to coordinate the express services of both companies. This proposal was defeated by railroad stockholders.
REA and Greyhound persisted in their efforts to coordinate their operations. Greyhound proposed to acquire a 20% interest in REA through acquisition of REA's 500,000 authorized but unissued shares, stating that its 'interest in REA * * * stems primarily from our views as to the improvements * * * which could be realized through combination and correlation of certain of our facilities and services.' Greyhound offered to pay $16 per share if permitted to name one-fifth of the REA Board of Directors and if the REA Board would declare its intention 'to consider seriously and work toward a long-term agreement between REA and Greyhound to consolidate operating functions and facilities * * *,' and if, further, the REA Board would agree 'to consider seriously at a later time * * *'th e sale of REA stock to airlines and the general public. Finally, Greyhound offered, if permitted to acquire the 500,000 shares, to purchase enough additional shares at $25 each to give it 50% of the stock of REA, the offer to remain open for 60 days following Greyhound's acquisition of the 500,000 shares. It expressed willingness, however, to purchase the 500,000 shares and leave 'to the future the question of the acquisition of additional shares by Greyhound and giving the railroads an opportunity to reconcile their views on this question.'
REA countered with an offer to sell the 500,000 shares at $20 per share provided Greyhound would agree to offer within the 60-day period to purchase an additional 1,000,000 shares of the outstanding stock at the same price. The agreement was consummated on this basis subject to ICC approval.
REA's application to the ICC sought approval only of the issuance to Greyhound of the 500,000 shares. The application was supplemented with detailed data reviewing the negotiations, a statement of REA's financial condition and a statement of the purposes to which the $10,000,000 realized from the sale of the 500,000 shares would be applied. The burden of the protests of numerous intervenors was that the transaction was not in the 'public interest' and for a 'lawful object,' but rather was the first step toward establishing a virtual monopoly of express transportation, and would result in 'control' by Greyhound of REA, necessitating a hearing under § 5 of the Act. The Department of Justice also intervened. It urged the ICC to conduct a hearing to determine whether the transaction would violate § 7 of the Clayton Act, suggesting that, while a § 5 proceeding might be unnecessary, one might be instituted and consolidated with the recommended Clayton Act § 7 proceeding, since the anticompetitive issues involved would be virtually identical.
Division Three of the ICC approved the application without hearing, ruling that investigation into the 'control' and 'anticompetitive' issues 'would not be appropriate at this time * * *.' After the ICC denial of petitions for reconsideration this action to enjoin and set aside the ICC order was filed. The full Commission meanwhile reconsidered and affirmed the action of Division Three but postponed the effective date of the order pending the conclusion of judicial proceedings.
In the District Court the parties adhered basically to the positions maintained before the ICC, except that the Department of Justice abandoned its position urging a hearing on the § 7 question and declined either to support or to oppose the ICC order. In sustaining the order the District Court reasoned that, while the ICC might be required i § ome circumstances to consider 'control' and 'anticompetitive' issues before approving a stock issuance under § 20a, the ICC properly exercised discretion to defer consideration of such questions in this case until after it was determined whether and to what extent Greyhound would succeed in purchasing additional shares from railroad stockholders; only then would the 'chain of events started by the stock issuance * * * (be) ascertainable rather than conjectural.' 255 F.Supp. 704, 709.
In this Court the Government concedes, and the other appellees assume arguendo, that important issues of 'control' and 'anticompetitive' effects were involved in the application before the ICC. The Government has completely reversed its position from what it was before the ICC, arguing here that § 20a was designed to accomplish only the limited objective of protecting stockholders and the public from fiscal manipulation, and that, in any event, postponement of consideration of 'control' and 'anticompetitive' issues was justified in this case because the facts relevant to both issues might be wholly different at the end of the 60-day period, and because no prejudice to any party's interests could result from the delay.
We do not agree that Congress limited ICC consideration under § 20a to an inquiry into fiscal manipulation. Even if Congress' primary concern was to prevent such manipulation, the broad terms 'public interest' and 'lawful object' negate the existence of a mandate to the ICC to close its eyes to facts indicating that the transaction may exceed limitations imposed by other relevant laws. Common sense and sound administrative policy point to the conclusion that such broad statutory standards require at least some degree of consideration of control and anticompetitive consequences when suggested by the circumstances surrounding a particular transaction. Both the ICC and this Court have read terms such as 'public interest' broadly, to require consideration of all important consequences including anticompetitive effects. Thus the ICC is required to weigh anticompetitive effects in approving applications for merger or control under § 5 of the Act, authorizing the ICC to grant such applications only if 'consistent with the public interest.' McLean Trucking Co. v. United States, 321 U.S. 67, 64 S.Ct. 370, 88 L.Ed. 544. And similarly broad responsibilities are encompassed within like broad directives addressed to other agencies. E.g., National Broadcasting Co. v. United States, 319 U.S. 190, 224, 63 S.Ct. 997, 1013, 87 L.Ed. 1344, FCC v. RCA Communications, Inc., 346 U.S. 86, 94, 73 S.Ct. 998, 1004, 97 L.Ed. 1470; People of State of California v. FPC, 369 U.S. 482, 484-485, 82 S.Ct. 901, 903, 8 L.Ed.2d 54.
It is true that the requirement that the ICC consider anticompetitive effects is more readily found under § 5, since § 5(11) enables the ICC to confer immunity from the antitrust laws for transactions approved under § 5(2). But the foundations of the ICC's obligation under § 5 are largely applicable to § 20a as well. Section 20a, like § 5, must after all be read in the context of overall ICC responsibilities. The responsibility under § 11 of the Clayton Act to enforce that Act's provisions is one of them. The responsibility to advance the National Transportation Policy, read into the 'public interest' standard of § 5, is another persistent and overriding duty, equallyap plicable to § 20a. In sum, as we said in McLean Trucking, supra, while transportation 'legislation constitutes the immediate frame of reference within which the Commission operates * * * and the policies expressed in it must be the basic determinants of its action. * * *, in executing those policies the Commission may be faced with overlapping and at times inconsistent policies embodied in other legislation enacted at different times and with different problems in view. When this is true, it cannot without more ignore the latter.' 321 U.S., at 80, 64 S.Ct. at 377.
In proceedings under § 20a(2), the ICC itself has not acted as though it lacks the power or responsibility to weigh anticompetitive consequences. In Columbia Terminals Co.-Issuance of Notes, 40 M.C.C. 288, 293, an application to issue notes under § 20a(2) was granted in part only on the condition that the notes be made the subject of competitive bidding. The ICC explicitly rejected the argument that § 10 of the Clayton Act, 15 U.S.C. § 20, requiring competitive bidding in certain situations, was superseded by § 20a. In Stock of New Jersey, I. & I.R. Co., 94 I.C.C. 727, 729, the Commission said, in considering an application to issue stock: '(I)t can not be said that in the performance of the broad duty imposed upon us by the statute we must confine our investigation and consideration to the effect of proposed issues upon the carrier immediately involved. In any application to us for authority to issue securities we are bound to measure the proposal by the test of public interest in whatever phase that interest may appear to be affected.'
This 'broad duty' was significantly adhered to in Chesapeake & O.R. Co. Purchase, 271 I.C.C. 5. There, the C & O sought modification of an earlier order so as to enable it to acquire and exercise 400,000 shares of New York Central, and two of C & O's directors sought authority under § 20a(12) to hold seats simultaneously on the Central Board. C & O and its directors alleged, in terms strikingly similar to the claims in this case, that Central needed funds and new management, and that the two companies were contemplating plans of mutual advantage and ultimately a merger under § 5(2). The ICC took a broad view of its power and responsibility. It found, as to the § 20a(12) issue, that an insufficient showing had been made that 'neither public nor private interests * * *' would be adversely affected by the proposed interlocking directorate, citing its own cases to the effect that authority would be granted under § 20a(12) only where no lessening of competition or independence occurred, 271 I.C.C., at 18, and pointing out that, even if the Central were strengthened, an interlocking directorate might injure other railroads in which the 'public has just as great an interest * * *,' 271 I.C.C., at 40. In treating the request that it approve the stock acquisition, the ICC referred in great detail to the facts that (1) the acquisition, when considered along with long-range plans, would result in C & O control of Cnt ral; (2) extensive competition between C & O and Central would be eliminated; and (3) cooperation between C & O and Central would pose a substantial threat to another railroad, 271 I.C.C., at 24-29. It refused to authorize the acquisition, concluding that it was in effect being asked 'to sanction a violation of the provisions of section 5(4) (requiring carriers to request authority under § 5(2) before acquiring control of another carrier) and also a violation of section 7 of the Clayton Antitrust Act.' 271 I.C.C., at 39, 43. It stated that, if the applicants were so confident that their long-run aims would be in the public interest, they should seek authority for control under § 5(2). These principles and arguments relied upon by the ICC in rejecting C & O's application are equally applicable here. The economic consequences do not differ because we are concerned here with the issuance of stock rather than an acquisition on the open market.
Appellees argue, with some ambivalence, that it would be anomalous to require the ICC to consider anticompetitive issues under § 20a(2). The ICC is authorized under § 5 to grant antitrust immunity for consolidations. No such power exists under § 20a, and the Government contends therefore that to require consideration of § 7 issues under § 20a would lead to the 'anomalous conclusion that a securities issue may have to be disallowed even though it might be the first step in an acquisition of control that the Commission could, on proper findings, authorize under section 5 notwithstanding antitrust considerations.' REA advances a variant of this argument pointing out that the Sixty-sixth Congress, which passed both § 5 and § 20a, would not have 'adopted the erratic policy of relaxing enforcement of the antitrust laws when competition was eliminated but requiring strick enforcement when lesser competitive harm might occur.'
First, it is by no means true that greater competitive harm necessarily results from consolidations than from stock issuances under § 20a. A particular consolidation may be in the public interest because it increases competition in some respects, while a stock issuance, even though not involving control, may have no similar redeeming feature. Second, any anomaly which may be created by the juxtaposition of §§ 5 and 20a stems, not from the fact that no immunity may be granted under § 20a, but from the ICC's special power under § 5. The obligation to enforce the Clayton Act is the rule, and § 5 is the exception. Finally, there are good reasons upon which Congress may have relied in providing that immunity might be conferred under § 5 but not under § 20a. Congress recognized in the Transportation Act of 1940, 54 Stat. 898, as it had in the Act of 1920, that railroad consolidations often result in benefits for the national transportation system as well as for the railroads involved. Consequently, it authorized the ICC to approve consolidations and to immunize them from the antitrust laws when they were found to be in the public interest. The special benefits sometimes realized from carrier consolidations are less likely to come about through the mere issuance of stock, unless the issuance results in control or merger; and when control or merger does result, he party acquiring control may invoke the Commission's power under § 5 to immunize the consolidation from the antitrust laws.
Appellees' reliance upon Alleghany Corp. v. Breswick & Co., 353 U.S. 151, 77 S.Ct. 763, 1 L.Ed.2d 726; 355 U.S. 415, 78 S.Ct. 421, 2 L.Ed.2d 374, is misplaced. That litigation stands at most for the proposition that the ICC has discretion in some circumstances to consider § 20a issues without coming to grips with the question whether control of one carrier by another may be unlawful. Alleghany had acquired control of the New York Central without ICC approval. It applied to the ICC rather than to the Securities and Exchange Commission for approval of an issue of preferred stock. The ICC took jurisdiction on the ground that, while Alleghany was an investment company normally under the jurisdiction of the SEC, its control of Central made it a carrier subject to ICC regulation. The District Court set aside the order approving the issuance on the ground that ICC jurisdiction to act under § 20a could not rest upon a control it had not approved. This Court reversed pointing out that it would be contrary to the policy of the statute to oust the ICC of regulatory jurisdiction because a noncarrier had failed to abide by the law. On remand the District Court considered the illegality of Alleghany's control as relevant to the merits of the issuance under § 20a, and we reversed again, stating simply that the only issue left open on remand was whether the stock issue 'as approved' was unlawful. 355 U.S. 415, 416, 78 S.Ct. 421, 422. However this litigation may be interpreted, it wholly fails to support the proposition that, because § 20a was designed primarily to protect against fiscal manipulation, the ICC is relieved of the necessity of considering other issues germane to the transaction.
We conclude, therefore, that the ICC is required, as a general rule, under its duty to determine that the proposed transaction is in the 'public interest' and for a 'lawful object,' to consider the control and anticompetitive consequences before approving stock issuances under § 20a(2). This does not mean the ICC must grant a hearing in every case, or that it may never defer consideration of issues which arise when special circumstances are present. But it does mean that, when the ICC exercises its discretion to approve issuances without first considering important control and competition issues, the reviewing court must closely scrutinize its action in light of the ICC's statutory obligations to protect the public interest and to enforce the antitrust laws. Whether or not an abuse of discretion is present must ultimately depend upon the transaction approved, its possible consequences, and and justifications for the deferral. We turn now to this question, first with respect to the deferral of the control issue, and second with respect to the deferral of the anticompetitive issues.
REA's proposed issuance of a 20% stock interest to Greyhound undoubtedly raised a serious question whether control of its operations might pass to Greyhound. Control under § 5 must be judged realistically, and is a matter of degree. See Rochester Tel. Corp. v. United States, 307 U.S. 125, 59 S.Ct. 754, 83 L.Ed. 1147. Even the 20% acquisition standing alone might raise an issue of control necessitating greater consideration than given it by the ICC, but it is clear from REA's own evidence that the purpose of its negotiations with Greyhound was to bring the two companies into a joint alignment. The 20% stock issuance was treated by both as the first step of a more ambitious project, and as evidence of the seriousness of each other's intentions to that end.
What the ICC has done must, however, be placed in perspective. It has not denied that a substantial issue of control is present, and it has not refused to consider the issue. It has held only that consideration should be deferred for the 60-day period during which Greyhound has are ed to extend to REA stockholders an offer to purchase up to 1,000,000 shares. We have stressed the unsatisfactory consequences which often occur when agencies defer action and leave parties uncertain as to their rights and obligations. United States v. Chicago, M. St. P. & P.R. Co., 294 U.S. 499, 510, 55 S.Ct. 462, 467, 79 L.Ed. 1023. We might also observe that the ICC apparently could have avoided the deferral by requiring REA and Greyhound to reform their contract so that all the facts relevant to the control issue could be ascertained before approval was given under § 20a(2). Nevertheless, we cannot say that the ICC exceeded its discretion when it deferred consideration of the control issue; radical changes in the relevant facts may take place during the 60-day period, and it is highly unlikely that any harm can flow to appellants or to the public interest from a deferral limited to that issue.
Resolution of the 'public interest' issue under § 5, requiring consideration of anticompetitive and other consequences, is required when the threshold fact of control or merger is established. But in this case, even assuming that the 20% purchase may amount to 'control' under the existing stock distribution, events may occur during the 60-day period which might negate this possibility. Some railroads have indicated their intention to sell their REA holdings, but whether Greyhound or the dissident railroads wind up in a controlling position may depend on the extent to which the latter exercise their right of first refusal. The dissident railroads have made clear their intention to prevent Greyhound from acquiring any additional shares, but even if they obtain one-third of REA's stock they will be able to determine the composition of REA's Board of Directors. In either case, the added power in the hands of the dissident roads may, depending on the circumstances, lead the ICC to find that Greyhound had not acquired control. Thus the control question can more realistically be resolved with finality after the 60-day period.
Moreover, the ICC reasonably concluded that allowing Greyhound tentatively to acquire the 20% stock interest would not prejudice appellants as to the control issue in light of the dissident railroads' position that Greyhound would not acquire 'one additional share under the offer to purchase up to one million shares * * *,' and because Greyhound would be unable under REA's bylaws to control the board, since its five directors would be faced by 18 railroad directors, any 13 of whom would have the power to prevent any action proposed by Greyhound.
The action of the Commission in deferring consideration of the anticompetitive issues stands on a different footing. The Commission's responsibility under § 5 and under the Clayton Act differs markedly, and the reasons which support an exercise of discretion as to the control issue are wholly inapplicable to the anticompetitive questions. There is, in short, no reasonable justification for deferring the Clayton Act questions.
The Commission is, of course, required to consider anticompetitive issues under the public interest standard of § 5, just as it must under the public interest standard of § 20a. But the duty under § 5, as we point out above, arises only after the threshold fact of control is established. No such preliminary finding need be made to trigger the ICC's duty under the Clyt on Act. A company need not acquire control of another company in order to violate the Clayton Act. See e.g., United States v. E. I. Du Pont De Nemours & Co., 353 U.S. 586, 77 S.Ct. 872, 1 L.Ed.2d 1057; American Crystal Sugar Co. v. Cuban-American Sugar Co., 152 F.Supp. 387 (D.C.S.D.N.Y.1957), aff'd, 259 F.2d 524 (C.A.2d Cir. 1958). Section 7 proscribes acquisition of 'any part' of a company's stock where the effect 'may be substantially to lessen competition, or to tend to create a monopoly.' Moreover, the purpose of § 5 is significantly different from that of the Clayton Act. Section 5 is designed to enable carriers to seek and obtain approval of consolidations with other carriers, with immunity from the antitrust laws. When a carrier effects a consolidation without ICC authority, the Commission can of course act under § 5(4). But, as the Commission has often held, the carrier must initiate consolidations under § 5, and it is reasonable to expect that carriers will seek the benefits of that provision. In contrast, the Clayton Act is prohibitive, and imposes a positive obligation upon the ICC to act. The Commission is directed, whenever it has reason to believe any carrier within its jurisdiction is violating § 7, to 'issue and serve upon such person and the Attorney General a complaint stating its charges in that respect, and containing a notice of a hearing * * *.' 15 U.S.C. § 21(b). Section 16, 15 U.S.C. § 26, excepts from the power of private persons to bring § 7 suits for injunctive relief all cases involving matters subject to ICC jurisdiction. By thus limiting the authority of private persons to institute court proceedings to enjoin § 7 violations, this provision underscores the ICC's responsibility to act when such violations are brought to its attention.
One of the principal justifications advanced for the ICC's deferral of the control issue is that the facts relevant to that issue may change so significantly during the 60-day period that the control question could be settled either way. No such possibility exists with respect to at least some of the anticompetitive issues presented by REA's application. We need not accept the argument of appellants, based upon the distinction between 'express' and other forms of transport, see, e.g., Railway Express Agency, Inc., Extension-Nashua, N.H., 91 M.C.C. 311, 322, sustained sub nom. Auclair Transportation, Inc. v. United States, 221 F.Supp. 328 (D.Mass.), aff'd, 376 U.S. 514, 84 S.Ct. 966, 11 L.Ed.2d 968, that the 20% stock acquisition would itself violate § 7 because REA controls 88% and Greyhound 7% of the 'express' market. For if appellees REA and Greyhound are correct that, because of the increasing cross-competition among groups carrying transport, it is impossible to categorize REA as a carrier of 'express,' then the claims of appellant truck lines, freight forwarders and trucking associations take on added significance. It is precisely the increasing diversification of REA's transport activity, together with Greyhound's considerable capacity and the economies and efficiencies the two companies intend to effectuate jointly, that concerns these appellants.
It is clear that REA and Greyhound contemplate major changes in their operation which could have a significant impact upon competition for express and other types of transport which they seek to carry. The 'Memorandum of Understanding' into which the companies entered about three weeks before REA agreed to Greyhound's 20% stock acquisition contemplates efficiencies and savings through consolidation of facilities for terminal service, of garages, and of communications, advertising and sales forces. These changes might therefore realize large savings for both REA and Greyhound, and in this way and other ways significantly strengthen their competitive position. And the Memorandum expresses a determination to engage in aggressive action to capture larger shares of express and transport business, especially by utilizing Greyhound's bus opra tions as a complement to REA's air and rail service. 'The consolidation of effort by the two companies,' the Memorandum states, 'would create a new market with revenue opportunity arising from a complete package express service to the public.' The 'new ability' of the air express service to reach off-airline points would add significantly to REA and Greyhound revenues, and the new market would have an estimated growth potential of 10% per year. Similarly, rail-bus service was expected to generate millions in 'new business,' and to 'create a new capability for the two carriers to compete in the LTL (less-than-load) market. The only foreseeable limitation to the growth of this service would be the physical space limitations of Greyhound's fleet.'
There is nothing in the record to rebut the allegations of many of the appellants that cooperation between Greyhound and REA of the sort contemplated by the Memorandum aided by the 20% stock acquisition will result in serious harm to appellants individually and to the public interest which they serve. The freight forwarders fear a great reduction in their business, as do the bus companies. Some of the bus companies, which engage in commuter transport, claim that Greyhound-REA cooperation would deprive them of their express business, and that, since that business makes economically feasible their commuter operations, would compel the termination of services essential to the public interest.
It cannot be said with assurance that deferral of consideration of the anticompetitive issues will in no way prejudice appellants or the public interest. The fact that the railroads presently control the REA Board of Directors is hardly relevant to that question. It is not the possibility of control that may prejudice appellants and the public interest, but simply the fact that with Greyhound holding 20% of REA's stock there is likely to be immediate and continuing cooperation between the companies, cooperation which appellants claim will be to their detriment and which the Government concedes may be against the public interest. If appellants are correct, and if such an alliance would in fact be against the public interest, then § 7 of the Clayton Act requires that it be stopped in its incipiency. Cf. FTC v. Dean Foods Co., 384 U.S. 597, 606, n. 5, 86 S.Ct. 1738, 1743, 16 L.Ed.2d 802.
We are told that REA is in need of funds, and that ICC approval of the 20% stock acquisition assures that REA will obtain capital and gain a measure of independence from the railroads. There is certainly support for the position that REA needs to free 'itself from the control and domination previously exercised by its railroad shareholders over its operations.' 80 ICC Ann.Rep., p. 22 (1966). The strong ties between REA and the railroads led to the operation of REA in the railroads' own interests, without regard to their coincidence with REA's best interests or the public interest. Prior to a 1959 agreement, generated in large part by REA losses, see Express Contract, 1959, supra, 308 I.C.C., at 546, REA was required to distribute traffic among carriers on the basis of existing traffic patterns, and the consent of rail carriers operating between given points was required before REA could utilize carriers other than railroads between those points. Changes in these limitations have enabled REA to finance some improvements and steadily to increase its corporate surplus. Study of REA Express, Staff Liaison Group V-C, CAB, FMC & ICC 24-26 (1965). But it does not follow that REA will be any better off in the long run, or that the public interest will be advanced, if its ownership shifts in part or entirely to Greyhound.
While the history of REA does not in itself provide a blueprint for its future, it does 'afford a basis for considering the lawfulness of REA's status and activities, and the economic desirability of its apparent direction of growth.' Study, op. cit. supra, at 3. That history indicates that there may be some relationshi b etween REA's depressed state and its close ties with railroads. Before acting on this premise, however, the ICC must at least consider the question whether a given course of action will in fact alleviate the problem. If railroad ownership operated in the past to deprive REA of an opportunity to prosper and serve the public interest, it is not inconceivable that partial ownership by Greyhound will have the same result. Greyhound, presumably, is no less likely to act in its own interest. If the railroads operated REA, as appellees contend, to minimize competition for transport generally between REA and the railroads, and for express between the railroads themselves and between railroads and other modes of transport, how will partial or complete ownership by Greyhound change things? Even if only partial ownership results, may Greyhound and the railroad owners operate REA so as to minimize competition between REA and themselves for transport generally? What effect, for example, would partial ownership by Greyhound have upon the recent efforts of REA to add to its express operations the hauling of larger and more varied volumes of freight, efforts which bring it into competition with Greyhound and other bus lines as well as with truck lines and freight forwarders? Moreover, what assurance is there that REA will not tend to route shipments via Greyhound in preference to more efficient or economical carriers or modes, just as the railroads bound REA to use their lines as opposed to other modes, absent their approval? We assume that REA needs funds and would be better off more independent from the railroads, but before the ICC can use these reasons to justify a diversification of ownership it must at least consider whether the specific action approved may operate to the detriment of REA or the public interest.
There is, finally, little merit to the Government's argument that deferral of the anticompetitive issues is strongly supported by considerations of administrative convenience. The only circumstance in which the anticompetitive issues may be eliminated from the case is if Greyhound, thwarted at the end of the 60 days in its plans to control REA, were to dispose of its 20% interest. But the ICC can hardly justify deferral of consideration of the consequences of a transaction on the possibility that the problems its approval creates may shortly vanish by a reversal of the transaction itself. Of course, if, as appellees claim, it is most likely that Greyhound will acquire no further stock, then consideration of those consequences now would not be wasted effort. And the argument of wasted effort is still less persuasive if appellees are proved wrong and Greyhound does acquire more stock. For the most significant question which the ICC must face is whether it is in the public interest that REA continue to be owned by other transport companies, and specifically by Greyhound. Once this question is resolved as to the 20% stock acquisition, and the consequences of that acquisition are fully weighed, the ICC's task in any subsequent proceeding if Greyhound enlarges its stock interest will by far more manageable.
We therefore conclude that, although the possibility that Greyhound may not increase its holdings within the 60-day period may justify deferral of resolution of the control issue, it does not justify delay in consideration of the anti-competitive effects of the 20% transaction. The Government was correct in its position before the ICC that this record placed 'before the Commission serious questions under section 7 of the Clayton Act,' requiring a hearing.
The judgment of the District Court is reversed with direction to enter a new judgment remanding the case to the Interstate Commerce Commission for further proceedings consistent with this opinion. It is so ordered.
Judgment reversed with direction.

## Notes

* ↑ Section 20a of the Interstate Commerce Act, as amended, 41 Stat. 494, 49 U.S.C. § 20a, provides in pertinent part:
* ↑ Section 5(2)(a)(i) of the Act, as amended, 41 Stat. 480, 482, 49 U.S.C. § 5(2)(a)(i), authorizes any carrier, with the approval and authorization of the Commission, 'to acquire control of another through ownership of its stock or otherwise * * *.' Upon application of a carrier seeking such authority, the Commission 'shall afford reasonable opportunity for interested parties to be heard,' and if 'the Commission finds that, subject to such terms and conditions and such modifications as it shall find to be just and reasonable, the proposed transaction is within the scope of subdivision (a) * * * and will be consistent with the public interest, it shall enter an order approving and authorizing such transaction, upon the terms and conditions, and with the modifications, so found to be just and reasonable * * *.' § 5(2)(b).
* ↑ Section 7 of the Clayton Act, as amended, 38 Stat. 731, 15 U.S.C. § 18, provides in pertinent part:
* ↑ Section 20a was originally § 437(1) of H.R. 10453, 66th Cong., which was almost identical to earlier legislation passed by the House in 1910 and 1914. See 58 Cong.Rec. 8317-8318 (1919). The 1910 version led to a study which condemned as a 'public evil' intercorporate holdings of railroad stock. Report of the Railroad Securities Commission, H.R.Doc. No. 256, 62d Cong., 2d Sess., 21 (1911). These findings were part of the background against which Congress eventually passed § 20a, along with the Federal Trade Commission and Clayton Acts.
* ↑ Section 5(11), 49 U.S.C. § 5(11), provides that 'any carriers or other corporations, and their officers and employees and any other persons, participating in a transaction approved or authorized * * * shall be and they are relieved from the operation of the antitrust laws * * *.'
* ↑ Section 11 of the Clayton Act, 15 U.S.C. § 21, provides in pertinent part: '(a) Authority to enforce compliance with * * * (§ 7) by the persons respectively subject thereto is vested in the Interstate Commerce Commission where applicable to common carriers subject to the Interstate Commerce Act, as amended * * *. (b) Whenever the Commission * * * shall have reason to believe that any person is violating * * * (§ 7) it shall issue * * * a complaint * * * containing a notice of a hearing * * *. The person so complained of shall have the right to * * * show cause why an order should not be entered by the Commission * * * requiring such person to cease and desist from the violation * * *.'
* ↑ In Pan American World Airways v. United States, 371 U.S. 296, 83 S.Ct. 476, 9 L.Ed.2d 325, we held that Congress had entrusted the narrow questions there presented to the CAB; but the violations alleged were of the Sherman Act, which unlike the Clayton Act, 15 U.S.C. § 21, supra, n. 6, contains no provision imposing an affirmative duty upon the agency to enforce the Act's provisions. The industry there was one 'regulated under a regime designed to change the prior competitive system,' id., at 301, 83 S.Ct., at 480, and the CAB could have retained power and granted antitrust immunity for the actions involved had they occurred after passage of § 411 of the Civil Aeronautics Act of 1938, 52 Stat. 1003, id., at 312, 83 S.Ct., at 486.
* ↑ A change in the agreement providing that Greyhound should offer to purchase the stock held by the railroads before the issuance of the 500,000 shares would have developed the relevant facts, and made unnecessary postponement of the determination of either the control or competition issue.
* ↑ If the dissident REA railroad stockholders exercised their right of first refusal to buy the 1,000,000 shares the other railroad stockholders might sell, their combined stockholdings would be increased to over 50% of the REA shares. See Brief for the United States and ICC, p. 18, n. 9.
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