FTC v. Dean Foods Co.
384 U.S. 597 (1966)

Annotate this Case

U.S. Supreme Court

FTC v. Dean Foods Co., 384 U.S. 597 (1966)

Federal Trade Commission v. Dean Foods Co.

No. 970

Argued March 28, 1966

Decided June 13, 1966

384 U.S. 597

CERTIORARI TO THE UNITED STATES COURT OF APPEALS

FOR THE SEVENTH CIRCUIT

Syllabus

Respondents, two substantial competitors in the sale of packaged milk in the Chicago area, signed a merger agreement following meetings with representatives of the Federal Trade Commission (FTC) who indicated that the merger would raise serious questions under the antitrust laws. At the time of the merger, one of the respondents was the third or fourth largest packaged milk distributor in the area, the other at least the second largest, and together they accounted for 23% of area sales of packaged milk. The FTC filed a complaint charging that the agreement violated § 7 of the Clayton Act and § 5 of the Federal Trade Commission Act. Thereafter, the FTC, under the All Writs Act, 28 U.S.C. § 1651(a), petitioned the Court of Appeals for a temporary restraining order and a preliminary injunction to maintain the status quo until the FTC determined the merger's legality. The FTC alleged the probability of its finding an antitrust violation, and that the need for injunctive relief was "compelling," since, under the merger, one of the respondents would no longer exist, its milk routes and certain of its plants and equipment would be sold and its remaining assets would be consolidated, precluding its restoration as a viable independent company if the merger were subsequently ruled illegal. The petition alleged that the Court of Appeals would consequently be deprived of its appellate jurisdiction over final FTC orders and the opportunity to enter a meaningful order of its own. The Court of Appeals, on the hearing for a preliminary injunction, dismissed the petition on the ground that the FTC had not entered a cease and desist order, and had no authority to institute the proceeding, Congress having failed to enact bills introduced for such a purpose. The contract was then closed. MR. JUSTICE CLARK, on application, issued a preliminary injunction against material corporate changes in the acquired company and subsequently this Court granted certiorari.

Held:

1. The Court of Appeals has jurisdiction to issue a preliminary injunction to prevent consummation of the merger agreement upon

Page 384 U. S. 598

a showing that all effective remedial order would otherwise be virtually impossible once the merger had been implemented, thus rendering a final divestiture decree futile. Pp. 384 U. S. 603-605.

(a) The All Writs Act extends to the potential jurisdiction of an appellate court where an appeal is not then pending, but may later be perfected. Pp. 384 U. S. 603-604.

(b) The grant in § 11(c) of the Clayton Act to courts of appeals of jurisdiction to review final orders of the FTC against illegal mergers on application of any person required thereby to cease and desist such violations includes the traditional power to preserve the status quo while administrative proceedings are in progress to prevent impairment of the effective exercise of appellate jurisdiction. Cf. Whitney Nat. Bank v. New Orleans Bank,379 U. S. 411. Pp. 384 U. S. 604-605.

2. The FTC, under the circumstances alleged in this case, has standing to seek preliminary relief under the All Writs Act. Pp. 384 U. S. 605-612.

(a) It would stultify Congress' purpose in entrusting the FTC with enforcement of the Clayton Act and granting it the power to order divestiture if the FTC did not have the incidental power to ask the courts of appeals to exercise their authority under the All Writs Act. Pp. 384 U. S. 606-612.

(b) The power of the courts of appeals to grant preliminary relief here derives from the All Writs Act, not the Clayton Act. P. 384 U. S. 608.

(c) Congress' failure to enact proposals that the FTC be empowered itself to issue preliminary relief or to proceed in district courts for that purpose reflects no intent to circumscribe traditional judicial remedies. Pp. 384 U. S. 608-611.

356 F. 2d 481, reversed and remanded.

Page 384 U. S. 599

MR. JUSTICE CLARK delivered the opinion of the Court.

At issue here is the power of the Court of Appeals under the All Writs Act, 28 U.S.C. § 1651(a) (1964 ed.), to temporarily enjoin the consummation of a merger that is under attack before the Federal Trade Commission as violative of § 7 of the Clayton Act, as amended, 64 Stat. 1125, 15 U.S.C. § 18 (1964 ed.). This case arose on the application of the Commission for a temporary restraining order and a preliminary injunction against respondents Dean Foods Company and Bowman Dairy Company to maintain the status quo until the Commission determined the legality of their merger. The Commission alleged that it had issued a complaint against respondents under § 7 of the Clayton Act and § 5 of the Federal Trade Commission Act, 38 Stat. 719, as amended, 52 Stat. 111, 15 U.S.C. § 45 (1964 ed.), and that, from the facts underlying the complaint, "it is probable that the Federal Trade Commission will enter an order finding a violation of these laws." The petition stated that there was a "compelling" need for preliminary relief, since the

"acquisition itself will split Bowman in two -- Dean will acquire fixed assets, receivables and good will; Bowman will retain all cash, government and other marketable securities, and some real estate investments"

for distribution to its stockholders. [Footnote 1] In addition, it was alleged that Dean planned to dispose of most of Bowman's retail milk routes, certain of its plants and equipment, and to consolidate the remaining assets. The Commission thus argued that, if the merger were allowed to be completed, "Bowman as an entity will no longer exist," and that it "will be extremely difficult and very probably impossible'"

Page 384 U. S. 600

to restore Bowman as "a viable independent" company if the merger were subsequently ruled illegal. In other words, consummation of the agreement would

"prevent the Commission from devising, or render it extremely difficult for the Commission to devise, any effective remedy after its decision on the merits."

As grounds for issuance of an extraordinary writ, the Commission asserted that the Court of Appeals

"will, in effect, be deprived of its appellate jurisdiction [over final Commission orders] and of the opportunity to enter a meaningful final order of its own in respect to this acquisition, since the res in custodia legis -- Bowman -- will have vanished."

The Court of Appeals entered a temporary restraining order against respondents, as prayed. On the hearing for a preliminary injunction, however, it dissolved the temporary restraining order and dismissed the petition for the reasons that

"no cease and desist order has been entered by the Commission relative to the subject matter in the case at bar and . . . we now hold that the Commission did not have authority to institute this proceeding in this court. . . ."

In its final judgment, the Court of Appeals supported its refusal to grant relief at the request of the Commission by reference to the fact that:

"in the 84th Congress and in the 89th Congress, bills sponsored by the said Commission were introduced, which bills, if enacted into law, would have conferred upon the Commission such authority as it is attempting to exercise in the case now before this court, but that said measures were not enacted into law, and Congress has not provided otherwise for bestowing this authority upon said Commission."

356 F.2d 481, 482.

A few hours after the Court of Appeals entered its order on January 19, 1966, the contract was closed and Dean acquired legal title to Bowman's operating assets.

Page 384 U. S. 601

Upon application by the Solicitor General on behalf of the Commission, Mr. Justice Clark, after consulting the other members of this Court, entered a preliminary injunction on January 24, 1966, restraining respondents from making any material changes with respect to Bowman's corporate structure or the assets purchased. This order provided that Dean might sell Bowman's retail home delivery routes upon terms and conditions acceptable to the Commission, but that any milk supplied by Dean to the purchasers of the routes must continue to be delivered under the Bowman label and from former Bowman plants. We granted certiorari on February 18, 1966, 383 U.S. 901, and expedited consideration of this case. We conclude that the Court of Appeals erred, and reverse its judgment.

I

Since the case comes to us from a dismissal on jurisdictional grounds, we must take the allegations of the Commission's application for a preliminary injunction as true. We need not detail the facts further than to say that Dean and Bowman were substantial competitors in the sale of packaged milk in the Chicago area, one of the largest markets in the United States for packaged milk. On November 2, 1965, attorneys for Dean and Bowman met with representatives of the Commission to discuss a proposal by Dean to purchase all of Bowman's plants and equipment, the Bowman name, all customer and supplier lists, together with the benefit of their relationships and various other assets, all of which were situated in the Chicago area. Bowman would consequently cease doing a dairy business there. It was emphasized that the inquiry was merely to ascertain the views of the staff of the Commission, and not to secure a formal advisory opinion. After investigation, on December 3, 1965, the Commission's staff advised Dean's counsel that it believed the acquisition would raise serious questions under the

Page 384 U. S. 602

antitrust laws, and that, on the basis of existing information, the staff would recommend that the Commission issue a complaint against the acquisition if consummated. After further meetings, Dean's counsel informed the Commission's staff on December 14, 1965, that the agreement had been signed. A week later, the Commission issued a formal complaint charging that the agreement violated § 7 of the Clayton Act and § 5 of the Federal Trade Commission Act.

It appears that, at the time of the merger, Dean was the third or fourth largest distributor of packaged milk in the Chicago area; Bowman was at least the second largest in that market, and together they enjoyed approximately 23% of the sales of packaged milk in the same area, while the four largest dairy companies had a 43% share thereof. Affidavits attached to the Commission's application alleged that, between 1954 and 1965, the number of packaged milk sellers in the Chicago market had declined from 107 to 57, and that, in the four months prior to the filing of the complaint, four more firms had been eliminated by acquisitions. From these statistics, it was concluded that the effect of Dean's acquisition of Bowman would be to substantially lessen competition. We place in the margin the Commission's summation of its complaint. [Footnote 2]

Page 384 U. S. 603

II

The All Writs Act, 28 U.S.C. § 1651(a), empowers the federal courts to "issue all writs necessary or appropriate in aid of their respective jurisdictions and agreeable to the usages and principles of law." The exercise of this power "is in the nature of appellate jurisdiction" where directed to an inferior court, Ex parte Crane, 5 Pet. 190, 30 U. S. 193 (1832) (Marshall, C.J.), and extends to the potential jurisdiction of the appellate court where an appeal is not then pending but may be later perfected. Cf. 32 U. S. 7 Pet. 634 (1833) (Marshall, C.J.). These holdings by Chief Justice Marshall are elaborated in a long line of cases, including McClellan v. Carland,217 U. S. 268 (1910), where Mr. Justice Day held:

"[w]e think it the true rule that where a case is within the appellate jurisdiction of the higher court a writ . . . may issue in aid of the appellate jurisdiction which might otherwise be defeated. . . ."

At 217 U. S. 280. And in Roche v. Evaporated Milk Assn.,319 U. S. 21 (1943), Chief Justice Stone stated that the authority of the appellate court

"is not confined to the issuance of writs in aid of a jurisdiction already acquired by appeal, but extends to those cases which are within its appellate jurisdiction although no appeal has been perfected. "

Page 384 U. S. 604

At 319 U. S. 25. Likewise, decisions of this Court

"have recognized a limited judicial power to preserve the court's jurisdiction or maintain the status quo by injunction pending review of an agency's action through the prescribed statutory channels. . . . Such power has been deemed merely incidental to the courts' jurisdiction to review final agency action. . . ."

Arrow Transp. Co. v. Southern R. Co.,372 U. S. 658, 372 U. S. 671, n. 22 (1963). There, the Court cited such authority as Scripps-Howard Radio, Inc. v. Federal Communications Comm'n,316 U. S. 4 (1942); West India Fruit & S.S. Co. v. Seatrain Lines, Inc., 170 F.2d 775 (C.A.2d Cir. 1948); and Board of Governors of Federal Reserve System v. Transamerica Corp., 184 F.2d 311 (C.A.9th Cir.), cert. denied, 340 U.S. 883 (1950).

Section 11(c) of the Clayton Act, as amended, 73 Stat. 243, 15 U.S.C. § 21(c), gives exclusive jurisdiction to review final orders by the Commission against illegal mergers, on application of "[a]ny person required by such order . . . to cease and desist from any such violation," to the courts of appeals "for any circuit within which such violation occurred or within which such person resides or carries on business." This grant includes the traditional power to issue injunctions to preserve the status quo while administrative proceedings are in progress and prevent impairment of the effective exercise of appellate jurisdiction. Cf. Continental Ill. Nat. Bank & Trust Co. of Chicago v. Chicago, R.I. & P. R. Co.,294 U. S. 648, 294 U. S. 675 (1935). A recent case involving a similar statutory proceeding is dispositive of this issue. Whitney Nat. Bank v. Bank of New Orleans,379 U. S. 411 (1965), raised the question whether holding companies were "lawfully entitled" to operate subsidiary banks within Louisiana, a question we held should be determined in the first instance by the Federal Reserve Board. We further concluded that the Board should reconsider its initial approval of such a plan in light of

Page 384 U. S. 605

an intervening Louisiana statute, and so gave the parties, who had sought review of the Board's order before the Court of Appeals for the Fifth Circuit, an opportunity to move that the case be remanded to the Board. It was noted that the Court of Appeals had authority "to issue such orders as will protect its jurisdiction pending final determination of the matter," at 379 U. S. 415, and that § 1651(a) empowered it to stay "the order of approval of the Federal Reserve Board pending final disposition of the review proceeding." At 379 U. S. 425. In response to the argument that the stay would not be sufficient because the Comptroller of Currency nonetheless intended to issue a certificate to the bank, we stated that, if

"the Court of Appeals should find it necessary to take direct action to maintain the status quo and prevent the opening of the bank, it has ample power to do so"

by an injunction against the applicants before the Federal Reserve Board themselves. At 379 U. S. 426. Such action would be analogous to the relief requested here by the Commission. [Footnote 3]

These decisions furnish ample precedent to support jurisdiction of the Court of Appeals to issue a preliminary injunction preventing the consummation of this agreement upon a showing that an effective remedial order, once the merger was implemented, would otherwise be virtually impossible, thus rendering the enforcement of any final decree of divestiture futile.

III

Dean and Bowman insist, however, that as a creature of statute the Commission may exercise only those functions delegated to it by Congress, and that Congress has

Page 384 U. S. 606

failed to give the Commission express statutory authority to request preliminary relief under the All Writs Act. [Footnote 4] But the Commission is a governmental agency to which Congress has entrusted, inter alia, the enforcement of the Clayton Act, granting it the power to order divestiture in appropriate cases. At the same time, Congress has given the courts of appeals jurisdiction to review final Commission action. It would stultify congressional purpose to say that the Commission did not have the incidental power to ask the courts of appeals to exercise their authority derived from the All Writs Act. [Footnote 5] Indeed, the opinions

Page 384 U. S. 607

in Arrow Transportation Co. and Whitney Nat. Bank necessarily recognized the standing of administrative agencies to seek such preliminary relief to ensure effective judicial review. Both decisions referred to Board of Governors v. Transamerica Corp., supra, where the Court of Appeals stayed a merger on application by the Federal Reserve Board. See also Public Utilities Comm'n v. Capital Transit Co., 94 U.S.App.D.C. 140, 214 F.2d 242 (1954), and West India Fruit & S.S. Co. v. Seatrain Lines, Inc., 170 F.2d 775, 779 (C.A.2d Cir. 1948). There is no explicit statutory authority for the Commission to appear in judicial review proceedings, but no one has contended it cannot appear in the courts of appeals to defend its orders. Nor has it ever been asserted that the Commission could not bring contempt actions in the appropriate court of appeals when the court's enforcement orders were violated, though it has no statutory authority in this respect. Such ancillary powers have always been treated as essential to the effective discharge of the Commission's responsibilities.

Page 384 U. S. 608

It must be remembered that the courts of appeals derive their power to grant preliminary relief here not from the Clayton Act, but from the All Writs Act and its predecessors dating back to the first Judiciary Act of 1789. Congress has never restricted the power which the courts of appeals may exercise under that Act. Nor has it withdrawn from the Commission its inherent standing as a suitor to seek preliminary relief in courts of appropriate jurisdiction. [Footnote 6] In the absence of explicit direction from Congress, we have no basis to say that an agency, charged with protecting the public interest, cannot request that a court of appeals, having jurisdiction to review administrative orders, exercise its express authority under the All Writs Act to issue such temporary injunctions as may be necessary to protect its own jurisdiction.

Respondents point -- as did the Court of Appeals -- to the fact that the Commission sought authority from both the Eighty-fourth and Eighty-ninth Congresses to grant preliminary injunctions itself or to proceed in the distract court as the Department of Justice can under the Clayton Act. [Footnote 7] Both former Chairman Gwynne and Chairman Dixon appeared in support of the measures, [Footnote 8] and referred to Federal Trade Comm'n v. International

Page 384 U. S. 609

Paper Co., 241 F.2d 372 (C.A.2d Cir. 1956), which held the Commission had no standing to seek preliminary injunctions from the courts of appeals. [Footnote 9] In addition, several Congressmen made statements regarding the need for statutory amendment. [Footnote 10] However, no proposal was put before the Congress relating to the authority of the Commission to secure preliminary relief before the courts of appeals in accordance with § 1651(a). The proposals concerned only the power of the Commission itself to issue preliminary relief or to proceed in the district courts for that purpose.

Congress neither enacted nor rejected these proposals; it simply did not act on them. [Footnote 11] Even if it had, the legislation as proposed would have had no effect whatever on the power that Congress granted the courts by the All Writs Act. We cannot infer from the fact that Congress took no action at all on the request of the Commission

Page 384 U. S. 610

to grant it or a district court power to enjoin a merger that Congress thereby expressed an intent to circumscribe traditional judicial remedies. Cf. Scripps-Howard Radio, Inc. v. Federal Communications Comm'n,316 U. S. 4, 316 U. S. 11 (1942). The decision in Wong Yang Sung v. McGrath,339 U. S. 33 (1950), is apposite. Following an adverse decision in Eisler v. Clark, 77 F.Supp. 610 (D.D.C.1948), the Department of Justice asked Congress for legislation exempting the Immigration Service from the Administrative Procedure Act. 60 Stat. 237, 5 U.S.C. § 1001 (1964 ed.). As was the case here, the appropriate committees of both Houses reported the proposal favorably, but Congress adjourned without taking any action. The Department nonetheless insisted in Wong Yang Sung that hearings in deportation cases did not have to conform to the requirements of the Administrative Procedure Act. In his discussion of legislative history, Mr. Justice Jackson wrote for a unanimous Court that

"we will not draw the inference, urged by petitioner, that an agency admits that it is acting upon a wrong construction by seeking ratification from Congress. Public policy requires that agencies feel free to ask legislation which will terminate or avoid adverse contentions and litigations."

At p. 339 U. S. 47. This Court has consistently refused to construe such requests by government agencies and the resulting nonaction of the Congress as affirmative evidence of no authority. [Footnote 12] Thus, in United States v. E. I. Du Pont De Nemours & Co.,353 U. S. 586 (1957), Mr. Justice Brennan held:

"During the 35 years before this action was brought (in 1949), the Government did not invoke § 7 against vertical acquisitions. The Federal Trade Commission has said that the section did not apply to vertical acquisitions. See F.T.C., Report on

Page 384 U. S. 611

Corporate Mergers and Acquisitions 168 (1955), H.R. Doc. No. 169, 84th Cong., 1st Sess. Also, the House Committee considering the 1950 revision of § 7 stated that '. . . it has been thought by some that this legislation [the 1914 Act] applies only to the so-called horizontal mergers. . . .' H.R. Rep. No. 1191, 81st Cong., 1st Sess. 11. The House Report adds, however, that the 1950 amendment was purposed ' . . . to make it clear that the bill applies to all types of mergers and acquisitions, vertical and conglomerate as well as horizontal. . . .' (Emphasis added.)"

"This Court has the duty to reconcile administrative interpretations with the broad antitrust policies laid down by Congress. . . . The failure of the Commission to act is not a binding administrative interpretation that Congress did not intend vertical acquisitions to come within the purview of the [1914] Act."

At p. 590.

Despite the representations of the Commission that the 1914 Act did not apply to vertical mergers, its sponsorship of legislation to so enlarge its coverage, and the passage of the 1950 Act by the Congress for this purpose, this Court nonetheless held that the 1914 Act included vertical mergers from its very inception, and thus required du Pont to divest its interest in General Motors stock, which had been acquired in 1915.

It is therefore clear that the "proceedings" in the Congress with reference to the authority of the Commission itself to issue or apply to the district courts for the issuance of preliminary injunctions in merger cases have no relevance whatever to the question before us. In short, Congress gave no attention to the exercise of judicial power by the courts of appeals under the All Writs Act, leaving that power intact and the standing of the Commission to invoke it undiminished. We thus hold

Page 384 U. S. 612

that the Commission has standing to seek preliminary relief from the Court of Appeals under the circumstances alleged. As stated earlier, we must take the allegations of the Commission as true, and so do not pass upon whether preliminary injunction should be whether a preliminary injunction should be issued. That is for the Court of Appeals to decide on remand, as it would decide any application to it for relief under the All Writs Act.

Reversed and remanded.

[Footnote 1]

Since consummation of the merger, all assets of Bowman, with the exception of cash and marketable securities which were exempted from the purchase agreement, have been transferred to Dean. Bowman has ceased dairy operations, and now acts as an investment fund, having received and invested the proceeds of the sale.

[Footnote 2]

The Federal Trade Commission alleged:

"(a) Actual or potential competition in the sale and distribution of packaged milk in the Chicago Area will be eliminated or prevented;"

"(b) Dean, a major competitive factor in the sale and distribution of packaged milk in the Chicago Area, will eliminate Bowman, another major competitive factor in the sale and distribution of packaged milk in the Chicago Area;"

"(c) Concentration in the sale and distribution of packaged milk in the Chicago Area will be increased, and deconcentration will be prevented;"

"(d) The restraining influence on noncompetitive behavior in the sale and distribution of packaged milk in the Chicago Area, which existed by reason of the independent operation of Bowman, will be eliminated;"

"(e) The acquisition will contribute to the over-all trend toward concentration in the sale and distribution of packaged milk in the United States . . . , thereby tending to bring about the adverse competitive effects described [elsewhere in the complaint];"

"(f) The emergence or growth of smaller packaged milk companies in the Chicago Area will be retarded, discouraged or prevented;"

"(g) The members of the consuming public, in the Chicago Area and throughout the United States, will be denied the benefits of the free and open competition in the sale and distribution of packaged milk."

[Footnote 3]

Of course, the courts of appeals have traditionally framed § 1651(a) writs in the form of compulsory injunctions aimed at private parties. E.g., Application of President & Directors of Georgetown College, 118 U.S.App.D.C. 80, 331 F.2d 1000, cert. denied, Jones v. President & Directors of Georgetown College, 377 U.S. 978 (1964). See Recent Cases, 77 Harv.L.Rev. 1539, 1542 (1964).

[Footnote 4]

For the proposition that the Commission must have express statutory authority to seek injunctions in the courts of appeals, two cases are cited. The first, Humphrey's Executor v. United States,295 U. S. 602 (1935), has no relevance to our problem. And the other, Federal Trade Comm'n v. Eastman Kodak Co.,274 U. S. 619, 274 U. S. 623-625 (1927), even though apposite, has been repudiated. It held that, in fashioning a final decree, the Commission "exercises only the administrative functions delegated to it by the Act," and therefore could not order divestiture of laboratories acquired through a stock purchase. This view was rejected in Pan American World Airways, Inc. v. United States,371 U. S. 296, 371 U. S. 312-313, nn. 17-18 (1963), the Court holding that "the power to order divestiture need not be explicitly included in the powers of an administrative agency to be part of its arsenal of authority," citing Gilbertville Trucking Co. v. United States,371 U. S. 115 (1962).

[Footnote 5]

Such a holding would especially interfere with the functions Congress has given the Commission in the merger field. As THE CHIEF JUSTICE stated in Brown Shoe Co. v. United States,370 U. S. 294 (1962), the Congress

"sought to assure the Federal Trade Commission and the courts the power to brake this force [business concentration] at its outset, and before it gathered momentum."

At 370 U. S. 317-318. But without standing to secure injunctive relief, and thereby safeguard its ability to order an effective divestiture of acquired properties, the Commission's efforts would be frustrated. As MR. JUSTICE DOUGLAS said in United States v. Crescent Amusement Co.,323 U. S. 173, 323 U. S. 185 (1944):

"The acquisition of a competing theatre terminates at once its competition. . . . And where businesses have been merged or purchased and closed out, it is commonly impossible to turn back the clock."

Here, the plan of merger itself contemplates the sale of the acquired home delivery milk routes and certain milk plants. In addition, Bowman has retained its cash and securities, with the intention ultimately to distribute them to its stockholders. If consummation of the merger is not restrained, the restoration of Bowman as an effective and viable competitor will obviously by impossible by the time a final order is entered. This is not unusual. Administrative experience shows that the Commission's inability to unscramble merged assets frequently prevents entry of an effective order of divestiture. E.g., Ekco Products Co., Trade Reg.Rep.

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