# Denver & Rio Grande Western Railroad Company v. United States/Concurrence White

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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
Mr. Justice WHITE, concurring in part and dissenting in part.
I agree with most of the Court's opinion, with its holding that competitive ac tors must be considered in a § 20a proceeding and with its ruling that a hearing should have been held by the Commission in this case before approving the issuance of the securities by Railway Express Agency, Inc., to Greyhound Corporation. But I am doubtful about those parts of the Court's opinion which indicate that although the public interest requires the consideration of competitive factors in connection with the issuance of stock under § 20a, the public interest also demands that if a lessening of competition is found or threatened within the meaning of § 7 of the Clayton Act, the issuance must be disapproved. Under § 5 of the Interstate Commerce Act, competitive factors must also be considered in determining the public interest, but there a balanced view of the public interest permits the approval of a merger or consolidation despite any actual or probable competitive impact. Mergers which would violate § 7 are thus permissible under § 5 if found in the public interest but only those acquisitions of stock which are not suspect under § 7 of the Clayton Act are permissible under § 20a.
In the last analysis the Court rests this rather odd distinction on the Act itself-that is, Congress is said to have intended this very result because it provided in § 5(11) that the approval of a transaction under § 5 relieves the parties from antitrust liability and did not so provide in connection with § 20a transactions. I do not think, however, that this ends the matter, and I find unconvincing the speculative reasons the Court gives for suggesting that Congress intended any such result.
Much more persuasive to me is the approach of Pan American World Airways, Inc. v. United States, 371 U.S. 296, 83 S.Ct. 476, 9 L.Ed.2d 325. That case involved the Civil Aeronautics Act of 1938, 52 Stat. 973, re-enacted as the Federal Aviation Act of 1958, 72 Stat. 731, 49 U.S.C. § 1301 et seq., which provided antitrust immunity for transactions approved by the Civil Aeronautics Board under §§ 408, 409, and 412. The course of conduct attacked by the United States under § 1 of the Sherman Act in Pan American was not, however, within any of these sections. The Court, nevertheless, held that the conduct was clearly of the kind specifically committed to regulation by the Board under other sections of the Act and was unassailable in an independent civil action brought by the United States under § 1 of the Sherman Act.
In the case before us, § 20a(2) provides that it shall be unlawful for any carrier to issue securities unless approved by the Commission after finding that the issuance:
'(a) is for some lawful object within its corporate purposes, and compatible with the public interest, which is necessary or appropriate for or consistent with the proper performance by the carrier of service to the public as a common carrier, and which will not impair its ability to perform that service, and (b) is reasonably necessary and appropriate for such purpose.'
The Commission may grant an application under § 20a in whole or in part with such modifications and on such terms and conditions as the Commission may deem appropriate, and it may from time to time make such supplemental orders with respect to the transaction as it may deem necessary. § 20a(3). Moreover, it is expressly provided that '(t)he jurisdiction conferred upon the commission by this section shall be exclusive and plenary, and a carrier may issue securities and assume obligations or liabilities in accordance with the provisions of this section without securing approval other than as specified herein.' § 20a(7).
Having these powers conferred upon it in the name of the public interest, the Commission may, in my view, approve the issuance of stock by a carrier if it deems the public interest requires it even though there may be a probable lessening of competition which otherwise would violate § 7 of the Clayton Act. This seems to be precisely what Congress intended by expressly providing in § 7 of the Clayton At itself that 'Nothing contained in this section shall apply to transactions duly consummated pursuant to authority given by the * * * Interstate Commerce Commission * * * under any statutory provision vesting such power in such Commission * * *.' 15 U.S.C. § 18.
It makes very little sense to me to hold that a stock acquisition involving control may be approved if the public interest requires it, despite any actual anticompetitive impact, and yet to forbid the approval of an acquisition which falls short of control but which 'may' injure competition within the meaning of the Clayton Act.
Thus while I agree that a hearing should be required before the Commission approves the issuance of the securities in this case, I would make it clear that competitive considerations are only some of the factors to be weighed in reaching a decision concerning the public interest, much as the Court has viewed the proceedings under § 5. McLean Trucking Co. v. United States, 321 U.S. 67, 64 S.Ct. 370. At the very least I would not now decide that the Commission is powerless to approve the issuance of securities under § 20a if it determines that the impact on competition would otherwise be barred by the Clayton Act.
Mr. Justice HARLAN, whom Mr. Justice STEWART joins, dissenting.
This case involves a proposed stock issue by appellee Railway Express Agency, Inc. (REA,) of 500,000 shares of previously authorized but unissued shares of its common stock. Under § 20a(2) of the Interstate Commerce Act, 49 U.S.C. § 20a(2), this type of stock transaction must be authorized by the Interstate Commerce Commission, which must determine whether the issue is 'for some lawful object within * * * (the applicant's) corporate purposes, and compatible with the public interest * * *.' Under the proposed transactions REA contracted to sell this block of shares for $10,000,000 to the Greyhound Corporation, which would then offer to purchase within a 60-day period an additional 1,000,000 shares from existing stockholders, all of whom are railroads and all of whom hold rights of first refusal as to the sale of existing REA shares. Some of these railroad-stockholders have been opposed to Greyhound's entry into REA and have expressed their intention to exercise their preemptive rights. It is undisputed that if Greyhound nevertheless succeeds in purchasing these additional shares it would be in a position to exercise a substantial degree of control over REA, cf. Rochester Tel. Corp. v. United States, 307 U.S. 125, 145, 59 S.Ct. 754, 764, and that such control would require the approval of the ICC under § 5(2) of the Interstate Commerce Act, 49 U.S.C. § 5(2). It was also alleged by the United States as an intervenor before the ICC that the possible exercise of control by Greyhound over REA and an anticipated co-ordination of certain services by the two carriers raised serious antitrust questions under § 7 of the Clayton Act, 15 U.S.C. § 18, which the ICC is bound to enforce as to regulated carriers, Clayton Act § 11, 15 U.S.C. § 21.
The Interstate Commerce Commission did not deal with the substance of these 'control' and 'antitrust' issues. It found that REA 'urgently needs the proceeds of $10,000,000 * * *,' and that it was not necessary, given the uncertainty as to the future relationship of Greyhound and REA, to deal with the control issue at that time. The Commission noted specifically that 'if in the future the acquisition of control or power to control o r other matter or transaction to which section 5 of the act applies, becomes imminent or apparent, the opportunity will be available for all interested persons to interpose their opposition * * *.'
On review, a three-judge District Court for the District of Colorado sustained the Commission's order, 255 F.Supp. 704. It read the ICC's decision, as does this Court, as saying only 'that in the circumstances presented the public interest requires the issuance of the stock and that determination of the competitive effects will be appropriate for consideration after the chain of events started by the stock issuance is ascertainable rather than conjectural.' Id., at 709. The District Court then held that '(i)n the circumstances it is not our prerogative to interfere with what we deem to be a reasonable exercise by the Commission of its discretionary powers.' Id., at 710.
I would affirm this judgment of the District Court, and therefore must dissent from today's decision. The Court holds 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).' Ante, p. 498. The Court notes, however, that '(t)his 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,' ibid., but concludes that while it was not an abuse of discretion to defer consideration of the 'control' question raised by the intervenors, it was improper to refuse to deal with the 'anticompetitive' issues at this stage. I believe that this decision misapplies the relevant statutes and seriously impedes sound administrative practice.
Section 20a(2) of the Interstate Commerce Act is concerned with new stock issues. Congress' dominant concern was 'to maintain a sound structure for the * * * support of railroad credit,' 1 Sharfman, The Interstate Commerce Commission 190 (1931), and nothing in the legislative background of the section indicates that the words 'for some lawful object within its corporate purposes, and compatible with the public interest' were intended to encompass issues of antitrust law. Of course the phrase 'the public interest' is broad, and in the context of other legislation comparable terms have been held to embrace antitrust matters. E.g., Federal Communications Act, § 307, 48 Stat. 1083, 47 U.S.C. § 307, as construed in FCC v. RCA Communications, Inc., 346 U.S. 86, 73 S.Ct. 998, 97 L.Ed. 1470. But the mere inclusion of such language in this instance is not the end of our inquiry, for § 20a must be read in its entirety and interpreted in conjunction with other sections of the Act.
In contrast to § 20a, which by its detailed and explicit terms deals only with the problem of fiscal responsibility, § 5 of the Act, enacted at the same time, deals specifically with problems of 'control.' Indeed, the standards laid out in § 5 are directly relevant to the various factual issues hypothesized by the Court in Part IV of its opinion. Section 5 does not deal solely with transfers of shares, but with any lease or contract between two carriers for the operation of their properties, §§ 5(2)(a)(i), 5(4); see Gilbertville Trucking Co. v. United States, 371 U.S. 115, 125, 83 S.Ct. 217, 223, 9 L.Ed.2d 177. It would thus appear that any type of agreement between Greyhound and REA for the integration of their operations would-with or without the sale of shares-fall within the purview of § 5.
Section 5 not only deals explicitly with problems of control, but it establishes the public interest criteria which the ICC is bound to use in making that type of inquiry. For example, the Commission must consider '(1) The effect of the proposed transaction upon adequate transportation service to the public; * * * (3) the total fixed charges resulting from the proposed transaction; and (4) the interest of the carrier employees affected.' § 5(2) (c). This Court has recognized that standards of market control in the transportation industry are different from those governing other business transactions: the ICC must take account of antitrust policy in judging the control questions under § 5, McLean Trucking Co. v. United States, 321 U.S. 67, 64 S.Ct. 370, but this interest is simply one of the relevant criteria, and if on balance the Commission finds a proposed undertaking to be in the public interest the statute authorizes a grant of antitrust immunity to the transaction. § 5(11); Seaboard Air Line R. Co. v. United States, 382 U.S. 154, 86 S.Ct. 277, 15 L.Ed.2d 223; Minneapolis & St. L.R. Co. v. United States, 361 U.S. 173, 80 S.Ct. 229, 4 L.Ed.2d 223; McLean Trucking Co. v. United States, supra. Section 5 thus covers fully the problems of control; likewise, the antitrust issues are deat with specifically in § 11 of the Clayton Act, which authorizes the ICC to enforce § 7 of that Act, forbidding the acquisition of stock the effect of which 'may be substantially to lessen competition, or to tend to create a monopoly.' Hence these sections, and not § 20a, are the substantive provisions governing the Commission's jurisdiction in respect to the anticompetitive aspects of this case.
For procedural reasons, too, § 20a seems inappropriate as a vehicle to replace or augment § 5 of the Interstate Commerce Act and §§ 7 and 11 of the Clayton Act. When a carrier applies for authorization to issue stock, the Commission must give notice to the various States in which the carrier operates so that relevant state regulatory agencies, which also supervise the finances and corporate structure of these companies, may raise objections to the proposed transaction. The Commission need not, however, hold a hearing before approving the transaction. § 20a (6). In contrast, when the ICC deals with problems of control under § 5, it is bound not only to notify the various state authorities but also to 'afford reasonable opportunity for interested parties to be heard.' § 5(2)(b). And § 11 of the Clayton Act requires the Commission to notify the Attorney General if it believes that any carrier is violating § 7, and the Attorney General has the statutory right to intervene in the mandatory hearing on the question.
Given the complexities of control and antitrust problems in the transportation field, and given the specific and detailed provisions of that statute in § 5, and in § 11 of the Clayton Act, devoted particularly to them, it seems to me quite evident that the sounder view of the statutory scheme is to regard § 20a as being limited to matters to corporate financing and § 5 and § 7 as being the source of the Commission's authority and duty to deal with these other matters.
None of the Commission cases cited by the Court in support of its position that § 20a was envisioned as also encompassing control and antitrust considerations is apposite. Columbia Terminals Co.-Issuance of Notes, 40 M.C.C. 288, dealt, as the Court notes, with § 10 of the Clayton Act, 15 U.S.C. § 20, which specifically requires common carriers in certain situations to sell securities 'by competitive bidding under regulations to be prescribed by rule or otherwise by the Interstate Commerce Commission.' The ICC merely held that this statute had not been repealed by § 20a. The general language cited by the Court from Stock of New Jersey, I. & I.R. Co., 94 I.C.C. 727, was written in a case in which the issue was whether the applicant railroad could pay an indebtedness to its sole stockholder, another railroad, through a distribution of stock as a dividend. The ICC held this method of financing acceptable; antitrust considerations were in no way involved.
The third ICC decision cited by the Court, Chesapeake & O.R. Co. Purchase, 271 I.C.C. 5, would seem, if anything, inconsistent with its view of § 20a. There the Commission was requested to approve an interlocking directorate, which is forbidden unless authorized by the Commission pursuant to § 20a(12) of the Interstate Commerce Act, 49 U.S.C. § 20a(12). In making its decision the Commission did not incorporate § 5 control standards into § 12a(12). Quite the contrary, it noted that '(t)he policy of the Congress as to consolidations, mergers, and other forms of corporate unification and association is now to be found in the provisions of section 5,' id., at 12; that no application under § 5(2) had been filed; and that '(i)t follows that the evidence pertaining to control of the New York Central or ultimate unification of the two carriers is irrelevant to the principal issues before us, and may not be considered in disposing of those issues.' Ibid. The Commission then determined, under its established standards for judging the acceptability of an interlocking directorate, id., at 18, that such an authorization would be improper, but ose rved that '(i)f the applicants are firmly of the opinion that the proposed association will result in the benefits to the carriers and to the public which they contend we should find on the showing that they have made in this proceeding, there is no reason why they should not file an application for some form of association under section 5(2) of the act.' Id., at 41-42.
The lack of authority for the Court's view of § 20a is not limited to administrative decisions. In the complex Alleghany Corp. litigation, summarized by the Court, ante, pp. 497-498, this Court sustained the ICC's determination that it could act upon a § 20a application without involving itself in difficult issues of intercorporate control as the District Court had ordered. The protracted and tangled character of that litigation, until resolved in the interests of simplicity by this Court's affirmance of the ICC's approach, should be a warning of the unfortunate consequences that may follow judicial requirements complicating and proliferating administrative hearings in unfamiliar fields; this is especially so where there are, as here, numerous parties some of whom have a strong interest in achieving delay.
Although not accepting the reading of the Act which I have urged, the Court nonetheless appears to recognize that the issue of 'control' is a separate one from that of financial regularity, and one that can appropriately be dealt with in a separate and subsequent proceeding. Since the Court also acknowledges, as it must, that at this later hearing REA and Greyhound may request a § 5 (11) exemption, and thus bring into play all the standards of § 5, I find the Court's insistence that this issue falls within the purview of § 20a rather than § 5 essentially an academic one. The ICC will still be able to conduct its hearings just as it wished to do here, except that its subsequent '§ 5 proceeding' will henceforth be labeled a '§ 20a and § 5 proceeding.'
Given the Court's recognition that the ICC has discretion to postpone the 'control' determination, I find it difficult to accept its argument that 'antitrust' factors may not similarly be postponed.
It should be recalled that the only matter raised in this application is REA's desire to issue 500,000 shares of its stock to 'a non-railroad purchaser,' which concedely would bring to the issuer capital funds required for investment purposes. Under the proposed transaction, after Greyhound purchases these shares it will extend an offer to purchase within 60 days an additional 1,000,000 shares, as to which other shareholders hold rights of first refusal. All parties are in agreement that control and antitrust problems will be raised if Greyhound is ultimately successful in effecting these additional purchases. The only question is whether the Commission can leave these questions for a later determination. Because of the uncertainty as to the outcome of the further stock purchase offer, the Court agrees that postponement of the control issue was proper. But this uncertainty is equally crucial to to the Clayton Act issues. The likelihood of a Clayton Act violation will of course be increased if Greyhound obtains these additional shares and is in a position to control, and to consolidate operations with, REA. On the other hand, if the shares are bought by some of the appellants whose interests appear to be adverse to Greyhound, the possibility of substantial harm to competition will be minimal. The core of the Clayton Act question, then, is inexorably tied to the control question, and the Court does not deny that these problems overlap. In these circumstances I find it impossible to follow the Court in holding, on the one hand, that the control hearing was permissibly postponed, but, on the other, that the ICC abused its discretion in similarly deferring any Clayton Act hearing.
To require such a proliferation of hearings as to a single transaction-one involving a straightforward business transaction neot iated in terms of existing market conditions and the existing needs of the parties-is bound to obstruct the smooth workings of the administrative process. The penetrating observations of Professor Jaffe seem to me especially pertinent in this situation:
'I gather the impression that some judges who quite insistently display a 'correct' attitude of deference on substantive issues apply a different standard to procedural decisions: they do not hesitate to protract and to complicate the administrative process. Their premise may be that the considerations that dictate deference to substantive decisions are inapplicable to procedural ones. This is only partly true. * * * Since procedural decisions should be made to serve the substantive task, it follows that expertness in matters of substance are relevant to the exercise of procedural discretion.
'* * * (An agency) must ration its limited resources of time, energy and money. It must devote them to those exigent and soluble problems which are most nearly related to its core responsibility. What problems are most exigent, how they can best be solved * * * are questions the solution to which peculiarly demands a feeling for the whole situation. * * * If a court is not as well fitted to solve substantive problems as the agency, if on this level intermittent, disjected criticism disperses accountability, how much more is this true where the deployment of forces is involved.' Jaffe Judicial Control of Administrative Action 566-567 (1965).
The courts have traditionally permitted busy agencies substantial flexibility in formulating their internal procedures, and encouraged their efforts to eliminate duplicative action and repetitive hearings. See, e.g., Chicago & N.W.R. Co. v. Atchison T. & S.F.R. Co., 387 U.S. 326, 341-343, 87 S.Ct. 1585, 1594-1595, 18 L.Ed.2d 803. Federal Power Comm'n v. Tennessee Gas Co., 371 U.S. 145, 153-155, 83 S.Ct. 211, 215-217, 9 L.Ed.2d 199 where the Court approved a 'two-step procedure' as 'not only entirely appropriate but in the best tradition of effective administrative practice'; United States v. Pierce Auto Lines, 327 U.S. 515, 534-536, 66 S.Ct. 687, 697, 90 L.Ed. 821; Baltimore & O.R. Co. v. United States, 386 U.S. 372, 459, 87 S.Ct. 1100, 1146, 18 L.Ed.2d 159 (dissenting opinion); cf. Fahey v. Mallonee, 332 U.S. 245, 67 S.Ct. 1552, 92 L.Ed. 2030; Opp Cotton Mills v. Administrator of Wage and Hour Div. of Dept. of Labor, 312 U.S. 126, 152-154, 61 S.Ct. 524, 536, 85 L.Ed. 624; United States v. Illinois Central R. Co., 291 U.S. 457, 54 S.Ct. 471, 78 L.Ed. 909.
The allowance of such flexibility, and the exercise of prudence by the courts, is especially appropriate where, as here, the issue is not whether to hold a hearing but when to do so, and where there has been no showing that harm would come from deferring consideration of the antitrust issues. This is not a case in which a merger is about to be consummated, and in which it might be feared that the integration of two businesses will be impossible to 'unscramble' at some future time. Compare FTC v. Dean Foods Co., 384 U.S. 597, 86 S.Ct. 1738. These issues concern, as the Court's parade of speculative examples indicates, ante, p. 505-506, the implications of a possible future coordination of some carrier services between REA and Greyhound. But these matters will only crystallize for purposes of legal analysis when it is ascertained (1) what type of control, if any, Greyhound will have over REA; and (2) what type of coordinated activities are planned. None of these issues has been prejudged, and provisional relief can be granted by the Commission, if necessary, §§ 5(2), (7), (9); cf. Gilbertville Trucking Co. v. United States, 371 U.S. 115, 129 131, 83 S.Ct. 217, 225-226. The district courts likewise have authority to grant injunctive relief on application of the Commission. § 5(8).
In these circumstances I do not believe it was an abuse of discretion for the ICC to authorize the issuance of stock, postponing consideat ion of the control and antitrust issues until the transaction was completed some 60 days later. It is regrettable that the Court's preoccupation with the future antitrust possibilities of this situation, fully acknowledged by all but still entirely speculative, should have led it to interfere, so unnecessarily, with the obviously sensible course of procedure adopted by the Commission.
I would affirm the judgment of the District Court.

## Notes

* ↑ The Commission found that REA had agreed 'to consider seriously and work toward a long-term agreement between applicant (REA) and Greyhound to consolidate operating functions and facilities, and to cooperate in all lawful, feasible and jointly advantageous ways to effect economies, improve service and increase public receptivity and patronage * * *.' A 'Memorandum of Understanding,' between an official of each of the two companies contained some suggested methods for achieving these goals.
* ↑ The ICC's order dealing with the legitimacy of this transaction said: '* * * applicant urgently needs the proceeds of $10,000,000 in its program of acquiring and modernizing terminals and equipment in order to keep operating costs at a reasonable level; that it is handicapped in borrowing to finance capital improvements because of its unfavorable debt equity ratio; that the proposed issue will improve its ratio as well as reduce to some extent the amount of future borrowing required; that the price of $20 per share is fair and reasonable; and that the expenses of the issue are estimated at $15,000 * * *.'
* ↑ The 'public interest' of concern to Congress was the problem of watered stock. See, e.g., statement of Congressman Rayburn: '* * * if we write into the law of the land a statute to the effect that before a railroad can issue new securities, before it can put them on the market, it must come before the properly constituted governmental agency, lay the full facts of its financial situation before that body, tell that body what it intends to do with the money derived from the sale of the issue of securities, and after it has received the approval of that regulating body ad it goes out and puts those securities on the market, then the Interstate Commerce Commission by this law is empowered at any time to call it to account and have it tell to that regulating body that it expended the money, the proceeds of the sale of securities, for the purposes for which it had made the application.' 58 Cong.Rec. 8376 (1919). See also statement of Congressman Esch, id., at 8317-8318. See generally MacVeagh, The Transportation Act of 1920, at 486-492 (1923).
* ↑ Section 20a(2) reads in its entirety: 'It shall be unlawful for any carrier to issue any share of capital stock or any bond or other evidence of interest in or indebtedness of the carrier (hereinafter in this section collectively termed 'securities') or to assume any obligation or liability as lessor, lessee, guarantor, indorser, surety, or otherwise, in respect of the securities of any other person, natural or artificial, even though permitted by the authority creating the carrier corporation, unless and until, and then only to the extent that, upon application by the carrier, and after investigation by the Commission of the purposes and uses of the proposed issue and the proceeds thereof, or of the proposed assumption of obligation or liability in respect of the securities of any other person, natural or artificial, the Commission by order authorizes such issue or assumption. The Commission shall make such order only if it finds that such issue or assumption: (a) is for some lawful object within its corporate purposes, and compatible with the public interest, which is necessary or appropriate for or consistent with the proper performance by the carrier of service to the public as a common carrier, and which will not impair its ability to perform that service, and (b) is reasonably necessary and appropriate for such purpose.'
* ↑ Both sections were parts of the Transportation Act of 1920, 41 Stat. 480, 494.
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