Denver & Rio Grande Western R. Co. v. United States, 387 U.S. 485 (1967)
U.S. Supreme CourtDenver & Rio Grande Western R. Co. v. United States, 387 U.S. 485 (1967)
Denver & Rio Grande Western Railroad Co. v. United States
Argued March 16, 1967
Decided June 5, 1967
387 U.S. 485
Railway Express Agency (REA) applied to the Interstate Commerce Commission (ICC) for authorization under § 20a of the Interstate Commerce Act to sell 500,000 authorized but unissued shares of its stock to Greyhound Corporation. Greyhound agreed, upon acquisition of these shares, to offer for 60 days to purchase up to 1 million shares of outstanding REA stock, all of which is owned by railroads which have the right of first refusal. REA and Greyhound had entered into a "Memorandum of Understanding" which contemplated efficiencies and savings through consolidation of terminal facilities, garages, communications, advertising, and sales forces. Section 20a(2) of the Act provides for ICC authorization of a carrier's stock issuance if "for some lawful object within [the applicant's] corporate purposes, and compatible with the public interest." Finding the issuance of the 500,000 shares for sale to Greyhound to be urgently needed, the ICC authorized the issuance under § 20a without a hearing, and declined to decide, pending the outcome of Greyhound's 60-day offer, the questions of control under § 5 of the Interstate Commerce Act or anticompetitive effect under § 7 of the Clayton Act. A three-judge District Court sustained the ICC order.
1. The ICC is required, as a general rule, under its duty to determine that the proposed transaction is in the "public interest" and for a "lawful object," to consider control and anticompetitive consequences before approving a stock issuance under § 20a(2) of the Interstate Commerce Act. Pp. 492-498.
2. The ICC did not exceed its discretion in deferring consideration of the issue of REA's control by Greyhound, as radical changes in the relevant facts might take place in the 60-day period, and it is highly unlikely that any harm could flow to appellants or to the public interest from a deferral limited to that issue. Pp. 387 U. S. 499-501.
3. The ICC exceeded its discretion in deferring consideration of the anticompetitive issues. Pp. 387 U. S. 501-507.
(a) While the ICC's duty to consider anticompetitive issues under the public interest standard of § 5 of the Interstate Commerce Act arises only after a threshold finding of control, no such preliminary finding need be made to trigger the ICC's duty under the Clayton Act. P. 387 U. S. 501.
(b) With respect to at least some of the anticompetitive issues presented by REA's application, the relevant facts will not change significantly during the 60-day period. Pp. 387 U. S. 502-503.
(c) With Greyhound's holding of 500,000 shares (20%) of REA's stock, there is likely to be immediate and continuing cooperation between the companies, which appellants claim will be to their detriment and which the Government concedes may be against the public interest. If such an alliance would, in fact, be against the public interest, § 7 of the Clayton Act requires that it be stopped in its incipiency. P. 387 U. S. 504.
(d) Before the ICC can justify a diversification of ownership on the grounds that REA has an urgent need for funds and would be better off more independent of the railroads, it must consider whether the action approved would operate to the detriment of REA or the public interest. Pp. 387 U. S. 505-506.
(e) There is little merit to the Government's contention that deferral of the anticompetitive issues is strongly supported by considerations of administrative convenience. Pp. 387 U. S. 506-507.
255 F. Supp. 704, reversed and remanded.