California v. Fpc, 369 U.S. 482 (1962)

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Author: Justice Douglas

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California v. Fpc, 369 U.S. 482 (1962)

Opinion of the Court by MR. JUSTICE DOUGLAS, announced by MR. JUSTICE BRENNAN.

El Paso Natural Gas Company first acquired the stock of the Pacific Northwest Pipeline Corp. and then applied to the Federal Power Commission for authority to acquire the assets pursuant to § 7 of the Natural Gas Act, 52 Stat. 825, 15 U.S.C. § 717f(c). This application was dated August 7, 1957. Prior thereto, on July 22, 1957, the Federal Government commenced an action against El Paso and Pacific Northwest, alleging that El Paso’s acquisition of the stock of Pacific Northwest violated § 7 of the Clayton Act,{1} 38 Stat. 731, as amended, 64 Stat. 1125, 15 U.S.C. § 18. On September 30, 1957, El Paso and Pacific Northwest filed a motion to dismiss the antitrust suit or to stay it, pending completion of the proceedings before the Commission. On October 21, 1957, that motion was denied after hearing, and we denied certiorari. 355 U.S. 950.

In May and June, 1958, the Department of Justice wrote four letters to the Commission, asking that the proceeding be stayed pending the outcome of the antitrust suit. On July 29, 1958, the Department of Justice was advised by the Commission that it would not stay its proceedings. The Commission invited the Antitrust Division of the Department to participate in the administrative proceedings, but it did not do so.

The hearings before the Commission started September 17, 1958. On October 2, 1958, El Paso and Pacific Northwest moved in the District Court for a continuance of the antitrust suit. On October 6, 1958, the Department of Justice asked the Commission to postpone its hearing, pending final outcome of the antitrust suit which had then been set for trial November 17, 1958. On October 7, 1958, the Commission wrote the District Court that, if the court denied El Paso and Pacific Northwest’s motion for a continuance and proceeded with the antitrust trial, the Commission would continue its merger hearings to a date that would not conflict with the trial date of the antitrust case, but that if the court granted the motion for continuance, the Commission would proceed with its hearing. On October 13, 1958, the District Court continued the antitrust suit until the final decision in the administrative proceedings. The latter proceedings were concluded, the Commission authorizing the merger on December 23, 1959. 22 F.P.C. 1091, 23 F.P.C. 350. The merger was consummated December 31, 1959.

Petitioner intervened in the administrative proceedings August 27, 1957, and obtained review by the Court of Appeals, which affirmed the Commission (111 U.S.App.D.C. 226, 296 F.2d 348), Judge Fahy dissenting. We granted certiorari, 368 U.S. 810.

Evidence of antitrust violations is plainly relevant in merger applications, for part of the content of "public convenience and necessity" as used in § 7 of the Natural Gas Act is found in the laws of the United States. City of Pittsburgh v. Federal Power Commission, 99 U.S.App.D.C. 113, 237 F.2d 741.

Immunity from the antitrust laws is not lightly implied. The exemption of agricultural cooperatives from the antitrust laws granted by § 6 of the Clayton Act and § 1 and § 2 of the Capper-Volstead Act of 1922 became relevant in Maryland and Virginia Milk Producers Ass’n v. United States, 362 U.S. 458. While § 7 of the Clayton Act gave immunity to

transactions duly consummated pursuant to authority given by . . . the Secretary of Agriculture under any statutory provision vesting such power in such . . . Secretary,

we held that the only authority of the Secretary was to approve "marketing agreements" (id.,469-470), and not other types of agreements or restraints, typically covered by the antitrust laws. Accordingly, we held that the District Court was authorized to direct the cooperative to dispose as a unit of the assets of an independent producer that had been acquired to stifle competition and restrain trade. We could not assume that Congress, having granted only a limited exemption from the antitrust laws, nonetheless granted an overall inclusive one. See United States v. Borden Co., 308 U.S. 188, 198-202. "When there are two acts upon the same subject, the rule is to give effect to both if possible." Id. at 198. Here, as in United States v. RCA, 358 U.S. 334, while "antitrust considerations" are relevant to the issue of "public interest, convenience, and necessity" (id. at 351), there is no "pervasive regulatory scheme" (ibid.) including the antitrust laws that has been entrusted to the Commission. And see National Broadcasting Co. v. United States, 319 U.S. 190, 223. Under the Interstate Commerce Act, mergers of carriers that are approved have an antitrust immunity, as § 5(11) of that Act specifically provides that the carriers involved "shall be and they are hereby relieved from the operation of the antitrust laws. . . ." See McLean Trucking Co. v. United States, 321 U.S. 67.

There is no comparable provision under the Natural Gas Act. Section 7 of the Clayton Act -- which prohibits stock acquisitions

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

-- contains a proviso that

Nothing contained in this section shall apply to transactions duly consummated pursuant to authority given by the . . . Federal Power Commission . . . under any statutory provision vesting such power in such Commission. . . .

The words "transactions duly consummated pursuant to authority" given the Commission "under any statutory provision vesting such power" in it are plainly not a grant of power to adjudicate antitrust issues. Congress made clear that, by this proviso in § 7 of the Clayton Act, ". . . it is not intended that . . . any . . . agency" mentioned "shall be granted any authority or powers which it does not already possess." S.Rep.No. 1775, 81st Cong., 2d Sess., p. 7. The Commission’s standard, set forth in § 7 of the Natural Gas Act, is that the acquisition, merger, etc., will serve the "public convenience and necessity." If existing natural gas companies violate the antitrust laws, the Commission is advised by § 20(a) to "transmit such evidence" to the Attorney General "who, in his discretion, may institute the necessary criminal proceedings." Other administrative agencies are authorized to enforce § 7 of the Clayton Act when it comes to certain classes of companies or persons,{2} but the Federal Power Commission is not included in the list.

We do not decide whether in this case there were any violations of the antitrust laws. We rule only on one select issue, and that is: should the Commission proceed to a decision on the merits of a merger application when there is pending in the courts a suit challenging the validity of that transaction under the antitrust laws? We think not. We think the Commission in those circumstances should await the decision of the courts.

The Commission considered the interplay between § 7 of the Clayton Act and § 7 of the Natural Gas Act, and said:

Section 7 of the Clayton Act, under which the antitrust suit was brought, prohibits the acquisition by one corporation of the stock or assets of another corporation where "the effect of such acquisition may be substantially to lessen competition, or to tend to create a monopoly." Exempt, however, are transactions consummated pursuant to Commission authority. This shows, reasons the presiding examiner, that Congress placed reliance on the Commission not to approve an acquisition of assets in violation of the injunction of the Clayton Act unless, in the carefully exercised judgment of the Commission, the acquisition would nevertheless be in the public interest. What we are attempting to arrive at is the public convenience and necessity. In reaching our determination, we do not have authority to determine whether a given transaction is in violation of the Clayton Act, but we are required to consider the bearing of the policy of the antitrust laws on the public convenience and necessity. City of Pittsburgh v. FPC, 237 F.2d 741, 754 (CADC). With the presiding examiner, we find that any lessening of competition whether in the consumer markets or the producing fields, does not prevent our approving the merger because there are other factors which outweigh the elimination of Pacific as a competitor. In any case, it appears that any lessening of competition is not substantial.

22 F.P.C. 1091, 1095.

Apart from the fact that the Commission did undertake to make a finding reserved to the courts by § 7 of the Clayton Act,{3} there are practical reasons why it should have held its hand until the courts had acted.

One is that, if the Commission approves the transaction and the courts in the antitrust suit later hold it to be illegal, an unscrambling is necessary. Maryland and Virginia Milk Producers Ass’n v. United States, supra. Thus, a needless waste of time and money may be involved. Also, these unscrambling processes often raise complicated and perplexing problems on tax matters and otherwise, as our recent decision in United States v. du Pont & Co., 353 U.S. 586, 366 U.S. 316, shows.{4} Such complexities are inherent in the situation, as approval of the transaction by the Commission would be no bar to the antitrust suit. See United States v. RCA, supra.

Another practical reason is that a transaction consummated under the aegis of the Commission as being a matter of "public convenience and necessity" is bound to carry momentum into the antitrust suit. The very prospect of undoing what was done raises a powerful influence in the antitrust litigation, as United States v. du Pont & Co., supra, illustrates.

The orderly procedure is for the Commission to await decision in the antitrust suit before taking action.

Section 7 of the Clayton Act, so far as material here, prohibits stock acquisitions having a prescribed effect. Section 7 of the Natural Gas Act confers jurisdiction on the Commission over the acquisition of assets of natural gas companies,{5} not over stock acquisitions in them. Had the Commission stayed its hand, and had the courts found the stock acquisition unlawful, the entire transaction would have been set aside in limine. Had the courts found the stock acquisition lawful, presumably no problems under § 7 of the Clayton Act would have remained. When the Commission proceeds in the face of a pending but undecided antitrust suit and approves a merger that has been preceded, as this one was, by a stock acquisition, it in substance treats the entire relation of the companies -- from the acquisition of stock to the merger -- as an integrated transaction. If that administrative action were approved, the Commission would be allowed to do by indirection what it has no jurisdiction to do directly.

It is not for us to say that the complementary legislative policies reflected in § 7 of the Clayton Act, on the one hand, and in § 7 of the Natural Gas Act, on the other, should be better accommodated. Our function is to see that the policy entrusted to the courts is not frustrated by an administrative agency. Where the primary jurisdiction is in the agency, courts withhold action until the agency has acted. Texas & Pac. R. Co. v. Abilene Cotton Oil Co., 204 U.S. 426. The converse should also be true, lest the antitrust policy whose enforcement Congress in this situation has entrusted to the courts is, in practical effect, taken over by the Federal Power Commission. Moreover, as noted, the Commission, in holding that "any lessening of competition is not substantial," was in the domain of the Clayton Act, a domain which is entrusted to the court in which the antitrust suit was pending.

The judgment of the Court of Appeals is reversed, and the case is remanded for proceedings in conformity with this opinion. It is so ordered.

MR. JUSTICE FRANKFURTER took no part in the decision of this case.

MR. JUSTICE WHITE took no part in the consideration or decision of this case.

1. Section 7 of the Clayton Act provides in relevant part:

No corporation engaged in commerce shall acquire, directly or indirectly, the 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.

No corporation 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 one or more corporations engaged in commerce, where in any line of commerce in any section of the country, the effect of such acquisition, of such stocks or assets, or of the use of such stock by the voting or granting of proxies or otherwise, may be substantially to lessen competition, or to tend to create a monopoly.

2. Section 11 of the Clayton Act, 15 U.S.C. § 21, vests authority to enforce compliance with § 7 by the persons subject thereto:

. . . in the Interstate Commerce Commission where applicable to common carriers subject to the Interstate Commerce Act, as amended; in the Federal Communications Commission where applicable to common carriers engaged in wire or radio communication or radio transmission of energy; in the Civil Aeronautics Board where applicable to air carriers and foreign air carriers subject to the Civil Aeronautics Act of 1938; in the Federal Reserve Board where applicable to banks, banking associations, and trust companies; and in the Federal Trade Commission where applicable to all other character of commerce to be exercised as follows: . . .

3. Where "the effect of such acquisition may be substantially to lessen competition." Section 7, supra,note 1.

4. In that case, which also was under § 7 of the Clayton Act, we said:

Section 7 is designed to arrest in its incipiency not only the substantial lessening of competition from the acquisition by one corporation of the whole or any part of the stock of a competing corporation, but also to arrest in their incipiency restraints or monopolies in a relevant market which, as a reasonable probability, appear at the time of suit likely to result from the acquisition by one corporation of all or any part of the stock of any other corporation.

353 U.S. at 589. As to the remedy, we stated in United States v. du Pont & Co., 366 U.S. at 334:

We think the public is entitled to the surer, cleaner remedy of divestiture. The same result would follow even if we were in doubt. For it is well settled that, once the Government has successfully borne the considerable burden of establishing a violation of law, all doubts as to the remedy are to be resolved in its favor.

5. Section 7(c) provides in relevant part:

No natural gas company or person which will be a natural gas company upon completion of any proposed construction or extension shall engage in the transportation or sale of natural gas, subject to the jurisdiction of the Commission, or undertake the construction or extension of any facilities therefor, or acquire or operate any such facilities or extensions thereof, unless there is no force with respect to such natural gas company a certificate of public convenience and necessity issued by the Commission authorizing such acts or operations.

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Chicago: Douglas, "Douglas, J., Lead Opinion," California v. Fpc, 369 U.S. 482 (1962) in 369 U.S. 482 369 U.S. 484–369 U.S. 491. Original Sources, accessed January 23, 2020, http://www.originalsources.com/Document.aspx?DocID=48TDAKY4KJJ17Q2.

MLA: Douglas. "Douglas, J., Lead Opinion." California v. Fpc, 369 U.S. 482 (1962), in 369 U.S. 482, pp. 369 U.S. 484–369 U.S. 491. Original Sources. 23 Jan. 2020. www.originalsources.com/Document.aspx?DocID=48TDAKY4KJJ17Q2.

Harvard: Douglas, 'Douglas, J., Lead Opinion' in California v. Fpc, 369 U.S. 482 (1962). cited in 1962, 369 U.S. 482, pp.369 U.S. 484–369 U.S. 491. Original Sources, retrieved 23 January 2020, from http://www.originalsources.com/Document.aspx?DocID=48TDAKY4KJJ17Q2.