Source: https://www.law.cornell.edu/supremecourt/text/492/1301
Timestamp: 2015-04-27 07:36:49
Document Index: 46537729

Matched Legal Cases: ['§ 7', '§ 1', '§ 16700', 'art. 872', '§ 16', '§ 16', '§ 16', '§ 7', '§ 5']

CALIFORNIA v. AMERICAN STORES COMPANY et al. | LII / Legal Information Institute
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492 U.S. 1301 (110 S.Ct. 1, 106 L.Ed.2d 616)
CALIFORNIA v. AMERICAN STORES COMPANY et al.
Decided: Aug. 22, 1989
Applicant, through its attorney general on behalf of himself and as parens patriae, brought the underlying action as a private plaintiff to enjoin the merger of respondent Lucky Stores, Inc., the largest retail grocery chain in California, and respondent American Stores Company, operator of Alpha Beta, the fourth largest retail grocery chain in California.
Applicant contends that the merger would substantially lessen competition in the relevant markets, in violation of § 7 of the Clayton Act, 38 Stat. 731, as amended, 15 U.S.C. 18, § 1 of the Sherman Act, 26 Stat. 209, as amended, 15 U.S.C. 1, and California's Cartwright Antitrust and Unfair Competition Acts, Cal.Bus. & Prof.Code §§ 16700-16761 and 17200-17208 (West 1987 and Supp.1989).
"The overwhelming statistical evidence has demonstrated a strong probability that the proposed merger will substantially lessen competition in violation of Section 7 of the Clayton Act. This showing has not been rebutted by clear evidence that the proposed merger will not, in fact, substantially lessen competition. . . . Unless defendants are enjoined, the citizens of California will be substantially and irreparably harmed. While the Court in no way belittles the harm defendants may suffer as a result of this preliminary injunction, the Court concludes that it is substantially less than the harm plaintiff would suffer if the merger is not enjoined." Id., at 1135.
The Court of Appeals for the Ninth Circuit affirmed in part and reversed and remanded in part. 872 F.2d 837 (1989). The Court of Appeals affirmed the District Court's finding that applicant had shown a likelihood of success on the merits and the possibility of irreparable harm. Id., at 844. The Court of Appeals found, however, that the remedy ordered by the District Court amounted to indirect divestiture, which, the Court of Appeals held, was not a remedy available to private plaintiffs under § 16 of the Clayton Act, 38 Stat. 737, as amended, 15 U.S.C. 26. 872 F.2d, at 844-846. Accordingly, the Court of Appeals remanded the case, concluding that the District Court's order enjoining respondents from integrating their operations was overly broad and thus an abuse of discretion. Id., at 845-846.
Moreover, the issue presented appears to be an important question of federal law over which the Circuits are in conflict. Section 16 of the Clayton Act provides in relevant part that "any person . . . shall be entitled to sue for and have injunctive relief . . . against threatened loss or damage by a violation of the antitrust laws . . . when and under the same conditions and principles as injunctive relief against threatened conduct that will cause loss or damage is granted by courts of equity." 15 U.S.C. 26. The Court of Appeals, relying on Circuit precedent, held that divestiture, whether direct or indirect, did not constitute "injunctive relief" within the meaning of § 16. See 872 F.2d, at 844-846 (citing International Telephone & Telegraph Corp. v. General Telephone & Electronics Corp., 518 F.2d 913, 920 (CA9 1975)); accord Arthur S. Langenderfer, Inc. v. S.E. Johnson Co., 729 F.2d 1050, 1060 (CA6), cert. denied, 469 U.S. 1036, 105 S.Ct. 510, 83 L.Ed.2d 401 (1984). As applicant notes, however, the Court of Appeals for the First Circuit has ruled that divestiture is a remedy available to private plaintiffs under § 16 in appropriate circumstances. Cia. Petrolera Caribe, Inc. v. Arco Caribbean, Inc., 754 F.2d 404, 413-430 (1985); see also NBO Industries Treadway Cos. v. Brunswick Corp., 523 F.2d 262, 278-279 (CA3 1975) (dictum), vacated on other grounds, 429 U.S. 477, 97 S.Ct. 690, 50 L.Ed.2d 701 (1977). A number of District Courts have also reached the same conclusion. See, e.g., Tasty Baking Co. v. Ralston Purina, Inc., 653 F.Supp. 1250, 1255-1256 (ED Pa.1987); Julius Nasso Concrete Corp. v. Dic Concrete Corp., 467 F.Supp. 1016, 1024-1025 (SDNY 1979); Credit Bureau Reports, Inc. v. Retail Credit Co., 358 F.Supp. 780, 797 (SD Tex.1971), aff'd, 476 F.2d 989 (CA5 1973); Bay Guardian Co. v. Chronicle Publishing Co., 340 F.Supp. 76, 81-82 (ND Cal.1972). Given the conflict among the lower courts on this important and recurring issue and the need for uniform enforcement of federal antitrust laws, I think it fair to say that there is a reasonable probability that the petition for a writ of certiorari will be granted in this case.
Finally, balancing the stay equities persuades me that the harm to applicant if the stay is denied, in the form of a substantial lessening of competition in the relevant market, outweighs the harm respondents may suffer as a result of a stay of the mandate. Applicant alleges, for example, that permitting the merger would cost the State's consumers $400 million a year in higher prices. Respondents contend that they are incurring costs of over $1 million a week by reason of the District Court's injunction and applicant's decision to file suit after the merger had been consummated. To be sure, the cost of enjoining a merger before consummation is staggering, see Western Airlines, Inc. v. Teamsters, 480 U.S. 1301, 1309, 107 S.Ct. 1515, 1519, 94 L.Ed.2d 744 (1987) (O'Connor, J., in chambers), and the cost of enjoining an already completed transaction even greater. But, as the District Court found, "the State conducted its investigation as swiftly as was responsibly possible." 697 F.Supp., at 1135. Under the circumstances, and in light of the public interests involved, it appears that the equities favor the applicant.
American Stores initiated a hostile takeover bid for the Lucky chain on March 21, 1988. Pursuant to the Hart-Scott-Rodino Antitrust Improvements Act, 90 Stat. 1390, 15 U.S.C. 18a, American Stores notified the Federal Trade Commission (FTC) of its intentions. On May 23, American Stores increased its tender offer, and Lucky's board of directors approved the merger. On May 31, the FTC filed an administrative complaint alleging violations of § 7 of the Clayton Act, 38 Stat. 731, as amended, 15 U.S.C. 18, and § 5 of the Federal Trade Commission Act, 38 Stat. 719, as amended, 15 U.S.C. 45. The FTC simultaneously proposed a consent order under which it would settle its antitrust complaint in exchange for American Stores' compliance with certain demands, including divestiture of certain supermarkets in northern California and an agreement to "hold separate" the two firms until American Stores satisfied all of the consent order's conditions. American Stores agreed to the consent order, and by June 9 completed its $2.5 billion acquisition of the outstanding Lucky stock. On August 31, the FTC gave final approval to the proposed consent order without modification. On September 1, applicant initiated the underlying action.