Source: https://www.law.cornell.edu/supremecourt/text/411/726
Timestamp: 2016-10-21 13:34:37
Document Index: 271537102

Matched Legal Cases: ['§ 15', '§ 4908', '§ 15', '§ 15', '§ 15', '§ 7']

FEDERAL MARITIME COMMISSION, Petitioner, v. SEATRAIN LINES, INC., et al. | US Law | LII / Legal Information Institute
Supreme Court aboutsearch liibulletin subscribe previews FEDERAL MARITIME COMMISSION, Petitioner, v. SEATRAIN LINES, INC., et al.
411 U.S. 726 (93 S.Ct. 1773, 36 L.Ed.2d 620)
Argued: March 21, 1973.
In enacting § 15 of the Shipping Act, 1916, Congress conferred on the Federal Maritime Commission (FMC) the power to exempt from the antitrust laws agreements, or those portions of agreements, between carriers that create an ongoing arrangement in which both parties undertake continuing responsibilities, and which therefore necessitate continuous FMC supervision, but not one-time acquisition-of-assets agreements that result in one of the contracting parties ceasing to exist. Pp. 731746.
The Commission is directed to approve all other agreements, and the statute expressly provides that agreements so approved are exempt from the antitrust laws.
The question presently before us is whether a contract which calls for the acquisition of all the assets of one carrier by another carrier and which creates no ongoing obligations is an 'agreement' within the meaning of this section. The question is of some importance, since if such contracts are not approved by the Commission, the antitrust laws are fully applicable to them. See Carnation Co. v. Pacific Westbound Conference, 383 U.S. 213, 86 S.Ct. 781, 15 L.Ed.2d 709 (1966). Cf. United States v. Borden Co., 308 U.S. 188, 60 S.Ct. 182, 84 L.Ed. 181 (1939). But cf. United States Navigation Co. v. Cunard S.S. Co., 284 U.S. 474, 52 S.Ct. 247, 76 L.Ed. 408 (1932); Far East Conference v. United States, 342 U.S. 570, 72 S.Ct. 492, 96 L.Ed. 576 (1952). On the other hand, if they are within the Commission's jurisdiction, the Commission may approve them even though they are violative of the antitrust laws, although the Commission must take antitrust principles into account in reaching its decision. See Volkswagenwerk Aktiengesellschaft v. FMC, 390 U.S. 261, 273274, 88 S.Ct. 929, 936937, 19 L.Ed.2d 1090 (1968); FMC v. Aktiebolaget Svenska Amerika Linien, 390 U.S. 238, 244246, 88 S.Ct. 1005, 10091010, 19 L.Ed.2d 1071 (1968).
Instead of holding a hearing to investigate these allegations, however, the Commission issued a summary order denying the request for an investigation and approving the agreement. The Commission held that '(w)hile section 15 of the Shipping Act, 1916, requires notice and opportunity for hearing, prior to agreement approval, there is no requirement of law that the mere filing of a protest is sufficient to require that a hearing be held before the Commission may grant approval of any protested agreement.' Finding that 'the likelihood of any impact at all upon (Seatrain's) operations which might result from approval of the agreement is a matter of mere speculation,' the Commission concluded that 'Seatrain has no standing in this matter, and that its protest is without substance.'
and Oceanic and PFEL, as intervenors, argued that the Commission lacked jurisdiction over the agreement. In a comprehensive opinion, the Court of Appeals found it unnecessary to reach the hearing issue, since it found that the Commission 'lacks jurisdiction under Section 15 of the Shipping Act, 1916, to approve arrangements of the type involved here, which do not require the continued existence or participation of the parties in such arrangements.' 148 U.S.App.D.C. 424, 441, 460 F.2d 932, 949 (1972). The Court therefore vacated the Commission's decision and directed that the agreement be removed from its docket. The case then came here on the Commission's petition for certiorari. 409 U.S. 1058, 93 S.Ct. 550, 34 L.Ed.2d 510 (1972).
None of these seven categories expressly refers to a one-time merger or acquisition-of-assets agreement which imposes no continuing obligation and which, indeed, effectively destroys one of the parties to the agreement. The Commission vigorously argues that such agreements can be interpreted as falling within the third categorywhich concerns agreements 'controlling, regulating, preventing, or destroying competition.'
Without more, we might be inclined to agree that many merger agreements probably fit within this category. But a broad reading of the third category would conflict with our frequently expressed view that exemptions from antitrust laws are strictly construed, see e.g., United States v. McKesson & Robbins, Inc., 351 U.S. 305, 316, 76 S.Ct. 937, 943, 100 L.Ed. 1209 (1956), and that '(r)epeals of the antitrust laws by implication from a regulatory statute are strongly disfavored, and have only been found in cases of plain repugnancy between the antitrust and regulatory provisions.' United States v. Philadelphia National Bank, 374 U.S. 321, 350 351, 83 S.Ct. 1715, 1735, 10 L.Ed.2d 915 (1963) (footnotes omitted). As we observed only recently: 'When . . . relationships are governed in the first instance by business judgment and not regulatory coercion, courts must be hesitant to conclude that Congress intended to override the fundamental national policies embodied in the antitrust laws.' Otter Tail Power Co. v. United States, 410 U.S. 366, 374, 93 S.Ct. 1022, 1028, 35 L.Ed.2d 359 (1973). See also Silver v. New York Stock Exchange, 373 U.S. 341, 83 S.Ct. 1246, 10 L.Ed.2d 389 (1963); Pan American World Airways, Inc. v. United States, 371 U.S. 296, 83 S.Ct. 476, 9 L.Ed.2d 325 (1963); California v. FPC, 369 U.S. 482, 82 S.Ct. 901, 8 L.Ed.2d 54 (1962); United States v. Borden Co., 308 U.S. 188, 60 S.Ct. 182, 84 L.Ed. 181 (1939). This principle has led us to construe the Shipping Act as conferring only a 'limited antitrust exemption' in light of the fact that 'antitrust laws represent a fundamental national economic policy.' Carnation Co. v. Pacific Westbound Conference, 383 U.S., at 219, 218, 86 S.Ct. 785, 784.
Our reluctance to construe the third category of agreements broadly so as to include discrete merger arrangements is bolstered by the structure of the Act. It should be noted that of the seven categories, six are expressly limited to ongoing arrangements in which both parties undertake continuing responsibilities. Indeed, even the third category refers to agreements 'controlling,' 'regulating' and 'preventing' competitionall of which are continuing activities. Only the reference to the destruction of competition supports the Commission's agreement that the provision was intended to cover one-time, discrete transactions. But even this reference must be read in light of the final, comprehensive category which refers to agreements 'in any manner providing for an exclusive preferential, or cooperative working arrangement.' As the Court of Appeals noted, this last category was clearly meant as a catchall provision, 'intended . . . to summarize the type of agreements covered.' 148 U.S.App.D.C., at 427, 460 F.2d, at 935. Cf. FMB v. Isbrandtsen Co., 356 U.S. 481, 492, 78 S.Ct. 851, 858, 2 L.Ed.2d 926 (1958). It is, of course, a familiar canon of statutory construction that such clauses are to be read as bringing within a statute categories similar in type to those specifically enumerated. See 2 J. Sutherland, Statutes and Statutory Construction § 4908 et seq. (3d ed. 1943) and cases there cited. Since the summary provision is explicitly limited to 'working arrangement(s)' (emphasis added), it is reasonable to conclude that Congress intended this limitation to apply to the specifically enumerated categories as well.
After examining some 80 steamship agreements and conference arrangements, the Alexander Committee concluded that 'practically all the established lines operating to and from American ports work in harmonious cooperation, either through written or oral agreements, conference arrangements, or gentlemen's understandings.' Alexander Report 281. The Committee found that this network of agreements, many of them secret, provided a comprehensive system for fixing rates and suppressing competition. See id., at 282295. As the Committee described the resulting competitive structure of the industry,
'The primary object of (the) conferences and agreements is to prevent new lines from being organized in a trade and to crush existing lines which refuse to comply with conditions prescribed by the combination, or which, for other reasons, are not acceptable as members of the conference. The methods which have been adopted from time to time to eliminate competition show the futility of a weak line attempting to enter a trade in opposition to the combined power of the established lines when united by agreement. By resorting to the use of the 'fighting ship,' or to unlimited rate cutting, the conference lines soon exhaust the resources of their antagonists. By distributing the loss resulting from the rate war over the several members of the conference, each constituent line suffers proportionately a much smaller loss than the one line which is fighting the entire group. Moreover, the federated lines can conduct the competitive struggle with the comfortable assurance that, following the retirement of the competing line, they are in a position to reimburse themselves through an increase in rates. To allow conferences, therefore, generally means giving the trade to the lines now enjoying it. Only a powerful line can hope to fight its way into the trade, and with the inevitable result, if successful, that it will join the combination or be allowed to exist by virtue of some rate understanding.' Alexander Report 304305.
Thus, the Committee chose to permit continuation of the conference system, but to curb its abuses by requiring government approval of conference agreements. It did so because it feared that if conferences were abolished, the result would be a net decrease in competition through the mergers and acquisition-of-assets assets agreements that would result from unregulated rate wars. It is readily apparent that the Commission's reading of the statute would frustrate this legislative purpose. The Committee gave the Commission power to insulate certain anticompetitive arrangements in order to prevent outright mergers. Yet the Commission would have us construe this authority in such a way as to allow it to shield the mergers themselvesthe very thing which Congress intended to prevent. Cf. Carnation Co. v. Pacific Westbound Conference, 383 U.S., at 218 220, 86 S.Ct., at 784785.
The illogical nature of the Commission's argument is especially apparent when one remembers that at the time the Act was passed, the Commission was arguably not permitted to take antitrust policies into account when ruling on proposed agreements. We have construed the 'public interest' standard contained in the Act as requiring the Commission to consider the antitrust implications of an agreement before approving it. See Volkswagenwerk Aktiengesellschaft v. FMC, 390 U.S., at 274 n. 20, 88 S.Ct., at 936; FMC v. Aktiebolaget Svenska Amerika Linien, 390 U.S., at 242244, 88 S.Ct., at 10081009. Cf. Mediterranean Pools Investigation, 9 F.M.C. 264, 289 (1966). But the 'public interest' criterion was not added to the Act until 1961. See 75 Stat. 763. Thus, under the petitioner's interpretation, at the time the Act was passed, the Commission was arguably required to approve merger agreements despite strong antitrust objections to them if the other criteria of the Act were met. We simply cannot believe that Congress intended to require approval of the very arrangements which, as the legislative history clearly shows, it wanted to prevent.
'The catalog or 'full classification of these agreements' (i.e., the 'agreements' to which the Alexander Committee's attention was primarily directed and to which its recommendations were exclusively directed) does not include a single agreement of merger or other form of corporate reorganization. The 'agreements' represented in the Report are all 'ongoing' in nature. Most of these 'agreements' are cooperative working arrangements. These 'agreements' describe practices or regular activities in which two or more shipping companies have agreed to participate over a considerable period of time. None of the 'agreements' studied by the Alexander Committee bears the slightest resemblance to an agreement of merger, which is essentially a single, discrete event, which transforms the relationship of the merging parties at the instant of merger.' 325 F.Supp., at 658659 (footnotes omitted).
Finally, an examination of contemporaneous and related statutes makes clear that when Congress intended to bring acquisitions and mergers under control, it did so in unambiguous language. For example, only a few years prior to passage of the Shipping Act, Congress expressly dealt with mergers involving water carriers. In the Panama Canal Act, 49 U.S.C. 5(14), Congress provided that:
Similarly, when Congress meant to require agency approval for mergers and acquisitions, it did so unambiguously. Thus, the Interstate Commerce Act, 49 U.S.C. 5(2)(a)(i) authorizes the Interstate Commerce Commission to give its approval 'for two or more carriers to consolidate or merge their proterties or franchises, or any part thereof, into one corporation for the ownership, management, and operation of the properties theretofore in separate ownership.' In the same manner, the Federal Communications Act, 47 U.S.C. 222(b)(1) provides:
Examination of the Federal Aviation Act is particularly instructive in this regard. Title 49 U.S.C. 1382(a) requires air carriers to file with the Civil Aeronautics Board for prior approval
This provision closely parallels § 15 of the Shipping Act, and was obviously modeled after it. Yet Congress clearly thought the provision insufficient to bring discrete merger and acquisition agreements within the Civil Aeronautics Board's jurisdiction, since it enacted another, separate provision requiring Board approval when air carriers 'consolidate or merge their properties.' 49 U.S.C. 1378(a)(1).
In light of these specific grants of merger approval authority, we are unwilling to construe the ambiguous provisions of § 15 to serve this purposea purpose for which it obviously was not intended. As the Court of Appeals found, the House Committee which wrote § 15 'neither sought information nor had discussion on ship sale agreements. They were neither part of the problem nor part of the solution.' 148 U.S.App.D.C., at 432, 460 F.2d, at 940. If, as petitioner contends, there is now a compelling need to fill the gap in the Commission's regulatory authority, the need should be met in Congress where the competing policy questions can be thrashed out and a resolution found. We are not ready to meet that need by rewriting the statute and legislative history ourselves.
Section 15 provides that '(e)very agreement, modification, or cancellation lawful under this section . . . shall be excepted from the provisions of sections 1 to 11 and 15 of Title 15, and amendments and Acts supplementary thereto.' Since the Act makes lawful those agreements approved by the Commission, its effect is to vest the Commission with the power to shield those agreements approved by it from antitrust attack. See Carnation Co. v. Pacific Westbound Conference, 383 U.S. 213, 216, 86 S.Ct. 781, 783, 15 L.Ed.2d 709 (1966). But cf. FMC v. Aktiebolaget Svenska Amerika Linien, 390 U.S. 238, 242246, 88 S.Ct. 1005, 10081010, 19 L.Ed.2d 1071 (1968).
Direct appeal to the Court of Appeals of final orders of the Commission is authorized by 28 U.S.C. 2342(3).
See 28 U.S.C. 2344.
The Reynolds court's observations were directed at the Committee's study of foreign trade. In this context, the Committee found that competition was largely frustrated by extensive use of conference arrangements. When the Committee turned to domestic trade, it found that '(u)nlike the practice of water carriers in the foreign trade of the United States, agreements to divide the territory or charge certain rates in the domestic trade are few.' Alexander Report 421. Rather, in the domestic arena, the Committee found that competition was controlled largely through mergers, chiefly between railroads and water carriers. The Commission argues from this fact that Congress intended merger agreements to be filed, since the legislation which was ultimately enacted made no distinction between foreign and domestic trade. But throughout the Report whenever the Committee referred to mergers and acquisitions, it distinguished sharply between them and agreements, for which the filing and approval mechanism was applicable. See the discussion in text. Cf. Note, The Shipping Industry Seeks a Safe Haven: Merger Jurisdiction for the FMC?, 5 Law & Pol. Int'l Bus. 274, 285286 (1973). Moreover, a careful reading of the Report makes clear that the Committee envisioned other devices for controlling the mergers prevalent in the domestic field. Thus, the Committee noted that the Panama Canal Act of 1912, 49 U.S.C. 5(14), already prohibited railroads from owning or controlling water carriers, see infra, at 742, and observed that this requirement went 'far toward eliminating some of the undesirable practices which were found by the Committee to exist in the domestic commerce of the United States.' Alexander Report 422. While the Committee made other recommendations with respect to domestic carriers, these merely paralleled its foreign recommendations and, hence, pertained to 'agreements' and 'arrangements' rather than 'mergers' and 'acquisitions' which it thought were sufficiently regulated by existing legislation. See id., at 422424.
the Clayton Act, 15 U.S.C. 18, as amended by 64 Stat. 1125, 1126. As amendded, the provision specifies that:
As is clear from the face of the statute, the Act confers no new jurisdiction on any of the listed agencies, but merely provides that mergers already exempt from Clayton Act coverage were to be unaffected by changes in the Act. As this Court held in California v. FPC, the amended § 7 was 'plainly not a grant of power to adjudicate antitrust issues.' 369 U.S. 482, 486, 82 S.Ct. 901, 904, 8 L.Ed.2d 54 (1962). Hence, nothing about the Commission's jurisdiction can be inferred from the inclusion of its predecessor on the list. This view is confirmed by the legislative history of the 1950 amendment. Although acceding to the Commission's request that it be included in the list of agencies left unaffected by the Clayton Act, see Letter of Grenville Mellen, Vice Chairman United States Maritime Commission to Senator Herbert O'Conor, Chairman, Senate Subcommittee to consider H.R. 2734, Sept. 29, 1949, reprinted in Brief for Petitioner 5254, the Committee made explicit that '(i)n making this addition . . . it is not intended that the Maritime Commission, or, for that matter, any other agency included in this category, shall be granted any authority or powers which it does not already possess.' S.Rep.No.1775, 81st Cong., 2d Sess., 7 (1950), U.S.Code Cong.Serv. p. 4300.