Source: http://www.law.cornell.edu/supremecourt/text/409/363
Timestamp: 2014-07-29 21:39:47
Document Index: 551185691

Matched Legal Cases: ['§ 408', '§ 408', '§ 408', '§ 408', '§ 408', '§ 409', '§ 408', '§ 408', '§ 408', '§ 408', '§ 1', '§ 411', '§ 414', '§ 408', '§ 408', '§ 1324', '§ 408', '§ 408', '§ 415', '§ 408', '§ 415', '§ 408', '§ 414', '§ 408', '§ 408', '§ 414', '§ 414', '§ 408', '§ 408', '§ 408', '§ 411', '§ 411', '§ 415', '§ 408', '§ 7', '§ 408', '§ 1002', '§ 415']

HUGHES TOOL COMPANY et al., Petitioners, v. TRANS WORLD AIRLINES, INC. TRANS WORLD AIRLINES, INC., Petitioner, v. HUGHES TOOL COMPANY et al. | LII / Legal Information Institute
Supreme Court aboutsearch liibulletin subscribe previews HUGHES TOOL COMPANY et al., Petitioners, v. TRANS WORLD AIRLINES, INC. TRANS WORLD AIRLINES, INC., Petitioner, v. HUGHES TOOL COMPANY et al.
409 U.S. 363 (93 S.Ct. 647, 34 L.Ed.2d 577)
[HTML] dissent, BURGER, BLACKMUN
[HTML] See 410 U.S. 975, 93 S.Ct. 1434, 1435.
Trans World Airlines (TWA) brought this antitrust action against the Hughes Tool Co. (Toolco) and others for treble damages as a result of the manner in which Toolco had exercised its controlling interest in TWA, with particular reference to Toolco's asserted acts to control and dictate the acquisition and financing of aircraft by TWA. As an organization engaged in phases of aeronautics, Toolco could not acquire control of an air carrier such as TWA without consent of the Civil Aeronautics Board (CAB). In 1944 the CAB approved de facto control of TWA by Toolco as comporting with the provisions of § 408 of the Federal Aviation Act. That provision permits acquisitions of control that the CAB finds are not inconsistent with the public interest and that will not result in monopoly. Section 414 immunizes from antitrust liability any conduct approved by a CAB order issued under § 408. The approval narrowly limited intercompany sales transactions without specific CAB approval, and required annual reporting. A few years later, Toolco and TWA made an agreement permitting Toolco to obtain full legal control of TWA. The CAB, after full hearings into the Toolco-TWA relationship, found that Toolco's financial and other support was of great importance to TWA and concluded that 'the continued interest of Toolco in TWA appears essential to the best interests of the carrier and the public.' The CAB's approval was made subject to the conditions of the 1944 order. As a result, from 1944 to 1960, every acquisition and lease of aircraft by TWA from Toolco and each financing by TWA from Toolco received CAB approval pursuant to § 408. In 1960, Toolco's stock in TWA was placed in a voting trust in connection with a program for financing TWA's acquisition of jet equipment. Shortly thereafter, TWA brought this suit. As a defense, Toolco relied on Pan American World Airways, Inc. v. United States, 371 U.S. 296, 83 S.Ct. 476, 9 L.Ed.2d 325. The District Court entered a default judgment against Toolco. The Court of Appeals affirmed, concluding that Pan American was inapplicable because, unlike the situation in that case, the conduct challenged in TWA's complaint was 'unrelated to any specific function of the CAB' and not within the CAB's exclusive competence. Held: The transactions that TWA challenged as violative of the antitrust laws were under the CAB's control and surveillance, and, by virtue of §§ 408 and 414 of the Federal Aviation Act, had immunity under the antitrust laws. The Court of Appeals, therefore, erred in holding that Pan American, supra, is not controlling on the facts involved here. Pp. 366389.
The complaint in this litigation alleged antitrust violations and damages suffered by Trans World Airlines (TWA) while under control of Hughes Tool Co. (Toolco). A default judgment was entered for over $145 million with interest at the rate of 7 1/2%. The District Court's opinions confirming the damages award are reported at 308 F.Supp. 679, 312 F.Supp. 478. The Court of Appeals affirmed, 449 F.2d 51. The cases are here on a petition for certiorari
and on a cross petition. 405 U.S. 915, 92 S.Ct. 960, 30 L.Ed.2d 785.
Specifically, s 408(a)(5) requires the approval of the Board when 'any person engaged in any other phase of aeronautics' seeks to acquire control of any air carrier in any manner whatsoever. Section 408(b) authorizes and directs the Board to approve such transactions, including acquisitions of control, that are in the 'public interest' and prohibits approval of any transaction 'which would result in creating a monopoly or monopolies and thereby restrain competition or jeopardize another air carrier' not a party to the transaction. Section 102 of the Act requires that in assessing the public interest and the public convenience and necessity, the Board should consider, among other things, '(c) ompetition to the extent necessary to assure the sound development of an air-transportation system properly adapted to the needs of the foreign and domestic commerce of the United States . . ..'
Section 408(e) empowers the Board, upon complaint or its own initiative, to investigate and determine whether any person is violating any provision of subsection (a) and, if such violation is found, to 'require such person to take such action, consistent with the provisions of this chapter, as may be necessary, in the opinion of the Board, to prevent further violation of such provision.' Under § 408(d), the Board has broad control over the accounts, records, and reports of anyone controlling an air carrier, and their inspection. The Board is further granted power to control the designation of any officer or director of an air carrier who is an officer, director, member, or the controlling stockholder of any person who is engaged 'in any phase of aeronautics.' § 409(a), 49 U.S.C. 1379(a). Section 414 relieves from the operation of the antitrust laws any person affected by any order under § 408 'insofar as may be necessary to enable such person to do anything authorized, approved, or required by such order.'
It was against this statutory backdrop that the Civil Aeronautics Board issued a series of decisions and orders with respect to the control of TWA by Toolco, the major decisions being issued in 1944, 1948, 1950, and 1960. The first decision, 6 C.A.B. 153 (1944), authorized control of approximately 45.6% of the outstanding stock of TWA. From the Board's opinion issued at that time, it appears that Howard Hughes first became interested in TWA at the invitation of his friend, Jack Frye, the president of TWA. Hughes began acquiring TWA stock through Toolco, which he solely owned. By 1942, Toolco had acquired 42.1% of TWA's outstanding stock and for all practical purposes was in position to control the day-to-day affairs of the carrier. Meanwhile, Hughes and Frye and jointly designed a four-engine transport, later known as the Constellation, which Lockheed agreed to manufacture under contract with Toolco. The contract was assigned by Toolco to TWA in 1942, Toolco reserving the right to purchase a sizable number of such aircraft through TWA. It was this arrangement by which Toolco might actually acquire for resale a number of commercial aircraft that, together with its experimental work in aviation and its manufacture of aircraft parts for the military, characterized Toolco as an organization engaged in any phase of aeronautics and therefore forbidden to acquire control of an air carrier such as TWA without the consent of the Board. Toolco's control of TWA, by virtue of its stock ownership which had by 1944 increased to 45.6%, was approved by the Board as being in the public interest and consistent with the provisions of § 408, including the prohibition against monopoly. In order to insure that Toolco would not abuse its power over TWA, 'to its own profit and to the detriment of the public interest,' 6 C.A.B., at 156, the approval was to continue only so long as intercompany purchases did not exceed $200 per item and did not amount to more than $10,000 in any one calendar year. Annual reports were required in this respect.
6 C.A.B., at 158.
opted for an investigation sufficiently broad to inquire 'into the actions and policies of the controlling company with respect to TWA for the period during which the prior-approved control existed . . . (f)or inevitably the controlling company, by virtue of its investment in the acquired carrier, will endeavor to make itself accountableas indeed the acquirer here under scrutiny hadfor the managerial efficiency, the operating economy, and the financial integrity of the controlled carrier.' 12 C.A.B. 192, 196 (1950). Before approving the additional acquisition, which would make certain '(c)omplete actual and legal control,' id., at 197, the Board determined not only to examine the future plans of Toolco but also its past conduct with respect to TWA.
Accordingly, the Toolco-Hughes-TWA relationship from 1939 to the date of the decision was examined in detail, including the events occurring since the letter agreement of January 1947. The major focus of the inquiry was the differences between TWA management and Toolco with respect to the acquisition of new flight equipmentthe quantity, the type, the timing, and the financing thereof. Unquestionably, TWA had been and was in need of additional financing to make possible the purchase of new equipment, particularly that needed to operate its expanded routes. TWA proposed and preferred equity financing in large measure, but Toolco most often insisted on financing new equipment through credit arrangements. Disagreement caused delay, and this, in combination with other factors, brought TWA to the verge of bankruptcy or reorganization in late 1946. It was at this juncture that the January 1947 letter agreement eventuated. Financial failure was averted; but urgent needs for new equipment continued, and substantial additions were made in the years from 1947 to 1950, most of it with the aid of Toolco and some of it by purchase from Toolco itself.
By the time the hearings concluded and the case was under submission, TWA's financial condition had considerably improved, measurably aided by better operating results, better expense control, and a stock offering to stockholders with the unsubscribed amount being underwritten by investment bankers. 12 C.A.B., at 208209.
In considering whether the additional control by Toolco would be in the public interest, the Board observed that there was no conflict of interest between Toolco's present or contemplated aeronautical activities and its control of an air carrier and that enhanced control presented no problems under the antimonopoly provisions of § 408(b). Id., at 216. The Board then noted that Toolco's contributions to the science of aeronautics by way of aircraft design and instrumental aids to aviation for both the armed services and civil aviation have been substantial and found that 'of specific importance to TWA, have been the contributions of Toolco and Mr. Hughes in the way of financial support to the carrier, in the selection and purchase of its equipment, and their advice and guidance to the engineering and operations departments of the carrier.' Ibid.
Most important, however, in the Board's opinion, were the efforts of Toolco to improve the financial position of TWA during the last few years. Although criticizing Toolco, along with others in the aircraft transportation industry, for relying too heavily on debt financing which, in the case of TWA had resulted in a very difficult, lopsided capital structure, the Board concluded that the record would not support a finding that the additional control would be inconsistent with the public interest. Indeed, the Board concluded that '(t)he continued interest of Toolco in TWA appears essential to the best interests of the carrier and the public.' Id., at 224.
The Board's approval in 1950 of the complete control of TWA by Toolco was made 'subject to the terms and conditions' imposed by the 1944 order with respect to intercompany purchases and annual reporting. See supra, at 370. As a result, from 1944 through 1960, every acquisition or lease of aircraft by TWA from Toolco and each financing of TWA by Toolco required Board approval. Applications by Toolco were made to the Board in each instance, with the terms and conditions of the transactions being described.
Each was approved by the Board and each was regarded as a modification or interpretation of its antecedent control orders under § 408. Each of these transactional orders recited a finding of the Board that the transaction was 'just and reasonable and in the public interest.' Then, in December 1960, the Board issued an order approving a major proposal by TWA for the acquisition of jet equipment, which among other things involved fundamental changes in relationship between TWA and Toolco in that the stock of the former, at the insistence of the financial institutions involved in the program, was to be placed in a voting trust and the company's Board of Directors reconstituted. 32 C.A.B. 1363. The dominant position of Toolco thus ended for the period of the trusteeship. In the course of its opinion accompanying the order, the Board stated that although it had not been officially informed of the reasons for the banks' insistence on the voting trust, it was not 'unaware of TWA's problems.' Id., at 1364. The Board knew, because it was a matter of public record, that TWA had been delayed in financing its jet fleet and the Board's opinion was that TWA had probably suffered because more attractive financing terms were no longer available and because the unavailability of equipment may have contributed to the company's failure to maintain its normal share of the transportation market. 'Under these circumstances' the Board said, 'we think it clear that Board action to facilitate TWA's acquisition of jet equipment is in the public interest. At the same time, however, it is evident that Toolco's control of TWA, as exercised through Hughes, has presented substantial problems requiring the Board's attention.' Id., at 1365. The Board went on to make clear that its approval would be required before Toolco would be permitted to reasume control over TWA and that any such approval would be forthcoming only after a most 'searching inquiry' into the public interest factors involved.
It was six months later that TWA, now no longer under control of Toolco, filed suit against the latter alleging violations of the antitrust laws to the injury of TWA's business. As analyzed by the Court of Appeals in its opinions filed in this case, the complaint rested principally on Toolco's conduct as controlling stockholder during the years 19551960. The assertions were that in 1955 the commercial air industry was converting to jet aircraft, and that TWA's competitors began in that year 'to aid in the development of and to purchase jet planes.' 332 F.2d 602, 605. Toolco and General Dynamics Corp. (Convair) had entered into an arrangement for the joint development of a suitable aircraft but the plan proved abortive, whereupon Toolco considered but ultimately abandoned a plan for itself to enter aircraft production. Meanwhile, Toolco had arranged for the purchase of jet aircraft from Convair and Boeing, the arrangements providing that Toolco could assign its rights to such aircraft to TWA.
The transactions on the basis of which damages were awarded were based primarily on profits lost as a result of five transactions relating to orders placed by Toolco for a fleet of 63 jet aircraft destined for use by TWA. 449 F.2d, at 6566:
In Pan American World Airways, Inc. v. United States, supra, the United States brought a civil antitrust action under §§ 1, 2, and 3 of the Sherman Act challenging the joint control of Panagra, an air carrier, by Pan American Airways and W. R. Grace & Co. The allegations were that Pan American, Grace, and Panagra had divided territories, that Pan American and Grace had conspired to monopolize air transportation on the west coast of South America, and that Pan American had used its power to prevent Panagra from extending its routes from the Canal Zone to the United States. The District Court found no division of territories and no conspiracy between Grace and Pan American but concluded that Pan American had violated the Sherman Act in interfering with Panagra's possible route extension. On cross appeals by Pan American and the United States, this Court held that the complaint should have been dismissed because § 411 of the Act gave the CAB broad power to investigate and bring to a halt unfair practices and unfair methods of competition, including those alleged in the complaint, and because if the courts were to intrude independently with their own construction of the antitrust laws the two regimes might collide. Hence, relief against the alleged division of territories, allocation of routes, and conspiracy to monopolize was a matter exclusively for the Board. The Court also pointed out that under § 414 of the Act, Board orders carried antitrust immunity for any conduct authorized, approved, or required by the order and that it would be odd to hold that an affiliation between an air carrier and others that would pass muster under § 408 could nevertheless run afoul of the antitrust laws: 'Whether or not transactions of that character meet the standards of competition and monopoly provided by the Act is peculiarly a question for the Board, subject of course to judicial review as provided in 49 U.S.C. 1486.' 371 U.S., at 309, 83 S.Ct., at 484, 9 L.Ed.2d 325.
In reaching this conclusion, the Board inquired broadly into all phases of the exercise of Toolco's control over TWA during the years 19441947. It was not only proper but necessary in determining whether further acquisition of control was consistent with the public interest to examine 'into the actions and policies of the controlling company . . . (f)or inevitably the controlling company, by virtue of its investment in the acquired carrier, will endeavor to make itself accountable . . . for the managerial efficiency, the operating economy, and the financial integrity of the controlled carrier.' 12 C.A.B., at 196. Hence, of major interest to the Board were the decisions of Toolco with respect to the type, quantity, timing, and financing of new equipment acquisitions by TWA. It examined and dealt with in great detail the assertions that Toolco had improperly delayed the arrival of new equipment, had insisted on debt rather than equity financing, and itself had sold or leased aircraft to TWA. All of these matters, the Board concluded, were central to proper determination of the issue of the additional control and, indeed, to the additional question before the Board as to whether the existing relationship should have been completely terminated.
Nor is it tenable to argue that, however relevant Toolco's new equipment decisions might have been to the public-interest standard mandated for Board approval of the additional control obtained in 1947, the Board's authority nevertheless terminated with that approval and that the Board, having issued its approval, was powerless to control or oversee its exercisde in the years to come. Section 408 permits only those acquisitions of control that are not inconsistent with the public interest and that will not result in a monopoly. It also authorizes the Board to approve acquisitions subject to such conditions as it may deem desirable. Section 408(e) empowers the Board to investigate and remedy violations of § 408(a). If a carrier has acquired control 'in any manner whatsoever' other than that approved by the Board, the Board is authorized either on complaint or its own initiative to investigate and if a violation is discovered it is ordered to remedy that situation. Section 204(a), 49 U.S.C.A. § 1324(a), authorizes the Board to issue and amend such orders as it shall deem necessary to carry out the provisions of and to exercise and perform its powers and duties under the statute.
We have little doubt that the authority of the Board, either on complaint or its own initiative, extended to forbidding any exercise of control by Toolco which was not authorized or contemplated by the initial or subsequent approval. This seems the clear import of the Act and of the Board's 19481950 proceedings.
two ingredients of the antitrust lawsare thus standards governing the CAB's exercise of authority in granting, allowing, or expanding or contracting the control which Toolco had over TWA by reason of the various orders issued by the CAB under § 408. In this context, the authority of the Board to grant the power to 'control' and to investigate and alter the manner in which that 'control' is exercised leads us to conclude that this phase of CAB jurisdiction, like the one in the Pan American case, pre-empts the antitrust field.
It should be noted in that connection that in the Pan American case, Pan American, which owned 50% of the stock of the air carrier Panagra, was charged with using its control to prevent Panagra from receiving the authority of the CAB to extend its route from the Canal Zone to the United States. That restraint was held beyond the reach of the antitrust laws even though the CAB had taken no action to investigate, let alone act on, the alleged misfeasance as the Board has done here for over 16 years.
There may be other exceptions. But where, as here, the CAB authorizes control of an air carrier to be acquired by another person or corporation, and where it specifically authorizes as in the public interest specific transactions between the parent and the subsidiary, the way in which that control is exercised in those precise situations is under the surveillance of the CAB, not in the hands of those who can invoke the sanctions of the antitrust laws. As noted, the parent company which controls an air carrier is subject to pervasive control by the CAB. The control which the CAB is authorized to grant or to deny under § 408 involves an appraisal of the impact of that control in terms of monopoly and competition; and the ongoing supervision entrusted to the CAB by § 415 is broad enough to put all transactions between parent and subsidiaryas originally conceived or subsequently exercisedunder CAB supervision.
We by no means hold that the Federal Aviation Act completely displaces the antitrust laws. Pan American, 371 U.S., at 305, 83 S.Ct., at 482, 9 L.Ed.2d 325. But where, as here, the CAB authorizes control of an air carrier to be acquired by another person or corporation, and where the CAB specifically authorizes as in the public interest specific transactions between the parent and the subsidiary, the way in which that control is exercised in those precise situations is under the surveillance of the CAB, not in the hands of those who can invoke the sanctions of the antitrust laws. The control which the CAB is authorized to grant or to deny under § 408 involves an appraisal of the impact of that control in terms of monopoly and competition; and the ongoing supervision entrusted to the CAB by § 415 is broad enough to put all transactions between parent and subsidiaryas originally conceived or subsequently exercisedunder CAB supervision.
The history of this cause is so remarkableindeed unique in the annals of modern federal jurisprudence, so far as I am aware that I must preface my dissent on the merits with a recital of the course of this litigation over nearly a dozen years. This protracted litigation, conducted at enormous cost, now comes to an abrupt end on an issue directly presented to this Court nearly eight years ago but not decided. As the strange history will demonstrate, resolution of the issue when it was first before the Court, as now decided, would have terminated this litigation without having the parties invest untold efforts and vast expense in a now wholly irrelevant contest over the proper measure of damages.
In response to the order to produce Hughes for examination along with the contested documents, Toolco filed a 'notice of position,' on February 8, 1963, advising the District Court and TWA that it had chosen to rest on the merits of its positions in order to 'avoid the burdens and expenses involved in further pretrial and trial proceedings prior to the time that an appellate court has had the opportunity to rule upon the decisions and orders heretofore made herein.'
This 'notice of position' constituted a default and accordingly judgment was entered against Toolco, on May 3, 1963. The District Court then certified to the United States Court of Appeals for the Second Circuit the question of the sufficiency of the complaint on which the default judgment was based. The issue of damages was referred to the Special Master. On June 2, 1964, the Second Circuit issued an opinion in which it decided that the District Court had jurisdiction of the action and that the orders of the Civil Aeronautics Board affecting the relationship between the parties did not constitute a good defense to the antitrust claims of TWA.
On April 14, 1970, the District Court filed a superseding order in which it added to the TWA award $7,500,000 as a reasonable attorney's fee (representing some 56,000 hours of work at a 'mixed rate' of $128 per hour) and $336,705.12 in costs, for a total of $145,448,141.07, plus interest. The judgment was stayed pending a renewed appeal to the Court of Appeals, which, on September 1, 1971, affirmed the judgment of the District Court, with only slight modification.
and todaymore than 11 years after it all began and more than seven years after the now-determinative issue was brushed aside by this Courtthe Court discovers that the actions alleged in TWA's complaint were immunized from the antitrust laws by the Civil Aeronautics Board's role in the ToolcoTWA relationship. This, of course, was the precise issue tendered to this Court for decision in 1964 in order to secure an early decision that might end the contest before enormous additional sums were expended in proving damages resulting from the actions alleged in TWA's complaint.
Indeed, today's 'ending' is quite a surpriseas great a surprise for some of us as it must be for the parties. I suggest it will even surprise the victors, for in the oral argument to this Court only a few fleeting comments were devoted to the point that now becomes the dispositive issue in the case. Of course, this was a sound allocation by counsel of the limited time allowed for argument since the Court had not considered the point worthy of notice in 1964 when the case was first here.
To be sure, all this is secondary to the correctness of today's decision. I am unable to join the Court's disposition because I believe it departs markedly from our prior decisions uniformly holding that repeal of the antitrust laws to accommodate other federal regulatory statutes 'is to be regarded as implied only if necessary to make the (regulatory scheme) work, and even then only to the minimum extent necessary.' Silver v. New York Stock Exchange, 373 U.S. 341, 357, 83 S.Ct. 1246, 1257, 10 L.Ed.2d 389 (1963). In particular, the Court today substantially enlarges the scope of Pan American World Airways, Inc. v. United States, 371 U.S. 296, 83 S.Ct. 476, 9 L.Ed.2d 325 (1963), a case which the Court says 'requires' the result it reaches todaynotwithstanding that Pan American's teaching was available in Volume 371 of the United States Reports when the Court dismissed the writ in this cause as improvidently granted.
* Passing to the merits of the Court's holding, I find it necessary at the outset to supplement the Court's description of the statutory framework from which this litigation arises. Section 408 of the Federal Aviation Act of 1958, 49 U.S.C. 1378,
requires the approval of the CAB when any person
seeks to acquire a controlling interest in any air carrier. The Board may approve such acquisition only if it finds that the acquisition will be consistent with the public interest. § 408(b), 49 U.S.C. 1378(b). Specifically, the Board 'shall not approve any . . . acquisition of control which would result in creating a monopoly or monopolies and thereby restrain competition or jeopardize another air carrier not a party to the . . . acquisition of control.' Ibid.
enumerating the general policies that are to guide the Board is similarly ambiguous. It includes among those factors to be weighed in evaluating the 'public interest' factor under the Act '(c)ompetition to the extent necessary to assure the sound development of an air-transportation system properly adapted to the needs of the . . . commerce of the United States . . ..' Again, though, the question is: competition by whom? In which market or markets?
There can be no doubt the Board is responsible for promoting competition in some sense; our inquiry is whether the Board is charged with fostering competition both within the air transportation market and without, in other markets essentially unrelated to air transportation and alien to the purposes for which the Board was created. Resolution of this ambiguity is critical to proper interpretation of § 414 of the Act,
which confers antitrust immunity upon '(a)ny person affected by any order made under (§ 408, inter alia) . . . insofar as may be necessary to enable such person to do anything authorized, approved, or required by such order.' What is 'authorized, approved, or required' by the CAB must surely by determined, at least to a very large extent, by the scope of the Board's mandate to evaluate potentially anticompetitive conduct.
A key aim of the new legislation, then, was to eliminate 'cutthroat competition' among air carriers. From the beginning, the air carriers pushed for a scheme of regulation to control entry and regulate price competition in the air transportation market. Yet equally soon after serious consideration of an air regulation bill began, the prospect of regulation gave rise to concern that the new system of regulation might be used to foster the development of an 'airline trust' or similar overconcentration in the air transportation market. In 1937, Commissioner Eastman of the Interstate Commerce Commission, who supported full federal regulation of air transportation, reminded the members of the Senate Commerce Committee that the proposed legislation would give the Commission unlimited authority to consolidate the Nation's airlines and, possibly, to do away with competition altogether. Eastman suggested that language be drafted to preclude undue consolidation among carriers.
As one commentator has stated, 'Eastman's suggestion appears to have been heeded, for when the (1937) bill was reported, the merger clause contained (the language which became the anti-monopoly restriction of section 408).' Comment, Merger and Monopoly in Domestic Aviation, 62 Col.L.Rev. 851, 856857 (1962). Final consideration of the Aviation bill was postponed until the next session of Congress, but when Senator McCarran and Representative Lea introduced legislation at the 1938 session to create an independent air regulatory agency, both bills 'contained a monopoly proviso virtually identical to the one that had been added to the 1937 bills, as reported.' Id., at 857.
To implement § 408's scheme for balancing stability with competition in the air transportation market, the bill provided explicit antitrust immunity in § 414.
The debates over § 414 like the origins of § 408reflect congressional concern with competition in the air transportation market. Senator McKellar asked Senator Truman, a major supporter of the aviation bill, if it were true that the proposed legislation would repeal the antitrust provisions of the existing airmail laws. When Senator Truman answered in the affirmative, Senator McKellar complained that:
'I desire to state that I cannot vote for any bill which proposes that a commission shall give air companies the right to combine and confederate into a huge monopoly. I regret very much that I shall have to vote against the bill.' 83 Cong.Rec. 67286729.
Senator McCarran disagreed. He told Senator McKeller that the bill 'contain(ed) every protection against the very thing which the Senator from Tennessee fears.' Senator Truman reminded his colleagues of the § 408 proviso requiring that the Board approve no acquisition of control that would 'result in creating a monopoly or monopolies and thereby restrain competition or jeopardize another air carrier not a party to the consolidation . . ..' Senator McCarran agreed that 'every precaution has been written into the bill so that the antitrust laws and all laws for the prevention of combinations and monopolies shall be enforced. . . . Protection has been written into the bill against combinations and monopolies in restraint of trade, in restraint of commerce, and in restraint of everything which would constitute a monoply.' Id., at 6729. Senator Copeland recited five different provisions of the bill 'where the question of monopoly is dealt with in one way or another with the view to its control and prevention.' When the debate turned from the discussion of general principles to application of those principles to a particular fact situation, again the Senators spoke of consolidation and competition by air carriers.
Our holding in Pan American World Airways, Inc. v. United States, 371 U.S. 296, 83 S.Ct. 476, 9 L.Ed.2d 325, becomes important in this setting. There, the Government filed an antitrust complaint alleging, inter alia, anticompetitive interference by Pan American with the route acquisitions of Panagra, a joint venture of Pan American World Airways and W. R. Grace & Co. This Court held that the complaint should be dismissed. The Court stood behind the presumption against implied antitrust immunity, 371 U.S., at 304305, n. 9, 83 S.Ct., at 482, 9 L.Ed.2d 325; however, for two interdependent reasons, the Court held that the conduct alleged in Panagra's complaint was immunized from the antitrust laws. First, the conduct specified in the complaint fell within the Board's basic mission and competencythe regulation of entry into and competition within the air transportation market:
The present case is different from Pan American in a critical respect. Here, we may assume the Board possesses full authority under the Act to supervise § 408 transactions between a controlling person and an air carrierjust as in Pan American, the allocation of routes and division of territories constituted the basic stuff of the Board's day-to-day business. Yet, unlike the acts specified by Panagra in Pan American, the acts charged in TWA's complaint are components of an antitrust conspiracy to restrain trade in the aircraft supply and manufacturing market. Section 411 does not command Board responsibility for preventing such a conspiracy, since § 411 is in terms restricted to unfair methods of competition 'in air transportation or the sale thereof.' Thus, to sustain its result in this case, the Court must fall back on one (or both) of two propositions: it must either find some specific authority in the Federal Aviation Act other than § 411 for its conclusion that the Board's mandate to police anticompetitive practices extends to the subject matter of TWA's complaint; or it must consider such statutory authority irrelevant to a finding of antitrust immunity. Neither approach is, in my view, sound.
A. Improbable as it seems, there is much in the Court's opinion to suggest that its judgment rests upon the assumption that antitrust immunity is conferred here simply by virtue of a rather extensive grant of procedural authority for the Board to intervene in the control-person-air-carrier relationship. The Court recounts in detail the history of the Board's involvement in the Toolco-TWA relationshipthough the Court does not suggest, as it cannot, that the Board specifically considered the actions by Toolco alleged in TWA's complaint to violate the antitrust laws.
The Court tells us that in 1950, the Board embarked upon a wide-ranging evaluation of the treatment afforded TWA by Toolco as controlling person though the Court does not suggest, as again it cannot, that the 1950 proceeding of the Board even remotely considered Toolco's actions as components of an antitrust conspiracy directed toward the aircraft supply and manufacturing market.
Finally, the Court makes much of the powers of investigation and continuing supervision provided by § 415 of the Actthough the Court does not acknowledge that those powers are explicitly limited by Congress to Board actions '(f)or the purpose of exercising and performing (the Board's) powers and duties under this Act,' and are therefore no indication of the scope of the Board's substantive responsibility.
The weakness inherent in the Court's recitation of 'procedural underbrush' is that it leaps from the premise of the Board's acknowledged procedural power to intervene in § 408 'control' transactions to the conclusion that the Board's substantive statutory duty to consider the anticompetitive impact of such transactions is or, for some reason of policy, ought to be equally unlimited. Yet, inescapably, it is the Board's substantive mandate upon which antitrust immunity properly turns; as our prior decisions teach, the potential of colliding substantive judgments forces the carving out of antitrust immunity, not simply the overlapping of jurisdiction to intervene in a particular type of transaction. We have uniformly insisted upon a substantive mandate to the regulatory agency to consider fully and remedy the relevant anticompetitive conduct. See, in addition to Pan American, supra, United States v. Borden Co., 308 U.S. 188, 206, 60 S.Ct. 182, 191, 84 L.Ed. 181 (1939) (relevant provision of Capper-Volstead Act 'does not cover the entire field of the Sherman Act'); Georgia v. Pennsylvania R. Co., 324 U.S. 439, 458, 65 S.Ct. 716, 726, 89 L.Ed. 1051 (1945) ('no warrant in the Interstate Commerce Act and the Sherman Act for saying that the authority to fix joint through rates clothes with legality a conspiracy to discriminate against a State or a region, to use coercion in the fixing of rates, or to put in the hands of a combination of carriers a veto power over rates proposed by a single carrier'); Maryland & Virginia Milk Producers Assn. v. United States, 362 U.S. 458, 469, 80 S.Ct. 847, 855, 4 L.Ed.2d 880 (1960) (§ 7 of Clayton Act immunized 'transactions duly consummated pursuant to authority given by . . . the Secretary of Agriculture' under statutory authority, but this included only marketing agreements and not agreements or restraints of wider scope typically covered by the antitrust laws); California v. Federal Power Comm'n, 369 U.S. 482, 485, 82 S.Ct. 901, 904, 8 L.Ed.2d 54 (1962) ('Here . . . while 'antitrust considerations' are relevant to the issue of 'public interest, convenience, and necessity' . . . there is no 'pervasive regulatory scheme' . . . including the antitrust laws that has been entrusted to the Commission'); United States v. Philadelphia National Bank, 374 U.S. 321, 351352, 83 S.Ct. 1715, 17341736, 10 L.Ed.2d 915 (1963) (though Comptroller of Currency was required to consider effect on competition in passing on bank merger, not required to give the factor any particular weight, to hold a hearing, or to subject his determination to judicial review).
B. The major premise of the Court's decision must, then, be that the Federal Aviation Act imposes on the Board full responsibility for evaluating and preventing anticompetitive impact, of whatever variety, flowing from a control transaction touching an air carrier. As the Court puts it, 'Competition and monopolytwo ingredients of the antitrust lawsare thus standards governing the CAB's exercise of authority in granting, allowing, or expanding or contracting all control which Toolco had over TWA by reason of the various orders issued by the CAB under § 408.' I cannot agree with the Court's reading of the provisions of the Act that require the Board of maintain competition. The Court offers no support for its reading of those provisions; and, as I have already indicated, the legislative history surely provides none. Moreover, the Board itself has consistently interpreted the Act not to impose on it the expansive role the Court now perceives for the first time. In a brief amicus curiae filed in 1964 and again in 1972, the Board disclaimed the mandate or the competency to police the aircraft supply market or any non-air carrier market which may be threatened by anticompetitive acts involving control of an air carrier. We have only recently reaffirmed the well-established doctrine that the consistent administrative construction of federal legislation 'is entitled to great weight.' Trafficante v. Metropolitan Life Insurance Co., 409 U.S. 205, at 210, 93 S.Ct. 364, at 367, 34 L.Ed.2d 415; Udall v. Tallman, 380 U.S. 1, 16, 85 S.Ct. 792, 801, 13 L.Ed.2d 616 (1965); Griggs v. Duke Power Co., 401 U.S. 424, 433434, 91 S.Ct. 849, 854855, 28 L.Ed.2d 158 (1971). As for the Board's competence to do the job assigned it by the Court, we are not tied to the Board's self-appraisal, but 'it is entitled to some weight,' particularly when the legal issue surrounding Toolco's alleged behavior in the aircraft supply market 'are typical antitrust problems and not at all typical airline law problems.' 'The search for a practical accommodation of court and agency . . . is not advanced by our ignoring the agency's considered sense of self-limitation.' Pan American World Airways, supra, 371 U.S., at 328, 330, 83 S.Ct., at 494 (Brennan, J., dissenting).
If the Board's basic function, the Act's legislative history, and the Board's view of its own mandate and competence were not enough to convince me that the Court's reading of the Act is erroneous, these factors are at least enough to raise substantial doubts. Such doubts, as our prior cases teach, are enough to secure the continuing availability of antitrust or other judicial remedies as additional safeguards for protection of the public interest. 'Repeals of the antitrust laws by implication from a regulatory statute are strongly disfavored.' United States v. Philadelphia National Bank, supra, 374 U.S., at 350, 83 S.Ct., at 1734, United States v. Borden Co., 308 U.S., at 198, 60 S.Ct., at 188 ('a cardinal principle of construction that repeals by implication are not favored'). See United States v. Socony-Vacuum Oil Co., 310 U.S. 150, 226228, 60 S.Ct. 811, 846 847, 84 L.Ed. 1129 (1940); Georgia v. Pennsylvania R. Co., 324 U.S., at 456457, 65 S.Ct., at 725726; California v. Federal Power Comm'n, 369 U.S., at 485, 82 S.Ct., at 903, and 14 additional cases cited in Mr. Justice Brennan's opinion for the Court of United States v. Philadelphia National Bank, supra, 374 U.S., at 350 n. 28, 83 S.Ct., at 1734. The traditional aversion to implied repeal of the antitrust laws should have particular force in the context of the Federal Aviation Act, which explicitly states that '(n)othing contained in this chapter shall in any way abridge nor alter the remedies now existing at common law or by statute, but the provisions of this chapter are in addition to such remedies.' 49 U.S.C. 1506; and see Pan American World Airways, supra, 371 U.S., at 321, 83 S.Ct., at 490 (Brennan, J., dissenting).
Returning to the 1964 efforts of Toolco to have the Court resolve the issue of the Board's authority with respect to the antitrust issue, it is elementary, of course, that a denial of a petition for certiorari decides nothing. It is also true that dismissal of a petition as improvidently granted, after full oral argument and briefing, is not a judgment on the merits in any sense. But when parties to litigation reach that stage and the Court fails to respond with a decision on the merits, lawyers read that as a signal that the case should proceed. These parties did sofor nine years and more than 15 million dollars in legal expenseonly to be told by the Court now that on the facts there is no legal liabilitythe very issue that could as well have been decided in 1964 as today. All of the litigation since 1964 has been confined to the massive task of determining damages and it will not do to say that the Court could not resolve the legal issues until damages were ascertained. Precisely the contrary is true.
Section 408, 72 Stat. 767, as amended, 49 U.S.C. 1378, reads in pertinent part as follows:
Section 102, 49 U.S.C. 1302, reads:
Section 414, 49 U.S.C. 1384, reads:
See also §§ 1002(b), (c), of the Act, 49 U.S.C. 1482(b), (c).
See also § 415 of the Act, 49 U.S.C. 1385, which provides that:
'Agreements of this nature, whereby a carrier operating in a particular territory obtains from a prospective competitor an undertaking, express or implied, not to attempt competitive operations, are likely to tend to impede the development of competition to the extent required by the present and future needs of the nation. Accordingly, we are of the opinion that such agreements thwart the purposes of the Act, and that their formation should in general be discouraged.' Pan American Airways, 3 C.A.B. 540, 546547.
The Pan American case is consistent with the view expressed in Silver v. New York Stock Exchange, 373 U.S. 341, 360 361, 83 S.Ct. 1246, 12581259, 10 L.Ed.2d 389, that a statutory scheme that does not create a total exception from antitrust laws may, nonetheless, in particular and discrete instances by implication grant immunity from an antitrust claim.
Section 408, 49 U.S.C. 1378, reads in pertinent part as follows:
Section 408(a)(5) was amended in 1969 to require Board approval of an acquisition of control of an air carrier by 'any other person.' 83 Stat. 103, 49 U.S.C. 1378(a)(5). Prior to 1969, the Act required Board approval only for acquisition of control of an air carrier by another air carrier, by persons having other specified transportation interest, or by a 'person engaged in any other phase of areonautics.'
Testimony of Joseph B. Eastman, Member, Interstate Commerce Commission, on S. 2 and S. 1760 before a Subcommittee of the Senate Committee on Interstate Commerce, 75th Cong., 1st Sess., 334335 (1937).
83 Cong.Rec. 67306731.
on May 17, 1956, the Board approved sale of 33 Lockheed aircraft, and spare parts, by Toolco to TWA;
on Dec. 18, 1956, the Board approved a proposal for TWA to borrow some $10 million in operating capital from Toolco;
on June 11, 1957, the Board approved a proposal whereby Toolco would refinance TWA's May 17, 1956, purchase of Lockheed aircraft;
on Dec. 30, 1958, the Board again approved a transaction relating to the nonjet Lockheed aircraft;
on Feb. 26, 1959, the Board approved a proposal whereby TWA would lease one Boeing 707131 aircraft from Toolco, plus spare parts, for the purpose of training its crews to fly jet aircraft;
on May 15, 1959, the Board approved the lease by Toolco to
TWA of 11 Boeing 707131 jet aircraft, with provision for obtaining spare parts from Toolco and leasing spare jet engines;
on July 1, 1959, the Board approved the lease of four additional aircraft by Toolco to TWA, and the extension of the leases on the previous jet aircraft. The leases were prolonged pending the working out of 'definitive financing arrangements' which, presumably, would enable TWA to acquire ownership of the aircraft;
on Sept. 30, 1959, the Board again approved extension of the jet leases upon the representation of Toolco and TWA that financing arrangements had not yet been completed;
on Jan. 29, 1960, the Board approved the lease by Toolco to TWA of eight 707131's and eight Convair 880's (all jet aircraft), on a day-to-day basis, and again with provision for spare parts. This approval was again premised on completion in the near future of 'definitive financing arrangements permitting (TWA) to operate these aircraft on a permanent basis';
on June 23, 1960, the Board approved acquisitioni.e., purchaseby TWA of 25 Boeing 707 and 20 Convair 880 jet aircraft, with $260 million to be raised by an offering of bonds and junior securities. Toolco was to guarantee the subscription and would lend $50 million to TWA to enable it to make the offering;
on July 21, 1960, the Board approved acquisition of title to two additional jet aircraft by TWA from Toolco; and
finally, on December 29, 1960, the Board approved creation of a voting trust for the placement of Toolco's holdings in TWA.