Opinion ID: 1312425
Heading Depth: 3
Heading Rank: 1

Heading: Words of the Statute

Text: The Cartwright Act (or Act) (Stats. 1907, ch. 530, pp. 984-987) states, Except as provided in this chapter, every trust is unlawful, against public policy and void. (Bus. & Prof. Code, § 16726.) The Act defines trust as a combination of capital, skill or acts by two or more persons for any of the following purposes: (a) To create or carry out restrictions in trade or commerce.... (e) To make or enter into or execute or carry out contracts, obligations or agreements of any kind or description, by which they ... [a]gree to pool, combine, or directly or indirectly unite any interests that they may have connected with the sale or transportation of any ... article or commodity, that its price might in any manner be affected. ( Id., § 16720, subds. (a) & (e)(4), italics added.) The Act makes agreements in violation of its provisions void and unenforceable ( id., § 16722), and subject to injunction ( id., § 16754.5) and civil actions for damages ( id., § 16750). Another section makes violation of the Act subject to fine or imprisonment, or both. ( Id., § 16755, subd. (a).) The Attorney General asserts that a merger is precisely a combination of capital, hence the statute covers mergers. It is questionable, however, whether the statutory meaning of combination is so broad. As defendants suggest, the word combination might well contemplate a situation in which separate entities that maintain separate and independent interests, act in concert  combine  for a certain purpose, but which thereafter perdure, i.e., continue to maintain their separate identities and interests. [2] A bona fide merger, however, is not such a relationship; in a merger the entities lose forever their separate identities, and become a new, independent entity. Accordingly, we question whether the words of the statute support the Attorney General's assertion that it was intended to apply to mergers. On the other hand, we cannot confidently know, without further inquiry, that defendants' interpretation is the intended one. In this situation, it is appropriate to look beyond the statute's terms to discover its intent. (E.g., Solberg v. Superior Court (1977) 19 Cal.3d 182, 198 [137 Cal. Rptr. 460, 561 P.2d 1148].)