CALIFORNIA v. AMERICAN STORES CO. ET AL.
No. 89-258
SUPREME COURT OF THE UNITED STATES
Argued January 16, 1990—Decided April 30, 1990
495 U.S. 271
H. Chester Horn, Jr., Deputy Attorney General of California, argued the cause for petitioner. With him on the briefs
Rex E. Lee argued the cause for respondents. With him on the brief were Carter G. Phillips, Mark D. Hopson, Donald B. Holbrook, and Kent T. Anderson.*
*Briefs of amici curiae urging reversal were filed for the State of Alabama et al. by Jim Mattox, Attorney General of Texas, Mary F. Keller, First Assistant Attorney General, Lou McCreary, Executive Assistant Attorney General, Allene D. Evans, Assistant Attorney General, and Donna L. Nelson, Assistant Attorney General, Don Siegelman, Attorney General of Alabama, and Walter S. Turner, Chief Assistant Attorney General, Douglas B. Baily, Attorney General of Alaska, and Thomas E. Wagner, Assistant Attorney General, John Steven Clark, Attorney General of Arkansas, Duane Woodard, Attorney General of Colorado, Clarine Nardi Riddle, Attorney General of Connecticut, and Robert M. Langer, Assistant Attorney General, Robert A. Butterworth, Attorney General of Florida, and Jerome W. Hoffman, Assistant Attorney General, Warren Price III, Attorney General of Hawaii, and Robert A. Marks and Ted Gamble Clause, Deputy Attorneys General, Jim Jones, Attorney General of Idaho, and Catherine K. Broad, Deputy Attorneys General, Neil F. Hartigan, Attorney General of Illinois, Robert Ruiz, Solicitor General, and Christine H. Rosso, Senior Assistant Attorney General, Thomas J. Miller, Attorney General of Iowa, and John R. Perkins, Deputy Attorney General, Robert T. Stephan, Attorney General of Kansas, Frederic J. Cowan, Attorney General of Kentucky, and James M. Ringo, Assistant Attorney General, James E. Tierney, Attorney General of Maine, and Stephen L. Wessler, Deputy Attorney General, J. Joseph Curran, Jr., Attorney General of Maryland, and Michael F. Brockmeyer and R. Hartman Roemer, Assistant Attorneys General, James M. Shannon, Attorney General of Massachusetts, and George K. Weber and Thomas M. Alpert, Assistant Attorneys General, Hubert H. Humphrey III, Attorney General of Minnesota, Stephen P. Kilgriff, Deputy Attorney General, Thomas F. Pursell, Assistant Attorney General, and James P. Spencer, Special Assistant Attorney General, Brian McKay, Attorney General of Nevada, and J. Kenneth Creighton, Deputy Attorney General, Peter N. Perretti, Jr., Attorney General of New Jersey, and Laurel A. Price, Deputy Attorney General, Robert Abrams, Attorney General of New York, O. Peter Sherwood, Solic-
Briefs of amici curiae urging affirmance were filed for the Business Roundtable by Thomas B. Leary and Janet L. McDavid; for the California Retailers Association et al. by Theodore B. Olson, James R. Martin, Phillip H. Rudolph, and Adrian A. Kragen; and for the United Food and Commercial Workers International Union et al. by George R. Murphy, Nicholas W. Clark, Robert W. Gilbert, Laurence D. Steinsapir, and D. William Heine.
JUSTICE STEVENS delivered the opinion of the Court.
By merging with a major competitor, American Stores Co. (American) more than doubled the number of supermarkets that it owns in California. The State sued, claiming that the merger violates the federal antitrust laws and will harm consumers in 62 California cities. The complaint prayed for a preliminary injunction requiring American to operate the acquired stores separately until the case is decided, and then to divest itself of all of the acquired assets located in California. The District Court granted a preliminary injunction preventing American from integrating the operations of the two companies. The Court of Appeals for the Ninth Circuit agreed with the District Court‘s conclusion that California had made
I
American operates over 1,500 retail grocery stores in 40 States. Prior to the merger, its 252 stores in California made it the fourth largest supermarket chain in that State. Lucky Stores, Inc. (Lucky), which operated in seven Western and Midwestern States, was the largest, with 340 stores. The second and third largest, Von‘s Companies and Safeway Stores, were merged in December 1987. 697 F. Supp. 1125, 1127 (CD Cal. 1988); Pet. for Cert. 3.
On March 21, 1988, American notified the Federal Trade Commission (FTC) that it intended to acquire all of Lucky‘s outstanding stock for a price of $2.5 billion.1 The FTC conducted an investigation and negotiated a settlement with American. On May 31, it simultaneously filed both a complaint alleging that the merger violated § 7 of the Clayton Act and a proposed consent order disposing of the § 7 charges subject to certain conditions. Among those conditions was a requirement that American comply with a “Hold Separate Agreement” preventing it from integrating the two companies’ assets and operations until after it had divested itself of
On August 31, 1988, the FTC gave its final approval to the merger. The next day California filed this action in the United States District Court for the Central District of California. The complaint alleged that the merger violated § 1 of the Sherman Act,
American filed an interlocutory appeal pursuant to
On California‘s application, JUSTICE O‘CONNOR entered a stay continuing the District Court‘s injunction pending further review by this Court. 492 U. S. 1301 (1989). We then granted certiorari to resolve the conflict between this decision and the earlier holding of the Court of Appeals for the First Circuit in CIA. Petrolera Caribe, Inc. v. Arco Caribbean, Inc., 754 F. 2d 404 (1985). We now reverse.
II
In its IT&T opinion, the Court of Appeals for the Ninth Circuit reasoned that the term “injunctive relief” as used in § 16 is ambiguous and that it is necessary to review the statute‘s legislative history to determine whether it includes divestiture. Then, based on its reading of a colloquy during a hearing before a subcommittee of the Judiciary Committee of the House of Representatives, it concluded that the draftsmen of the bill did not intend to authorize the remedies of
American endorses the analysis of the Court of Appeals for the Ninth Circuit, but places greater reliance on two additional arguments. First, it argues that there is a significant difference between the text of § 15 of the Act, which authorizes equitable relief in actions brought by the United States, and the text of § 16, which applies to other parties. Specifically, it argues that the former is broad enough to encourage “structural relief” whereas the latter is limited to relief against anticompetitive “conduct.” Second, reading § 16 in its historical context, American argues that it reflects a well-accepted distinction between prohibitory injunctions (which are authorized) and mandatory injunctions (which, American argues, are not).
American‘s argument directs us to two provisions in the statutory text, and that is the natural place to begin our analysis. Section 15 grants the federal district courts jurisdiction “to prevent and restrain violations of this Act” when
It is agreed that the general language of § 15, which provides that antitrust violations “shall be enjoined or otherwise prohibited,” is broad enough to authorize divestiture. Indeed, in Government actions divestiture is the preferred
“Divestiture or dissolution has traditionally been the remedy for Sherman Act violations whose heart is intercorporate combination and control, and it is reasonable to think immediately of the same remedy when § 7 of the Clayton Act, which particularizes the Sherman Act standard of illegality, is involved. Of the very few litigated § 7 cases which have been reported, most decreed divestiture as a matter of course. Divestiture has been called the most important of antitrust remedies. It is simple, relatively easy to administer, and sure. It should always be in the forefront of a court‘s mind when a violation of § 7 has been found.” United States v. E. I. du Pont de Nemours & Co., 366 U. S. 316, 329–331 (1961) (footnotes omitted).
On its face, the simple grant of authority in § 16 to “have injunctive relief” would seem to encompass divestiture just as plainly as the comparable language in § 15. Certainly § 16‘s reference to “injunctive relief . . . against threatened loss or damage” differs from § 15‘s grant of jurisdiction to “prevent and restrain violations,” but it obviously does not follow that one grant encompasses remedies excluded from the other.7 Indeed, we think it could plausibly be argued that § 16‘s terms are the more expansive. In any event, however, as the Court of Appeals for the First Circuit correctly observed, § 16 “states no restrictions or exceptions to the forms of injunctive relief a private plaintiff may seek, or that a court may order. . . . Rather, the statutory language indicates Congress’ intention that traditional principles of equity govern the grant of injunctive relief.” 754 F. 2d, at
American rests its contrary argument upon two phrases in § 16 that arguably narrow its scope. The entitlement “to sue for and have injunctive relief” affords relief “against threatened loss or damage by a violation of the antitrust laws.” Moreover, the right to such relief exists “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. . . .”
In this case, however, the requirement of “threatened loss or damage” is unquestionably satisfied. The allegations of the complaint, the findings of the District Court, and the opinion of the Court of Appeals all assume that even if the merger is a completed violation of law, the threatened harm to California consumers persists. If divestiture is an appropriate means of preventing that harm, the statutory reference to “threatened loss or damage” surely does not negate the court‘s power to grant such relief.8
The second phrase, which refers to “threatened conduct that will cause loss or damage,” is not drafted as a limitation on the power to grant relief, but rather is a part of the general reference to the standards that should be applied in fashioning injunctive relief. It is surely not the equivalent of a directive stating that unlawful conduct may be prohibited but structural relief may not be mandated. Indeed, as the Ninth Circuit‘s analysis of the issue demonstrates, the distinction between conduct and structure—or between prohibitory and mandatory relief—is illusory in a case of this kind. Thus, in the IT&T case the court recognized that an injunction prohib-
If we assume that the merger violated the antitrust laws, and if we agree with the District Court‘s finding that the conduct of the merged enterprise threatens economic harm to California consumers, the literal text of § 16 is plainly sufficient to authorize injunctive relief, including an order of divestiture, that will prohibit that conduct from causing that harm. This interpretation is consistent with our precedents, which have upheld injunctions issued pursuant to § 16 regardless of whether they were mandatory or prohibitory in character. See Zenith Radio Corp. v. Hazeltine Research, Inc., 395 U. S. 100, 129–133 (1969) (reinstating injunction that required defendants to withdraw from patent pools); see also Silver v. New York Stock Exchange, 373 U. S. 341, 345, 365 (1963) (reinstating judgment for defendants in suit to compel
Finally, by construing § 16 to encompass divestiture decrees we are better able than is American to harmonize the section with its statutory context. The Act‘s other provisions manifest a clear intent to encourage vigorous private litigation against anticompetitive mergers. Section 7 itself creates a relatively expansive definition of antitrust liability: To show that a merger is unlawful, a plaintiff need only prove that its effect ”may be substantially to lessen competition.” Clayton Act § 7, 38 Stat. 731,
III
Although we do not believe the statutory language is ambiguous, we nonetheless consider the legislative history that persuaded the Ninth Circuit to place a narrow construction on § 16. To understand that history, however, it is necessary to place the statute in its historical perspective.
The Sherman Act became law just a century ago. It matured some 15 years later, when, under the administration of Theodore Roosevelt, the Sherman Act “was finally being used against trusts of the dimension that had called it into
Concern about the adequacy of the Sherman Act‘s prohibition against combinations in restraint of trade prompted President Wilson to make a special address to Congress in 1914 recommending that the antitrust laws be strengthened. 2 The New Democracy, The Public Papers of Woodrow Wilson 81–89 (R. Baker & W. Dodd eds. 1926). Congressman Clayton, the Chairman of the House Judiciary Committee, promptly appointed a subcommittee to prepare the legislation. The bill drafted by the subcommittee contained most of the provisions that were eventually enacted into the law now known as the Clayton Act. The statute reenacted certain provisions of the Sherman Act and added new provisions of both a substantive and procedural character. Letwin,
Some proponents of reform, however, were critical of the bill for not going further. Thus, for example, proposals that were never enacted would have expressly authorized private individuals to bring suit for the dissolution of corporations adjudged to have violated the law and for appointment of receivers to wind up the corporation‘s affairs.13 Samuel Untermyer, a New York lawyer who urged Congress to give private plaintiffs express authority to seek dissolution decrees, stated his views in a colloquy with Congressman John Floyd during a hearing on the bill before the House Judiciary Committee. Floyd told Untermyer that “We did not intend by section 13 to give the individual the same power to bring a suit to dissolve the corporation that the Government has,” and added that the committee Mem-
Two weeks later, Louis Brandeis, testifying on behalf of the administration before the same committee, was asked whether he favored a proposal “to give the individual the right to file a bill in equity for the dissolution of one of these combinations, the same right which the Government now has and which it is its duty to perform.” Brandeis responded that the proposal was not sound and added:
“It seems to me that the right to change the status [of the combination], which is the right of dissolution, is a right which ought to be exercised only by the Government, although the right for full redress for grievances and protection against future wrongs is a right which every individual ought to enjoy.
“Now, all of this procedure ought to be made so as to facilitate, so far as possible, the enforcement of the law in aid, on the one hand, of the Government, and in aid, on the other hand, of the individual. But that fundamental principle is correct, that the Government ought to have the right, and the sole right, to determine whether the circumstances are such as to call for a dissolution of an alleged trust.” Id., at 649–650.
American relies on these exchanges to support two slightly different arguments. First, it suggests that the committee recognized a distinction between relief directed at conduct and relief that is designed to change a company‘s status or structure. Second, it suggests that Congressman Floyd‘s statements permit an inference that the Congress as a whole rejected the possibility of a private dissolution remedy, and
We have already concluded that the suggested distinction between divestiture and injunctions that prohibit future conduct is illusory. These excerpts, moreover, from the legislative history provide even less support for such a categorical distinction than does the text of § 16 itself.
The flaw in American‘s second suggestion is its assumption that the dissolution proposals submitted to Congress contemplated nothing more extreme than divestiture. Dissolution could be considerably more awesome. As the New York Court of Appeals ominously declared before affirming a decree against the North River Sugar Refining Company, dissolution was a “judgment . . . of corporate death,” which “represent[ed] the extreme rigor of the law.”14 This meaning is evident from the text of the Senate amendment proposing private dissolution suits, which provided for a receiver to administer the doomed corporation‘s assets.15
Once the historical importance of the distinction between dissolution and divestiture is understood, American‘s argument from the legislative history becomes singularly unpersuasive. The rejection of a proposed remedy that would terminate the corporate existence of American and appoint a
For similar reasons, we need not consider how much weight might otherwise be due to Graves v. Cambria Steel Co., 298 F. 761 (NY 1924), a brief District Court decision by Judge Learned Hand upon which American relies heavily.27 The suit appears to have been brought by dissatisfied shareholders of a target corporation who wished to dissolve the new merged entity. The plaintiffs sought relief
The inferences that American draws from its excerpts from the subcommittee hearings simply are not confirmed by anything that has been called to our attention in the Committee Reports, the floor debates, the Conference Report, or contemporaneous judicial interpretations.28 Indeed, a fair reading of the entire legislative history supports the conclusion that § 16 means exactly what it says when it endorses the “conditions and principles” governing injunctive relief in courts of equity: that the provision should be construed generously and flexibly pursuant to principles of equity. See
“The essence of equity jurisdiction has been the power of the Chancellor to do equity and to mould each decree to the necessities of the particular case. Flexibility rather than rigidity has distinguished it.”
More recently, in Weinberger v. Romero-Barcelo, 456 U. S. 305, 313 (1982), we observed that when Congress endows the federal courts with equitable jurisdiction, Congress acts aware of this longstanding tradition of flexibility. “‘Unless a statute in so many words, or by a necessary and inescapable inference, restricts the court‘s jurisdiction in equity, the full scope of that jurisdiction is to be recognized and applied.‘” Ibid., quoting Porter v. Warner Holding Co., 328 U. S. 395, 398 (1946). These principles unquestionably support a construction of the statute that will enable a chancellor to impose the most effective, usual and straightforward remedy to rescind an unlawful purchase of stock or assets. The fact that the term “divestiture” is used to describe what is typically nothing more than the familiar remedy of rescission does not place the remedy beyond the normal reach of the chancellor.
IV
Our conclusion that a district court has the power to order divestiture in appropriate cases brought under § 16 of the Clayton Act does not, of course, mean that such power should be exercised in every situation in which the Government would be entitled to such relief under § 15. In a Government case the proof of the violation of law may itself establish sufficient public injury to warrant relief. See Du Pont, 366 U. S., at 319–321; see also Virginian R. Co. v. Railway Employees, 300 U. S. 515, 552 (1937) (“Courts of equity may, and frequently do, go much farther both to give and withhold relief in furtherance of the public interest than they are accustomed to go when only private interests are involved“); United States v. San Francisco, 310 U. S. 16, 30–31 (1940)
Such questions, however, are not presented in this case. We are merely confronted with the naked question whether the District Court had the power to divest American of any part of its ownership interests in the acquired Lucky Stores, either by forbidding the exercise of the owner‘s normal right to integrate the operations of the two previously separate companies, or by requiring it to sell certain assets located in California. We hold that such a remedy is a form of “injunctive relief” within the meaning of § 16 of the Clayton Act. Accordingly, the judgment of the Court of Appeals is reversed, and the case is remanded for further proceedings consistent with this opinion.
It is so ordered.
JUSTICE KENNEDY, concurring.
In agreement with our holding that § 16 of the Clayton Act does authorize divestiture as a remedy for violations of § 7 of the Clayton Act, I join the Court‘s opinion. I write further to note that both the respondents and various interested labor unions, the latter as amici curiae, have argued for a different result on the basis of the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (Clayton Act § 7A, as added and amended),
Section 7A enables the Federal Government to review certain transactions that might violate § 7 before they occur. The provision, in brief, requires those contemplating an acquisition within its coverage to provide the Federal Trade Commission (FTC) with the information necessary for determining “whether such acquisition may, if consummated, violate the antitrust laws.”
The respondents, and the unions in their brief as amici, argue that a State or private person should not have the power to sue for divestiture under § 16 following a settlement approved by the FTC. They maintain that the possibility of such actions will reduce the Federal Government‘s negotiating strength and destroy the predictability that Congress sought to provide when it enacted § 7A. It is plausible, in my view, that allowing suits under § 16 may have these effects in certain instances. But the respondents and unions have identified nothing in § 7A that contradicts the Court‘s interpretation of § 7 and § 16. Section 7A, indeed, may itself contain language contrary to their position. See, e. g.,
The Court‘s opinion, however, does not render compliance with the Hart-Scott-Rodino Antitrust Improvements Act irrelevant to divestiture actions under § 16. The Act, for instance, may bear upon the issue of laches. By establishing a
“California could have sued several months earlier and attempted to enjoin the merger before the stock sale was completed. The Attorney General chose not to do so. California must accept the consequences of his choice.” 872 F. 2d 837, 846 (1989).
With the understanding that these consequences may include the bar of laches, I join the Court‘s decision.
Notes
“The order here questioned was entered when respondent actually held and owned the stock contrary to law. The Commission‘s duty was to prevent the continuance of this unlawful action by an order directing that it cease and desist therefrom and divest itself of what it had no right to hold. Further violations of the Act through continued ownership could be effectively prevented only by requiring the owner wholly to divest itself of the stock and thus render possible once more free play of the competition which had been wrongfully suppressed.” FTC v. Western Meat Co., 272 U. S. 554, 559 (1926).
The suggestion that continuing ownership of stock unlawfully acquired might constitute a “further violatio[n] of the Act” would cast some doubt upon the utility of American‘s distinction between mandatory and prohibitory injunctions even were we inclined to accept the relevance of that distinction. As we reject the distinction, we have, however, no cause to pursue this line of inquiry further.“That whenever a corporation shall acquire or consolidate the ownership or control of the plants, franchises, or property of other corporations, copartnerships, or individuals, so that it shall be adjudged to be a monopoly or combination in restraint of trade, the court rendering such judgment shall decree its dissolution and shall to that end appoint receivers to wind up its affairs and shall cause all of its assets to be sold in such manner and to such persons as will, in the opinion of the court, restore competition as fully and completely as it was before said corporation or combination began to be formed. The court shall reserve in its decree jurisdiction over said assets so sold for a sufficient time to satisfy the court that full and free competition is restored and assured.” 51 Cong. Rec. 15863 (1914).
Judge Finch, writing for a unanimous court, began the opinion by announcing: “The judgment sought against the defendant is one of corporate death.” Id., at 608, 24 N. E., at 834. He then said that although the “life of a corporation is indeed less than that of the humblest citizen,” “destruction of the corporate life” may not be effected “without clear and abundant reason.” Ibid. The ensuing opinion bristles with the rhetoric of moral condemnation; when characterizing the corporation‘s defense, for example, Judge Finch commented that the court had been asked “to separate in our thought the soul from the body, and admitting the sins of the latter to adjudge that the former remains pure.” Id., at 626, 24 N. E., at 837.
“As applied in both early and more recent antitrust cases, ‘dissolution’ refers to an antitrust judgment which dissolves or terminates an illegal combination or association—putting it out of business, so to speak. ‘Divestiture’ is used to refer to situations where the defendants are required to divest or dispossess themselves of specified property in physical facilities, securities, or other assets.” Oppenheim, Divestiture as a Remedy Under the Federal Antitrust Laws, 19 Geo. Wash. L. Rev. 119, 120 (1950).
Nevertheless, for at least the past four decades dissolution and divestiture have been treated as interchangeable terms in antitrust law. See United States v. E. I. du Pont de Nemours & Co., 366 U. S. 316, 330, n. 11 (1961) (terms are to a “large degree interchangeable“); see also Oppenheim, 19 Geo. Wash. L. Rev., at 121 (recognizing technical distinction between terms, but treating them as interchangeable nonetheless).
During the first decades of this century, however, “dissolution” was the favored term for a remedy that put an end to an unlawful combination and “divestiture” was rarely mentioned in the antitrust context. The early 20th-century treatise writers seem to have spoken exclusively in terms of dissolution. See, e. g., W. Thornton, A Treatise on the Sherman Anti-Trust Act § 372 (1913). Not surprisingly, all of the legislative history cited by the parties to this case refers to dissolution, not to divestiture.
Yet even without using the term “divestiture,” Congress could and did recognize the appropriateness of a divestiture remedy in merger cases: § 11 of the Clayton Act expressly authorizes the FTC to order a defendant corporation to “divest itself of the stock held . . . contrary to the provisions of sectio[n] seven . . . of this Act.” 38 Stat. 735. Indeed, the term “divestiture” appears to have entered the antitrust vocabulary as a consequence of FTC proceedings against alleged violators of § 7 of the Act. See, e. g., Arrow-Hart & Hegeman Electric Co. v. FTC, 291 U. S. 587 (1934); FTC v. Western Meat Co., 272 U. S. 554 (1926). Use of the term in those cases is unsurprising, for the text of the Act suggested that “divestiture,” rather than “dissolution,” was the remedy being sought.
By 1944, Justice Douglas was using the two terms in close proximity, see United States v. Crescent Amusement Co., 323 U. S. 173, 188–189 (1944)
(Sherman Act case), although it is at least arguable that his usage preserved the technical distinction that was to be generally elided less than a decade later. Cf. Swift & Co. v. United States, 276 U. S. 311, 319 (1928) (referring to “divestiture of the instrumentalities” in a case raising both Sherman Act and Clayton Act claims). It would appear that, as the moral conception of dissolution lost favor and divestiture decrees became paradigmatic of dissolution remedies, the two concepts were collapsed into one another.