Source: https://supreme.justia.com/cases/federal/us/369/482/
Timestamp: 2019-04-22 06:49:31+00:00

Document:
One natural gas company acquired nearly all of the stock of another, and the Federal Government commenced an action in a Federal District Court to have the acquisition of stock declared to be in violation of § 7 of the Clayton Act and to require divestiture. Shortly thereafter, the company which had acquired the stock applied to the Federal Power Commission under § 7 of the Natural Gas Act for authority to merge the assets of the two companies. The Commission authorized the merger of assets while the antitrust action was still pending in the District Court. The Court of Appeals sustained the Commission's action.
Held: the Commission should not have proceeded to a decision on the merits of the merger application when there was pending in the courts a suit challenging the validity of that transaction under the antitrust laws. It should have awaited the decision of the courts. Pp. 369 U. S. 483-490.
111 U.S.App.D.C. 226, 296 F. 2d 348, reversed.
El Paso Natural Gas Company first acquired the stock of the Pacific Northwest Pipeline Corp. and then applied to the Federal Power Commission for authority to acquire the assets pursuant to § 7 of the Natural Gas Act, 52 Stat. 825, 15 U.S.C. § 717f(c). This application was dated August 7, 1957. Prior thereto, on July 22, 1957, the Federal Government commenced an action against El Paso and Pacific Northwest, alleging that El Paso's acquisition of the stock of Pacific Northwest violated § 7 of the Clayton Act, [Footnote 1] 38 Stat. 731, as amended, 64 Stat. 1125, 15 U.S.C. § 18. On September 30, 1957, El Paso and Pacific Northwest filed a motion to dismiss the antitrust suit or to stay it, pending completion of the proceedings before the Commission. On October 21, 1957, that motion was denied after hearing, and we denied certiorari. 355 U.S. 950.
In May and June, 1958, the Department of Justice wrote four letters to the Commission, asking that the proceeding be stayed pending the outcome of the antitrust suit. On July 29, 1958, the Department of Justice was advised by the Commission that it would not stay its proceedings. The Commission invited the Antitrust Division of the Department to participate in the administrative proceedings, but it did not do so.
The hearings before the Commission started September 17, 1958. On October 2, 1958, El Paso and Pacific Northwest moved in the District Court for a continuance of the antitrust suit. On October 6, 1958, the Department of Justice asked the Commission to postpone its hearing, pending final outcome of the antitrust suit which had then been set for trial November 17, 1958. On October 7, 1958, the Commission wrote the District Court that, if the court denied El Paso and Pacific Northwest's motion for a continuance and proceeded with the antitrust trial, the Commission would continue its merger hearings to a date that would not conflict with the trial date of the antitrust case, but that if the court granted the motion for continuance, the Commission would proceed with its hearing. On October 13, 1958, the District Court continued the antitrust suit until the final decision in the administrative proceedings. The latter proceedings were concluded, the Commission authorizing the merger on December 23, 1959. 22 F.P.C. 1091, 23 F.P.C. 350. The merger was consummated December 31, 1959.
Petitioner intervened in the administrative proceedings August 27, 1957, and obtained review by the Court of Appeals, which affirmed the Commission (111 U.S.App.D.C. 226, 296 F.2d 348), Judge Fahy dissenting. We granted certiorari, 368 U.S. 810.
Gas Act is found in the laws of the United States. City of Pittsburgh v. Federal Power Commission, 99 U.S.App.D.C. 113, 237 F.2d 741.
"transactions duly consummated pursuant to authority given by . . . the Secretary of Agriculture under any statutory provision vesting such power in such . . . Secretary,"
laws. . . ." See McLean Trucking Co. v. United States, 321 U. S. 67.
"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"
"Nothing contained in this section shall apply to transactions duly consummated pursuant to authority given by the . . . Federal Power Commission . . . under any statutory provision vesting such power in such Commission. . . ."
The words "transactions duly consummated pursuant to authority" given the Commission "under any statutory provision vesting such power" in it are plainly not a grant of power to adjudicate antitrust issues. Congress made clear that, by this proviso in § 7 of the Clayton Act, ". . . it is not intended that . . . any . . . agency" mentioned "shall be granted any authority or powers which it does not already possess." S.Rep.No. 1775, 81st Cong., 2d Sess., p. 7. The Commission's standard, set forth in § 7 of the Natural Gas Act, is that the acquisition, merger, etc., will serve the "public convenience and necessity." If existing natural gas companies violate the antitrust laws, the Commission is advised by § 20(a) to "transmit such evidence" to the Attorney General "who, in his discretion, may institute the necessary criminal proceedings." Other administrative agencies are authorized to enforce § 7 of the Clayton Act when it comes to certain classes of companies or persons, [Footnote 2] but the Federal Power Commission is not included in the list.
We do not decide whether in this case there were any violations of the antitrust laws. We rule only on one select issue, and that is: should the Commission proceed to a decision on the merits of a merger application when there is pending in the courts a suit challenging the validity of that transaction under the antitrust laws? We think not. We think the Commission in those circumstances should await the decision of the courts.
of the policy of the antitrust laws on the public convenience and necessity. City of Pittsburgh v. FPC, 237 F.2d 741, 754 (CADC). With the presiding examiner, we find that any lessening of competition whether in the consumer markets or the producing fields, does not prevent our approving the merger because there are other factors which outweigh the elimination of Pacific as a competitor. In any case, it appears that any lessening of competition is not substantial."
Apart from the fact that the Commission did undertake to make a finding reserved to the courts by § 7 of the Clayton Act, [Footnote 3] there are practical reasons why it should have held its hand until the courts had acted.
are inherent in the situation, as approval of the transaction by the Commission would be no bar to the antitrust suit. See United States v. RCA, supra.
Another practical reason is that a transaction consummated under the aegis of the Commission as being a matter of "public convenience and necessity" is bound to carry momentum into the antitrust suit. The very prospect of undoing what was done raises a powerful influence in the antitrust litigation, as United States v. du Pont & Co., supra, illustrates.
The orderly procedure is for the Commission to await decision in the antitrust suit before taking action.
Section 7 of the Clayton Act, so far as material here, prohibits stock acquisitions having a prescribed effect. Section 7 of the Natural Gas Act confers jurisdiction on the Commission over the acquisition of assets of natural gas companies, [Footnote 5] not over stock acquisitions in them. Had the Commission stayed its hand, and had the courts found the stock acquisition unlawful, the entire transaction would have been set aside in limine. Had the courts found the stock acquisition lawful, presumably no problems under § 7 of the Clayton Act would have remained.
When the Commission proceeds in the face of a pending but undecided antitrust suit and approves a merger that has been preceded, as this one was, by a stock acquisition, it in substance treats the entire relation of the companies -- from the acquisition of stock to the merger -- as an integrated transaction. If that administrative action were approved, the Commission would be allowed to do by indirection what it has no jurisdiction to do directly.
It is not for us to say that the complementary legislative policies reflected in § 7 of the Clayton Act, on the one hand, and in § 7 of the Natural Gas Act, on the other, should be better accommodated. Our function is to see that the policy entrusted to the courts is not frustrated by an administrative agency. Where the primary jurisdiction is in the agency, courts withhold action until the agency has acted. Texas & Pac. R. Co. v. Abilene Cotton Oil Co., 204 U. S. 426. The converse should also be true, lest the antitrust policy whose enforcement Congress in this situation has entrusted to the courts is, in practical effect, taken over by the Federal Power Commission. Moreover, as noted, the Commission, in holding that "any lessening of competition is not substantial," was in the domain of the Clayton Act, a domain which is entrusted to the court in which the antitrust suit was pending.
The judgment of the Court of Appeals is reversed, and the case is remanded for proceedings in conformity with this opinion. It is so ordered.
"No corporation engaged in commerce shall acquire, directly or indirectly, the 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."
"No corporation 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 one or more corporations engaged in commerce, where in any line of commerce in any section of the country, the effect of such acquisition, of such stocks or assets, or of the use of such stock by the voting or granting of proxies or otherwise, may be substantially to lessen competition, or to tend to create a monopoly."
". . . in the Interstate Commerce Commission where applicable to common carriers subject to the Interstate Commerce Act, as amended; in the Federal Communications Commission where applicable to common carriers engaged in wire or radio communication or radio transmission of energy; in the Civil Aeronautics Board where applicable to air carriers and foreign air carriers subject to the Civil Aeronautics Act of 1938; in the Federal Reserve Board where applicable to banks, banking associations, and trust companies; and in the Federal Trade Commission where applicable to all other character of commerce to be exercised as follows: . . ."
"Section 7 is designed to arrest in its incipiency not only the substantial lessening of competition from the acquisition by one corporation of the whole or any part of the stock of a competing corporation, but also to arrest in their incipiency restraints or monopolies in a relevant market which, as a reasonable probability, appear at the time of suit likely to result from the acquisition by one corporation of all or any part of the stock of any other corporation."
"We think the public is entitled to the surer, cleaner remedy of divestiture. The same result would follow even if we were in doubt. For it is well settled that, once the Government has successfully borne the considerable burden of establishing a violation of law, all doubts as to the remedy are to be resolved in its favor."
"No natural gas company or person which will be a natural gas company upon completion of any proposed construction or extension shall engage in the transportation or sale of natural gas, subject to the jurisdiction of the Commission, or undertake the construction or extension of any facilities therefor, or acquire or operate any such facilities or extensions thereof, unless there is no force with respect to such natural gas company a certificate of public convenience and necessity issued by the Commission authorizing such acts or operations."
"proceed to a decision on the merits of a merger application when there is pending in the courts a suit challenging the validity of that [merger and its antecedent] transaction[s] under the antitrust laws,"
The holding does not turn on any facts or circumstances which may be said to be peculiar to this particular case. It is not limited to Federal Power Commission proceedings. Without adverting to any legal principle or statute to support its decision, the Court appears to lay down a pervasive rule, born solely of its own abstract notions of what "orderly procedure" requires, that seemingly will henceforth govern every agency action involving matters with respect to which the antitrust laws are applicable and antitrust litigation is then pending in the courts.
Commission has found to be in the public interest, is at least for the time being, set for naught without the slightest inquiry into whether the antitrust charges leveled against it are weighty or not. The Court's action is the more unusual because it is taken (1) despite the antitrust court's denial of interlocutory relief when such relief was belatedly sought by the Government; (2) in the face of the considered judgment of the Solicitor General, representing the public interests respectively involved in the administrative and antitrust proceedings, that determination of the ultimate effect of the Commission's order should be left to abide the event of the antitrust case, and that, meanwhile, such order should be allowed to stand; and (3) at the instance only of an intervenor in the Commission's proceeding which was not even a party to the Government's antitrust suit.
The undiscriminating nature and reach of this decision become apparent when attention is focused on the procedural events occurring prior to the order of the Commission which is here under attack. On July 22, 1957, the Department of Justice instituted a civil action in the United States District Court in Utah against the El Paso Natural Gas Company and the Pacific Northwest Pipeline Company, seeking to restrain an alleged violation of § 7 of the Clayton Act. This violation was said to have occurred when, beginning in January, 1957, El Paso embarked on a program of acquiring nearly all of Pacific's outstanding common stock. The complaint asked that the purchase be declared to be a violation of § 7 of the Clayton Act, and that El Paso be directed to divest itself of Pacific's stock. No interlocutory relief appears to have been requested.
the Government did not seek temporary relief from the District Court in Utah. El Paso, on the other hand, contended that "primary jurisdiction" with regard to the merger resided with the Commission, and sought to have the antitrust action stayed. Its motion was denied by the District Court, and on March 3, 1958, we denied leave to file a petition for common law certiorari to that decision. 355 U.S. 950.
When the case was returned to the District Court, the Government again made no effort to obtain from that court an order maintaining the status quo pending the outcome of the suit. Instead, the Assistant Attorney General in charge of the Antitrust Division suggested to the Commission that it stay its own proceedings until the antitrust suit had terminated. When this request was rejected by the Commission, the Antitrust Division withdrew from the Commission proceedings despite an express invitation from the Commission that it participate.
Hearings before the Commission's examiner were scheduled to begin on September 17, 1958, and the trial of the antitrust suit in the District Court was set for November 17, 1958. At a hearing on several pretrial matters held in the District Court on September 5 and 6, the Government, for the first time, moved for a temporary injunction to restrain the asset merger even if the Commission's approval were forthcoming. [Footnote 2/1] That motion was denied, and not renewed thereafter. The Commission's hearings began on September 17, and were recessed on September 26 until November 12.
once more asked the Commission to stay its proceedings pending the outcome of the antitrust case. While noting that the Government had refused the Commission's invitation to intervene in the merger proceedings, the Commission agreed to defer to the District Court. It notified the court that if El Paso's motion for a continuance of the trial were denied, the Commission would continue its merger proceeding to a later date. On October 13, 1958, the District Court issued an order granting El Paso's motion, and continued the antitrust trial "until the final determination by the Federal Power Commission of the applications now pending before it." The Government has never sought to review this order by mandamus or by any other available means. The Commission subsequently held its hearings and authorized the merger of El Paso and Pacific in an order dated December 23, 1959. It is that order which the Court today in effect holds to have been entered without jurisdiction.
The Court relies on three "practical reasons" to support its perplexing conclusion that, despite the Government's failure promptly to seek relief pendente lite in the antitrust suit, its failure to press for review of the denial of such relief when belatedly sought and the Commission's expressed willingness to defer to the antitrust court, the Commission was nonetheless required to withhold approval of the merger application: (1) If the asset merger were approved and executed, and the stock purchase thereafter held to be illegal, an "unscrambling" involving "needless waste of time and money" would be necessary; (2) such an "unscrambling" would "raise complicated and perplexing problems on tax matters and otherwise"; (3) the Commission's approval of the asset merger "is bound to carry momentum into the antitrust suit." (Ante,pp. 369 U. S. 488-489). Whatever weight these considerations may be deemed to have, I think that "orderly procedure"
"and before final decree, the court may at any time make such temporary restraining order or prohibition as shall be deemed just in the premises."
this plan. The court's denial of the temporary injunction must be presumed to have been based on its evaluation of the likelihood of success of the antitrust suit and of the difficulties that might arise if interlocutory relief were denied. Not having renewed its motion, the Government may surely not revive it indirectly by attacking the Commission's order. Moreover, by what authority is petitioner, the State of California, an intervenor only in the Commission's proceedings, empowered to assert claims relating to the enforcement of the antitrust laws that are unavailable to the Government, the plaintiff in the antitrust action?
antitrust suit, it is the court considering the antitrust claim which should guard itself against giving weight to this irrelevancy, not the Commission passing on the merger application. And if the lower courts should ultimately go wrong in this regard, their error would be correctible in this Court.
Likewise, there is little substance to the difficulty which this Court finds in a court "undoing what was done" (ante, p. 369 U. S. 489) by the Commission. Had the antitrust trial court been fearful on that score, it could have entered an appropriate interlocutory order ensuring that nothing would be done while the litigation was pending.
Finally, I do not think that the record in this case justifies a conclusion that the Commission's refusal to postpone consideration of the merger application amounted to an abuse of discretion. On the Court's premise that the agency's approval did not immunize the transaction from antitrust liability, the Commission's action in granting the certificate of public convenience and necessity did no more than permit the merger to be consummated subject to all possible antitrust infirmities. And, even proceeding on the Commission's premise that the proviso of § 7 of the Clayton Act gives it the power to immunize mergers from antitrust liability, its decision to go ahead after being notified by the District Court that the motion to continue the antitrust suit had been granted could hardly be regarded as an abuse of discretion.
terms as are "just in the premises" with an absolute rule prohibiting the regulating agency from considering applications relating to matters which are also involved in a pending antitrust suit, this decision seems to leave no room for sensible accommodation of the two sets of interests in a given instance. Neither the inflexible rule announced by the Court nor its decision on the facts of this case is supported by reason or authority.
The fact that such a motion was made and denied does not appear in the record before this Court. However, it is asserted in El Paso's brief, and is not denied by any of the other parties.
"those areas . . . in which active regulation has been found necessary to compensate for the inability of competition to provide adequate regulation."
Federal Communications Comm'n v. RCA Communications, Inc., 346 U. S. 86, 346 U. S. 92.
Whatever may be the impact on a § 7 action of the Commission's approval of this merger, it can be felt only in the antitrust suit. Consequently, I would, as the Solicitor General has suggested, leave this issue open for consideration in the District Court should be agency's order be asserted as a defense in that action.

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