Source: https://m.openjurist.org/376/us/651
Timestamp: 2020-07-11 09:09:21
Document Index: 235767761

Matched Legal Cases: ['§ 7', '§ 1124', '§ 7', '§ 7', '§ 7', '§ 18']

376 US 651 United States v. El Paso Natural Gas Company | OpenJurist
376 U.S. 651 - United States v. El Paso Natural Gas Company
EL PASO NATURAL GAS COMPANY et al.
El Paso had been interested in acquiring Pacific Northwest since 1954. The first offer from El Paso was in December 1955—an offer Pacific Northwest rejected. Negotiations were resumed by El Paso in the summer of 1956, while Pacific Northwest was trying to obtain a California outlet. The exchange of El Paso shares for Pacific shares was accepted by Pacific Northwest's directors in November 1956, and by May 1957 El Paso had acquired 99.8% of Pacific Northwest's outstanding stock. In July 1957 the Department of Justice filed its suit charging that the acquisition violated § 7 of the Clayton Act. In August 1957 El Paso applied to the Federal Power Commission for permission to acquire the assets of Pacific Northwest. On December 23, 1959, the Commission approved and the merger was effected on December 31, 1959. In 1962 we set aside the Commission's order, holding that it should not have acted until the District Court had passed on the Clayton Act issues. People of State of California v. Federal Power Comm'n, 369 U.S. 482, 82 S.Ct. 901, 8 L.Ed.2d 54. Meanwhile (in October 1960) the United States amended its complaint so as to include the asset acquisition in the charged violation of the Clayton Act.
There was a trial, and after oral argument the judge announced from the bench3 that judgment would be for appellees and that he would not write an opinion. He told counsel for appellees 'Prepare the findings and conclusions and judgment. They obeyed, submitting 130 findings of fact and one conclusion of law, all of which, we are advised, the District Court adopted verbatim. Those findings, though not the product of the workings of the district judge's mind, are formally his; they are not to be rejected out-of-hand, and they will stand if supported by evidence. United States v. Crescent Amusement Co., 323 U.S. 173, 184—185, 65 S.Ct. 254, 89 L.Ed. 160. Those drawn with the insight of a disinterested mind are, however, more helpful to the appellate court.4 See 2B Barron and Holtzoff, Federal ractice and Procedure (Wright ed. 1961), § 1124. Moreover, these detailed findings were 'mechanically adopted,' to use the phrase of the late Judge Frank in United States v. Forness, 2 Cir., 125 F.2d 928, 942, and do not reveal the discerning line for decision of the basic issue in the case. On review of the record—which is composed largely of undisputed evidence—we conclude that 'the effect of such acquisition may be substantially to lessen competition' within the meaning of § 7 of the Clayton Act.
Pacific Northwest, though it had no pipeline into California, is shown by this record to hav been a substantial factor in the California market at the time it was acquired by El Paso. At that time El Paso was the only actual supplier of out-of-state gas to the vast California market, a market that expands at an estimated annual rate of 200 million cubic feet per day.5 At that time Pacific Northwest was the only other important interstate pipeline west of the Rocky Mountains. Though young, it was prospering and appeared strong enough to warrant a 'treaty' with El Paso that protected El Paso's California markets.
This is not a field where merchants are in a continuous daily struggle to hold old customers and to win new ones over from their rivals. In this regulated industry a natural gas company (unless it has excess capacity) must compete for, enter into, and then obtain Commission approval of sale contracts in advance of constructing the pipeline facilities. In the natural gas industry pipelines are very expensive; and to be justified they need long-term contracts for sale of the gas that will travel them. Those transactions with distributors are few in number. For example, in California there are only two significant wholesale purchasers—Pacific Gas & Electric in the north and the Southern Companies in the south. Once the Commission grants authorization to construct f cilities or to transport gas in interstate commerce, once the distributing contracts are made, a particular market is withdrawn from competition. The competition then is for the new increments of demand that may emerge with an expanding population and with an expanding industrial or household use of gas.
Pacific Northwest had proximity to the California market—550 miles distant in Wyoming, even nearer in Idaho only 250 miles away in Oregon. Moreover, it had enormous reserves in the San Juan Basin, the Rocky Mountains, and Western Canada. Had Pacific Northwest remained independent, there can be no doubt it would have sought to exploit its formidable geographical position vis-a -vis California. No one knows what success it would have had. We do know, however, that two interstate pipelines in addition to El Paso now serve California—one of the newcomers being Pacific Gas Transmission Co., bringing down Canadian gas. So we know that opportunities would have existed for Pacific Northwest had it remained independent.
Unsuccessful bidders are no less competitors than the successful one. The presence of two or more suppliers gives buyers a choice. Pacific Northwest was no feeble, failing company;6 nor was it inexperienced and lacking in resourcefulness. It was one of two major interstate pipelines serving the trans-Rocky Mountain States; it had raised $250 million for its pipeline that extended 2,500 miles through rugged terrain. It had adequate reserves and managerial skill. It was so strong and militant that it was viewed with concern, and coveted, by El Paso. If El Paso can absorb Pacific Northwest without violating § 7 of the Clayton Act, that section has no meaning in the natural gas field. For normally there is no competition—once the lines are built and the long-term contracts negotiated—except as respects the incremental needs.
Since appellees have been on notice of the antitrust charge from almost the beginning—indeed before El Paso sought Commission approval of the merger—we not only reverse the judgment below but direct the District Court to order divestiture without delay.7
Contrary to what I had first thought, the Government is not asking in this case, as it did in United States v. Yellow Cab Co., 338 U.S. 338, at 340, 70 S.Ct. 177, at 178, 94 L.Ed. 150, that we 'in effect * * * try the case de novo,'. Rather it contends that on the undisputed facts of record the ultimate determination below was clearly erroneous. See id., 338 U.S. at 341—342, 70 S.Ct. 177, 94 L.Ed. 150. For reasons given in the Court's opinion, I agree that a violation of § 7 of the Clayton Act has been established, and that the District Court erred in deciding otherwise. On this score I shall comment only on two matters.
Second. This case affords another example of the unsatisfactoriness of the existing bifurcated system of antitrust and other regulation in various fields. In this case, the Federal Power Commission had indicated its approval of this merger as being in the public interest. The Department of Justice, however, considered the merger to be violative of the antitrust laws and, for that reason alone, against the public interest. This Court, under the present scheme of things has no choice on this record* but to sustain the position of the Department of Justice, as indeed it has felt constrained to do, albeit in my view with less justification, in other recent cases involving dual regulation. Cf. United States v. Philadelphia National Bank, 374 U.S. 321, 83 S.Ct. 1715, 10 L.Ed.2d 915; United States v. First National Bank & Trust Co., 376 U.S. 665, 84 S.Ct. 1033, any my dissenting opinions in those cases. It would be unrealistic not to recognize that this state of affairs has the effect of placing the Department of Justice in the driver's seat even though Congress has lodged primary regulatory authority elsewhere.
Section 7 of the Clayton Act, 38 Stat. 731, as amended in 1950 by the Celler-Kefauver Anti-Merger Act, 64 Stat. 1125, 15 U.S.C. § 18, 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.' (Italics added.)
'The Court. Judgment will be for the defendant in this case. Prepare the findings and conclusions and judgment.
Judge J. Skelly Wright of the Court of Appeals for the District of Columbia recently said:
'Who shall prepare the findings? Rule 52 says the court shall prepare the findings. 'The court shall find the facts specially and state separately its conclusions of law.' We all know what has happened. Many courts simply decide the case in favor of the plaintiff or the defendant, have him prepare the findings of fact and conclusions of law and sign them. This has been denounced by every court of appeals save one. This is an abandonment of the duty and the trust that has been placed in the judge by these rules. It is a noncompliance with Rule 52 specifically and it betrays the primary purpose of Rule 52—the primary purpose being that the preparation of these findings by the judge shall assist in the adjudication of the lawsuit.
California, in a brief amicus curiae, pp. 5—6, tells us:
Cf. International Shoe Co. v. Federal Trade Comm'n, 280 U.S. 291, 50 S.Ct. 89, 74 L.Ed. 431.
Cf. Wisconsin v. Illinois, 281 U.S. 179, 197, 50 S.Ct. 266, 74 L.Ed. 799.
This Court has not had the benefit of an amicus brief from the Federal Power Commission.