The civil penalty provisions of the Clayton Act, 15 U.S.C. §
21(
l), and the Federal Trade Commission Act, 15 U.S.C. §
45(
l), similarly provide in part that each separate
violation of a Federal Trade Commission (FTC) cease and desist
order issued under the respective Acts shall be a separate offense,
except that, in the case of a violation through "continuing failure
or neglect to obey" a final order of the FTC each day of
continuance of such failure shall be deemed a separate offense.
After the FTC had charged the Continental Baking Co. (Continental),
a bakery which later merged with respondent, with violations of § 7
of the Clayton Act and § 5 of the Federal Trade Commission Act by
various acquisitions of other bakeries, the parties agreed to a
consent order prohibiting Continental from "acquiring" other
bakeries. Thereafter, alleging that Continental had acquired assets
in other companies in violation of this order, the Government
brought suit for civil penalties to be imposed daily from the date
of the contract of acquisition to the date of filing of the
complaint. The District Court, while holding that the order had
been violated, declined to order daily penalties, finding that the
order proscribed only the initial act of acquisition, that the
violations did not constitute "a continuing failure or neglect to
obey" within the meaning of §§ 21(
l) and 45(
l),
and that, therefore, only a single penalty might be imposed. The
Court of Appeals affirmed that holding.
Held: "Acquiring" as used in the consent order means
both the initial transaction and the maintaining of the rights
obtained without resale, and therefore violation of the order is a
"continuing failure or neglect to obey" an FTC order within the
meaning of §§ 21(
l) and 45(
l) and thus subject to
daily penalties thereunder. Pp.
420 U. S.
230-243.
(a) The purpose of the "continuing failure or neglect to obey"
provisions of §§ 21(
l) and 45(
l), as shown by
their legislative
Page 420 U. S. 224
histories, to assure that the penalty provisions would
meaningfully deter violations whose
effect is continuing
and whose detrimental effect could be terminated or minimized by
the violator at some time after initiating the violation, would be
undermined and the penalty would be converted into a minor tax if
violation of an order prohibiting "acquiring" assets were treated
as a single violation. Pp.
420 U. S. 230-233.
(b) Since the consent order "as it is written" supports an
interpretation that the act of acquisition continues until the
assets are disgorged (
see (c),
infra), there is
no need to determine whether §§ 21(
l) and 45(
l)
would permit the imposition of daily penalties even if the consent
order must be read, as respondent claims, to proscribe only the
initial act of acquisition. Pp.
420 U. S.
233-238.
(c) Under the consent order "as it is written," "acquiring" must
mean both the act of first obtaining assets and the retention and
use of those assets, since to conclude otherwise would be to ignore
the flexibility of the English language, as well as the
circumstances surrounding the order and the context in which the
parties were operating. That conclusion is supported by both the
"appendix" to the parties' agreement of which the order is a part
and the complaint, as proper aids for construing the order which is
to be construed basically as a contract. But even without the aid
of these documents, "acquiring," as used in an antitrust decree or
order, continues until the assets are disgorged, since "acquiring"
and related words, as used in the antitrust context, encompass the
continuing act of obtaining certain rights and treating them as
one's own. Pp.
420 U. S.
238-243.
485 F.2d 16, reversed and remanded.
BRENNAN, J., delivered the opinion of the Court, in which
DOUGLAS, MARSHALL, WHITE, and BLACKMUN, JJ., joined. STEWART, J.,
filed a dissenting opinion, in which BURGER, C.J., and POWELL and
REHNQUIST, JJ., joined,
post, p.
420 U. S.
243.
Page 420 U. S. 225
MR. JUSTICE BRENNAN delivered the opinion of the Court.
The question presented by this case is whether violations of the
prohibition of a Federal Trade Commission (FTC) consent order
against "acquiring" other companies constituted single violations
within the meaning of the applicable civil penalty statutes, 38
Stat. 734, as amended, 15 U.S.C. § 21(
l); 38 Stat. 719, as
amended, 15 U.S.C. § 45(
l), or whether such violations
constituted a "continuing failure or neglect to obey" within the
meaning of those statutes, authorizing imposition of daily
penalties. The United States District Court for the District of
Colorado interpreted the consent order to proscribe only the
initial act of acquisition, and held that, therefore, only a single
penalty might be imposed. 1972 CCH Trade Cases � 73,993, p. 92, 127
(Aug. 2, 1971). The Court of Appeals for the Tenth Circuit affirmed
the District Court to that extent, 485 F.2d 16 (1973). A subsequent
decision of the Court of Appeals for the Eighth Circuit is in
conflict,
United States v. Beatrice Foods Co., 493 F.2d
1259 (1974),
cert. pending No. 73-1798. In interpreting a
consent order worded in its pertinent terms similarly to that in
this case, the Court of Appeals for the Eighth Circuit held that
acquisition is a continuing offense until it is undone, noting that
the construction of "acquiring" as a single, rather than
continuing, violation "ignores the crucial effects of an
acquisition and would render nonacquisition orders virtually
meaningless."
Id. at 1270.
We granted certiorari in order to resolve this conflict between
Courts of Appeals concerning the proper application of the
"continuing" violation clauses of 15 U.S.C. §§ 21(
l) and
45(
l) to wording employed in a large number of FTC consent
orders. [
Footnote 1] Since we
interpret
Page 420 U. S. 226
"acquiring" as used in the consent order in this case to mean
both the initial transaction and the maintaining of the rights
obtained without resale, we hold that violation of the consent
order is a continuing violation subject to daily penalties, and
reverse. [
Footnote 2]
Page 420 U. S. 227
I
The FTC alleged in 1960 that Continental Baking Co.
(Continental), [
Footnote 3] a
major producer of bread and other bakery products, had violated § 7
of the Clayton Act, 38 Stat. 731, 64 Stat. 1125, 15 U.S.C. § 18,
and § 5 of the Federal Trade Commission Act, 15 U.S.C. § 45, by
various acquisitions which "may have the effect of substantially
lessening competition or tending to create a monopoly. . . ."
Before any decision in the case, the parties agreed to a proposed
consent order which was approved by the FTC in May, 1962. The
order, among
Page 420 U. S. 228
other things, prohibited Continental for 10 years [
Footnote 4] from
"acquiring, directly or indirectly, through subsidiaries or
otherwise, the whole or any part of the stock, share capital, or
assets of any concern, corporate or non-corporate, engaged in any
state of the United States in the production and sale of bread and
bread-type rolls unless the Commission, on petition for
modification of this Section III of this order, permits such an
acquisition. . . ."
Alleging that Continental had acquired assets in three companies
in violation of this order, the Government brought suit in the
District of Colorado under § 11(
l) of the Clayton Act, 15
U.S.C. § 21(
l) [
Footnote
5] and § 5(
l) of the Federal
Page 420 U. S. 229
Trade Commission Act, 15 U.S.C. § 45(
l), [
Footnote 6] for civil penalties and other
relief. The complaint prayed for penalties of $1,000 per day from
the date of the contract of acquisition to the date of filing of
the complaint on each of the three counts.
The District Court held that two of the three transactions were,
in fact, in violation of the consent order. It declined, however,
to order daily penalties, finding that
"the terms of the consent order proscribe only the act of
acquisition, and that the violations of the consent order . . . did
not constitute a 'continuing failure or neglect to obey' [15 U.S.C.
§§ 21(
l), 45(
l)] said
Page 420 U. S. 230
order. . . . Once these two acquisitions were accomplished, the
violations were complete."
1972 CCH Trade Cases, at 92, 129. The District Court therefore
entered a judgment against ITT Continental for $5,000 for each of
the two violations found. [
Footnote
7]
The Court of Appeals reversed the District Court only insofar as
it had held one of the three transactions not in violation of the
consent order. It affirmed on the matter of daily penalties,
holding that
"whether the order was directed to the acquisition or to the
acquisition and retention of assets or interests . . . [is] an
interpretation of the consent order, and the result is in
accordance with the prevailing standards."
485 F.2d at 21. Remand to the District Court was ordered only
for imposition of a penalty for the third violation.
II
The basic question before us is whether there has been a
"continuing failure or neglect to obey" an FTC order within the
meaning of 15 U.S.C. §§ 21(
l) and 45(
l).
The "continuing failure or neglect to obey" provision
Page 420 U. S. 231
of § 45(
l) was added to the Federal Trade Commission
Act in 1950, and the like provision of § 21(
l) to the
Clayton Act in 1959. Although the legislative history of these
provisions is sparse, some examples of behavior intended to be
covered by the "continuing" violation provisions do appear in the
legislative history. These include continuing conspiracies to fix
prices or control production, maintenance of a billboard in
defiance of an order prohibiting false advertising, failure to
dissolve an unlawful merger, and failure to eliminate an
interlocking directorate.
See letter from FTC General
Counsel to Senator Fulbright, 96 Cong.Rec. 3026-3027 (1950);
Hearings on H.R. 432, H.R. 2977, H.R. 6049, and S. 726 before the
Antitrust Subcommittee of the House Committee on the Judiciary,
86th Cong., 1st Sess., 21 (1959); H.R.Rep. No. 580, 86th Cong., 1st
Sess., 7 (1959). These violations share two discernible
characteristics: the detrimental effect to the public and the
advantage to the violator continue and increase over a period of
time, and the violator could eliminate the effects of the violation
if it were motivated to do so, after it had begun. Without these
characteristics, daily penalties for such violations would probably
have no greater deterrent effect than a single penalty, and
accumulating daily penalties would therefore be unfair.
The legislative history also makes clear that Congress was
concerned with avoiding a situation in which the statutory penalty
would be regarded by potential violators of FTC orders as nothing
more than an acceptable cost of violation, rather than as a
deterrence to violation. For example, Senator Aiken, chief
proponent of the 1950 amendment, said that, if daily penalties for
certain violations of the Federal Trade Commission Act were not
permitted, "the fine would amount to a license in the amount of
$5,000 for misrepresentation, which would be a very cheap fine,
indeed." 96 Cong.Rec. 3025 (1950).
Page 420 U. S. 232
Similarly, the House of Representatives Judiciary Committee said
in its report on the 1959 amendments:
"Although the maximum penalty may be severe, in certain cases,
it would be appropriate. In the absence of the maximum penalty for
a continuing offense, for example, commission and board orders with
respect to mergers and interlocking directorships, would be
ineffective. In such cases, unless the maximum penalty applied and
each day of a continuing violation considered a separate offense,
an order dissolving an unlawful merger could be ignored after the
mere payment of a $5,000 fine."
H.R.Rep. No. 580, 86th Cong., 1st Sess., 7 (1959).
See
also Hearings on H.R. 432, H.R. 2977, H.R. 6049, and S. 726,
supra, at 30 (letter from FTC General Counsel).
Thus, the "continuing failure or neglect to obey" provisions of
15 U.S.C. §§ 21(
l) and 45(
l) were intended to
assure that the penalty provisions would provide a meaningful
deterrence against violations whose effect is continuing and whose
detrimental effect could be terminated or minimized by the violator
at some time after initiating the violation. It seems apparent that
acquisition in violation of an FTC order banning "acquiring"
certain assets could be such a violation. Any anticompetitive
effect of an acquisition continues as long as the assets obtained
are retained, and the violator could undo or minimize any such
effect by disposing of the assets at any time after the initial
transaction. On the other hand, if violation of an order
prohibiting "acquiring" assets were treated as a single violation,
any deterrent effect of the penalty provisions would be entirely
undermined, and the penalty would be converted into a minor tax
upon a violation which could reap large financial benefits to the
perpetrator. As we have seen, Congress
Page 420 U. S. 233
added the continuing penalty provisions precisely to avoid such
a result.
III
Respondent insists, however, that the underlying FTC order was a
consent order proscribing only the initial act of acquisition, and
that, therefore, the imposition of daily penalties which might
otherwise be mandated cannot be permitted. Its argument is that
"acquiring" in the consent order unambiguously refers only to the
initial transaction, and that to read it otherwise is to add the
words "holding" or "retaining" assets to the literal language of
the order. This addition to the language of the order, ITT
Continental contends, violates the principle of a line of cases
culminating in
United States v. Armour & Co.,
402 U. S. 673
(1971), that any command of a consent decree or order must be found
"within its four corners,"
id. at
402 U. S. 682,
and not by reference to any "purposes" of the parties or of the
underlying statutes.
See United States v. Atlantic Refining
Co., 360 U. S. 19
(1959);
Hughes v. United States, 342 U.
S. 353 (1952). Respondent asks us to conclude that the
"acquirings" prohibited by the consent order are not capable of
persisting over time, and that, therefore, there can be no
"continuing failure or neglect to obey" the order. The Government,
on the other hand, contends that the parties meant "acquiring" to
include both purchase and retention of assets, and that, therefore,
it is unnecessary to depart from the "four corners" rule of
Armour to conclude that there has been a continuing
violation.
In
Armour, it was first determined that the
construction of the consent decree urged by the Government was
inconsistent with the express terms of the consent decree it was
seeking to enforce. [
Footnote
8] The decree involved in
Page 420 U. S. 234
Armour was the Meat Packers Consent Decree of 1920,
entered in settlement of an antitrust case filed in District Court.
Paragraph fourth of the decree enjoined Armour from engaging in
certain businesses. The Greyhound Corporation, which was engaged in
some of those businesses, acquired control of Armour. The
Government claimed that this acquisition was in violation of the
consent decree, contending that the purpose of the decree was
structurally to separate the meatpackers from the retail food
business entirely, and that the relationship between Armour and
Greyhound was therefore prohibited.
The Court noted that the language of the decree
"
taken in its natural sense, bars only active conduct
on the part of the defendants. . . . [T]he decree does not speak in
terms of relationships in general, but, rather, prohibits certain
behavior, and, in doing so, prohibits some, but not all, economic
interrelationship between Armour and the retail food business. . .
. In short, we do not find in the decree a structural separation
such as the Government claims. . . . [T]he decree leaves gaps
inconsistent with so complete a separation."
402 U.S. at
402 U. S. 678,
680. (Emphasis supplied.)
Similarly, in both
Atlantic Refining and
Hughes, the Court first undertook to determine whether the
language of the decree could support the construction urged by
Page 420 U. S. 235
the Government, and concluded that it could not. In
Hughes, the decree provided that Hughes was either to
dispose of his stock in a certain corporation or commit the voting
rights of his stock to a trustee "until [he] shall have sold his
holdings of stock." 342 U.S. at
342 U. S. 355
n. The Court said:
"A reading of the either/or wording
would make most persons
believe that Hughes was to have a choice of two different
alternatives. Hughes would have no choice if the first
'alternative' was to sell the stock and the second 'alternative'
was also to sell the stock."
Id. at
342 U. S. 356.
(Emphasis supplied.) Therefore, the Court concluded, the consent
decree could not be construed, as the Government desired, to
require Hughes to sell his stock.
In
Atlantic Refining, the Court concluded that the
construction urged by the Government was a "strained construction,"
360 U.S. at
360 U. S. 22,
inconsistent with the "normal meaning,"
id. at 23, of the
language used. It commented that, if the parties had intended the
meaning urged by the Government, "one can hardly think of less
appropriate language."
Id. at 22.
In all three of these cases, it was only after concluding that
the language, fairly read, could not support the Government's
construction that the Court turned to the contention that the
restrictive reading was inconsistent with the purposes of the
decree and of the antitrust laws assertedly violated. It was in
this context that the Court noted that, because consent decrees are
normally compromises in which the parties give up something they
might have won in litigation and waive their rights to litigation,
it is inappropriate to search for the "purpose" of a consent decree
and construe it on that basis.
"[T]he decree itself cannot be said to have a purpose; rather,
the parties have purposes, generally opposed to each other, and the
resultant decree embodies as much of those opposing
Page 420 U. S. 236
purposes as the respective parties have the bargaining power and
skill to achieve. . . . [T]he instrument must be construed as it is
written, and not as it might have been written had the plaintiff
established his factual claims and legal theories in litigation.
[
Footnote 9]"
Armour, 402 U.S. at
402 U. S.
681-682. Thus, the basic import of
Armour, Atlantic
Refining, and
Hughes is that, since consent decrees
and orders have many of the attributes of ordinary contracts,
[
Footnote 10] they should be
construed basically as contracts,
Page 420 U. S. 237
without reference to the legislation the Government originally
sought to enforce but never proved applicable through
litigation.
We note that this case differs from
Armour, Hughes, and
Atlantic Refining in a most important respect. In each of
those cases, the question of whether or not the consent decree was
violated was the question for decision; in this case, respondent
was found to have committed violations, and the issue before us
affects only the manner of assigning penalties for each violation
found. Thus, respondent is subject to some penalty, and there is no
possibility as there was in
Armour, Atlantic Refining, and
Hughes that respondent will be penalized for behavior not
prohibited at all by the order "within its four corners,"
Armour, 402 U.S. at
402 U. S. 682.
Nothing in the consent order suggests that, although the parties
agreed that Continental would refrain from "acquiring," they also
agreed to limit the penalties which would otherwise apply if
Continental did not refrain from that behavior. Such an agreement
would be exceedingly odd, for it would undermine whatever
prohibitions were imposed. As we have seen,
420 U.
S. supra, it is quite possible that, under §§
21(
l) and 45(
l), violation of an FTC adjudicated
order against "acquiring" would be subject to daily penalties. It
is not clear that
Armour would require a different result
merely because we are dealing with a consent order, since the
parties reached no agreement at all concerning penalties to be
applied in case of violation of the order.
Page 420 U. S. 238
We need not, however, determine whether §§ 21(
l) and
45(
l) would permit the imposition of daily penalties even
if the consent order must be read as respondent maintains to
proscribe only the initial act of acquisition. For we agree with
the Government that the order "as it is written" does support an
interpretation that the act of acquisition continues until the
assets acquired are disgorged.
IV
Since a consent decree or order is to be construed for
enforcement purposes basically as a contract, reliance upon certain
aids to construction is proper, as with any other contract. Such
aids include the circumstances surrounding the formation of the
consent order, any technical meaning words used may have had to the
parties, and any other documents expressly incorporated in the
decree. [
Footnote 11] Such
reliance does not in any way depart from the "four corners" rule of
Armour.
In this case, the consent order was part of an agreement between
the parties entitled "Agreement Containing Consent Order to Divest
and to Cease and Desist." The agreement incorporates by reference
an "appendix," which sets forth at length the background leading to
the complaint and the proposed order. In addition, the agreement
provides that "[t]he complaint may be used in construing the terms
of the order." Since the parties themselves so provided, both the
appendix and the complaint are proper aids to the construction of
the order and of the agreement of which it is part. [
Footnote 12]
Page 420 U. S. 239
The complaint alleged that Continental had pursued "a continuous
practice of
acquiring various bakeries throughout the
United States" (emphasis supplied), which were thereby "eliminated
. . . as independent competitive factors in the manufacture, sale
and distribution of bread and bread-type rolls. . . ." If the
"acquiring" against which the order and the complaint incorporated
in it were directed were limited to the single transaction by which
Continental obtained rights in another company, it is hard to see
why the effect which the complaint alleged followed from
acquisitions would necessarily occur. For if Continental had sold
the companies acquired as soon as the initial transactions were
completed to other, independent companies, the bakeries would not
have been "eliminated . . . as independent competitive
factors."
Reference to the appendix also supports the conclusion that
"acquiring" as used in the order means both the initial transaction
granting Continental rights in an independent bakery and the
maintaining of those rights without resale. The appendix notes:
"One of the principal problems in the baking industry is the
tendency towards concentration and the continuous growth of major
baking companies
through acquisition. Such acquisitional
growth and tendency towards concentration places in the hands of a
few large companies the means to set the pattern of competition. .
. . If this order is
Page 420 U. S. 240
adopted by the Commission, the respondent's alleged continuous
practice of
acquiring companies baking and selling bread
and bread-type rolls will be brought to a halt. . . ."
(Emphasis supplied.) It is apparent that the "acquisitional
growth" referred to in the appendix cannot be achieved merely by
discrete transactions without reference to what is done with the
assets obtained after those transactions. If Continental were
merely a speculator in baking companies, buying assets in them and
selling them soon thereafter, it would not necessarily create
"through acquisition" a "tendency towards concentration" giving it
the "means to set the pattern of competition." Thus, "acquiring" in
both the appendix and the order, parts of the same agreement, must
mean obtaining and retaining assets, not merely the former.
Even without the aid of these explanatory documents properly
usable to construe this particular order, we would have to conclude
that "acquiring," as used in an antitrust decree or order,
continues until the assets obtained are disgorged. As the foregoing
analysis of the ancillary documents here illustrates, "acquiring"
and related words do not, as respondent insists, unambiguously
refer to a single transaction. Rather, as a matter of ordinary
usage, they can, and in the antitrust context they do, encompass
the continuing act of obtaining certain rights and treating them as
one's own. We must assume that the parties here used the words with
the specialized meaning they have in the antitrust field, since
they were composing a legal document in settlement of an antitrust
complaint.
We need not go beyond the Clayton Act itself to conclude that
"acquisition," as used in § 7 of the Act, means holding, as well as
obtaining, assets. The Act provides that the FTC, if it finds a
violation of § 7, can require a party to "divest itself of the
stock, or other share capital, or assets,
held . . . contrary
to the provisions of [§ 7]."
Page 420 U. S. 241
15 U.S.C. § 21(b). (Emphasis supplied.) Thus, the framers of the
Act did not regard the terms "acquire" and "acquisition" as
unambiguously banning only the initial transaction of acquisition;
rather, they read the ban against "acquisition" to include a ban
against holding certain assets.
This Court's opinions reflect the same understanding. For
example, in
FTC v. Western Meat Co., 272 U.
S. 554 (1926), the Court, in discussing an FTC order
based on a violation of § 7, said:
"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."
Id. at
272 U. S. 559.
(Emphasis supplied.)
See also Arrow-Hart & Hegeman Elec.
Co. v. FTC, 291 U. S. 587,
291 U. S.
596-599 (1934).
Similarly, this Court's opinion in
United States v. Du
Pont, 353 U. S. 586
(1957), rests upon the conclusion that "acquisition" can mean, and
in the context of § 7 of the Clayton Act does mean, both the
purchase of rights in another company and the retention of those
rights.
In
Du Pont, a § 7 case was brought in 1949, but based
on a purchase of stock by Du Pont in 1917-1919. It was argued that
"the Government could not maintain this action in 1949 because § 7
is applicable only to the acquisition of stock, and not to the
holding or subsequent use of stock." 353 U.S. at
353 U. S.
596-597. Thus, Du Pont was seeking to interpret
"acquire," as used in § 7, [
Footnote 13] much as
Page 420 U. S. 242
respondent here seeks to read "acquiring" in the consent
decree.
The Court in
Du Pont rejected the interpretation urged
upon it. Instead, the Court held that there is a violation
"any time when the acquisition threatens to ripen into a
prohibited effect. . . . To accomplish the congressional aim, the
Government may proceed at any time that an acquisition may be said
with reasonable probability to contain a threat that it may lead to
a restraint of commerce or tend to create a monopoly of a line of
commerce."
Id. at
353 U. S. 597.
Thus, there can be a violation at some time later even if there was
clearly no violation -- no realistic threat of restraint of
commerce or creation of a monopoly -- at the time of the initial
acts of acquisition. Clearly, this result can obtain only because
"acquisition" under § 7 is not a discrete transaction, but a status
which continues until the transaction is undone. [
Footnote 14]
Page 420 U. S. 243
Thus, under the order "as it is written," "acquiring" must mean
both the act of first obtaining assets and the retention and use of
those assets. To conclude otherwise would be to ignore the
flexibility of the English language, as well as the circumstances
surrounding the order and the context in which the parties were
operating. And, since the order bans the continuing act of
obtaining and retaining certain assets, a violation of the order is
a "continuing failure or neglect to obey" it, and daily penalties
may be imposed under 15 U.S.C. §§ 21(
l) and
45(
l).
Because the Court of Appeals erred in concluding that daily
penalties could not be imposed, we reverse and remand for
proceedings consistent with this opinion.
It is so ordered.
[
Footnote 1]
According to the Petition for Writ of Certiorari 18A-22A and
Brief for United States 12 n. 12 in this case, there were in all,
as of June 18, 1974, 67 FTC orders, of which most are consent
orders but some are litigated orders, which bar acquisitions in
language similar to the language of the order in this case. All of
these orders bar future acquisitions but do not expressly bar the
"holding" or "retention" of stock or assets acquired in violation
of their terms.
[
Footnote 2]
The Petition for Certiorari of the United States presented the
single question whether its prayer for daily penalties was properly
denied. Respondent. did not cross-petition, yet seeks to raise
several issues not presented by the petition. Respondent contends
that (1) the three transactions for which penalties have been or
are to be imposed did not violate the consent order; (2) the
consent order was not binding upon ITT Continental as successor
after Continental ceased to exist, so that daily penalties could
not accrue for the period after the merger; and (3) daily penalties
could not be imposed because the FTC had not advised respondent of
the alleged violations prior to the filing of the complaint. We do
not address any of these issues in deciding this case.
Respondent recognizes that, not having cross-petitioned, it
cannot attack the judgment insofar as it sustained the findings of
violations and imposed penalties for such violations.
United
States v. American Railway Express Co., 265 U.
S. 425,
265 U. S. 435
(1924).
Cf. Morley Construction Co. v. Maryland Casualty
Co., 300 U. S. 185
(1937). Respondent argues that it may nevertheless seek to sustain
the Court of Appeals' limitation on the penalties on the theory
that no penalty should have been awarded at all. Ordinarily,
however, as a matter of practice and control of our docket, if not
of our power, we do not entertain a challenge to a decision on the
merits where the only petition for certiorari presents solely a
question as to the remedy granted for a liability found to exist,
even if the respondent is willing to accept whatever judgment has
already been entered against him.
Strunk v. United States,
412 U. S. 434,
412 U. S. 437
(1973);
NLRB v. International Van Lines, 409 U. S.
48,
409 U. S. 52 n.
4 (1972);
NLRB v. Express Publishing Co., 312 U.
S. 426,
312 U. S.
431-432 (1941).
Cf. Langnes v. Green,
282 U. S. 531,
282 U. S. 538
(1931).
But see LeTulle v. Scofield, 308 U.
S. 415 (1940). We follow that rule of practice in this
case, particularly because the issue of whether there were any
violations concerns only a particular order as applied to a
discrete set of facts, and therefore would not merit this Court's
grant of a petition for certiorari.
The courts below did not decide the other two issues, because
they were not pertinent once it was determined that there was no
continuing violation. (The District Court did express the opinion
that "it would seem unreasonable to permit the Commission to
knowingly let daily penalties accrue without giving notice of the
Commission's position at the earliest reasonable time," 1972 CCH
Trade Cases � 73,993, pp. 92, 127, 92, 129 (Aug. 2, 1971), but it
said that this statement was "obiter dictum.") In the absence of
decisions on these questions by the courts below, we decline to
address them.
FTC v. Anheuser-Busch, Inc., 363 U.
S. 536,
363 U. S. 542
(1960);
Jaffke v. Dunham, 352 U.
S. 280 (1957);
Aetna Casualty & Surety Co. v.
Flowers, 330 U. S. 464,
330 U. S. 468
(1947).
Cf. Dandridge v. Williams, 397 U.
S. 471,
397 U. S. 476
n. 6. (1970).
[
Footnote 3]
Continental was merged on September 13, 1968, with a wholly
owned subsidiary of International Telephone and Telegraph Corp.
called ITT Continental Baking Company (ITT Continental). While ITT
Continental has never contested its liability under the merger
agreement for any violations of the consent order committed by
Continental before the merger, it continues to maintain in this
Court, as it did below, that it is not itself bound by the consent
order.
See n 2,
supra.
[
Footnote 4]
The consent order expired by its own terms on May 15, 1972. In
April, 1972, the FTC ordered ITT Continental to show cause why the
order's ban on acquisitions should not be extended until April,
1977. Although the administrative law judge recommended the
extension, the FTC declined to approve the extension because of
inadequate proof of increased concentration in the relevant local
markets.
In re ITT Continental Baking Co., 84 F.T.C. 1349
(1974). However, the FTC did express a continuing concern with the
levels of concentration in the baking industry. It issued an order
requiring ITT Continental to inform the Commission
"of any acquisitions of any interest in any concern engaged in
the production and sale of bread and bread-type rolls, such report
to be filed not less than sixty (60) days prior to each such
acquisition."
Id. at 1400. ITT Continental and other members of the
baking industry were informed that
"[a]ny significant mergers in this industry, and particularly
any that promise to raise concentration still higher in a
metropolitan area that already appears to be dangerously close to
the borderline between effective competition and effective
monopoly, will receive the most searching attention from this
agency."
Id. at 1399.
[
Footnote 5]
Title 15 U.S.C. § 21(
l) provides:
"Any person who violates any order issued by the commission or
board under subsection (b) of this section after such order has
become final, and while such order is in effect, shall forfeit and
pay to the United States a civil penalty of not more than $5,000
for each violation, which shall accrue to the United States and may
be recovered in a civil action brought by the United States. Each
separate violation of any such order shall be a separate offense,
except that, in the case of a violation through continuing failure
or neglect to obey a final order of the commission or board each
day of continuance of such failure or neglect shall be deemed a
separate offense."
[
Footnote 6]
Title 15 U.S.C. § 45(
l) provides:
"Any person, partnership, or corporation who violates an order
of the Commission to cease and desist after it has become final,
and while such order is in effect, shall forfeit and pay to the
United States a civil penalty of not more than $5,000 for each
violation, which shall accrue to the United States and may be
recovered in a civil action brought by the United States. Each
separate violation of such an order shall be a separate offense,
except that, in the case of a violation through continuing failure
or neglect to obey a final order of the Commission each day of
continuance of such failure or neglect shall be deemed a separate
offense."
The maximum penalty for each violation under 15 U.S.C. §
45(
l) has since been increased from $5,000 to $10,000.
Pub.L. 93-153, § 408(c), 87 Stat. 591.
Although the government requested 1,000 per day per violation,
the statutes prescribe no minimum penalty, and the District Court
has discretion to determine the amount of the penalty for each
violation whether the transactions are construed as single or as
continuing violations. Thus, while totaling the penalty as a series
of daily violations, rather than as a single violation, could raise
substantially the total penalty assessed, the statutory scheme does
not require that result, and the trial judge's determination would
prevail in the absence of an abuse of discretion.
[
Footnote 7]
The complaint also requested a permanent injunction commanding
future compliance with the consent order. The District Court found
that it was empowered in a civil penalty proceeding based on an FTC
order to grant equitable relief, and it issued an injunction in the
exact words of the FTC order. This injunction expired, as did the
consent order, on May 15, 1972.
See n 4,
supra. Since the Court of Appeals
decision in this case, Congress has amended 15 U.S.C. §
45(
l) expressly to empower district courts in civil
penalty proceedings to grant equitable relief. Pub.L. 93-153, §
408(c), 87 Stat. 591.
Although the complaint did not request a divestiture order, the
Government later requested divestiture, and this request was
embodied in the District Court's pretrial order. App. 27. However,
the District Court declined to order this relief, 1972 CCH Trade
Cases, at 92, 129, and the Court of Appeals affirmed this denial as
within the discretion of the trial court. 485 F.2d 16, 21 (CA10
1973).
[
Footnote 8]
The Court in
Armour noted that the Government might be
able to obtain the relief sought in ways other than by construction
of the consent decree. First, it could have brought a new action to
enjoin the acquisition under § 7 of the Clayton Act. Second,
"if the Government believed that changed conditions warranted
further relief against the acquisition, it could have sought
modification of the Meat Packers Decree itself."
402 U.S. at
402 U. S.
674-675. Respondent argues that these alternatives are
also present in this case, and that it is therefore unnecessary to
adopt the construction of the order urged by the Government.
However, the possible availability of other means of obtaining
sanctions against the acquisitions challenged here cannot preclude
the Government from obtaining whatever penalties may be proper for
violations of the consent order
[
Footnote 9]
In
Hughes v. United States, 342 U.
S. 353 (1952), the Court likewise rejected an invitation
to further the asserted "purposes" of the consent decree by
approving an interpretation the "language cannot support."
Id. at
342 U. S. 356.
It noted that evidence might show that the sale requirement was
justified, but it regarded the construction urged by the Government
as effecting "a substantial
modification of the original
decree."
Id. at
342 U. S. 357.
(Emphasis supplied.) While it believed this modification could be
had after a proper hearing proving the need for such modification
under applicable standards, it would not sanction such modification
in the guise of construing a consent decree.
Id. at
342 U. S.
357-358.
[
Footnote 10]
Similarly, in
United States v. Atlantic Refining Co.,
360 U. S. 19
(1959), while the Court agreed that the interpretation offered by
the Government might better effectuate the purposes of the acts
assertedly violated, this
"does not warrant our substantially
changing the terms
of a decree to which the parties consented without any adjudication
of the issues. And we agree with the District Court that accepting
the Government's present interpretation would do just that."
Id. at
360 U. S. 23.
(Emphasis supplied.) Again, the Court noted that modification might
be appropriate, but modification disguised as construction was not.
See also Liquid Carbonic Corp. v. United States, 350 U.S.
869 (1955),
rev'g 123 F. Supp. 653 (EDNY 1954);
United
States v. International Harvester Co., 274 U.
S. 693 (1927).
[
Footnote 10]
Consent decrees and orders have attributes both of contracts and
of judicial decrees or, in this case, administrative orders. While
they are arrived at by negotiation between the parties and often
admit no violation of law, they are motivated by threatened or
pending litigation. and must be approved by the court or
administrative agency.
Compare United States v. Swift &
Co., 286 U. S. 106,
286 U. S. 115
(1932), with the language in
Armour cited in the text,
supra at
420 U. S.
235-236. Because of this dual character, consent decrees
are treated as contracts for some purposes, but not for others.
See Jinkinson, Negotiation of Consent Decrees, 9 Antitrust
Bull. 673, 675-676 (1964); Handler, Twenty-fourth Annual Antitrust
Review, 72 Col.L.Rev. 1, 33-34 (1972).
[
Footnote 11]
"Assuming that a consent decree is to be interpreted as a
contract, it would seem to follow that evidence of events
surrounding its negotiation and tending to explain ambiguous terms
would be admissible in evidence."
Handler,
supra, n 10, at 23 n. 148.
[
Footnote 12]
Respondent argues that, even if the complaint and appendix can
be used as aids to construction, they only show that the parties
could use broader language than that, in the order itself, making
the limited language actually used highly significant and
controlling. One Court of Appeals has used similar reasoning to
approve a strict reading of a consent decree which was accompanied
by a collateral agreement.
Artvale, Inc. v. Rugby Fabrics
Corp., 303 F.2d 283 (CA2 1962). However, this reasoning is
erroneous as applied to this case. Where parties in one agreement
include both a consent order and an explanation of that order, and
also provide that the complaint is to be used to construe the
order, it seems logical to conclude that, at least as to
interpretations not precluded by the words of the order itself, the
collateral documents can and should be used to give meaning to the
words of the order.
[
Footnote 13]
The first paragraph of § 7, at the time the
Du Pont
case was brought, provided:
"No corporation engaged in commerce shall acquire, directly or
indirectly, the whole or any part of the stock or other share
capital of another corporation engaged also in commerce, where the
effect of such acquisition may be to substantially lessen
competition between the corporation whose stock is so acquired and
the corporation making the acquisition, or to restrain such
commerce in any section or community, or tend to create a monopoly
of any line of commerce."
15 U.S.C. § 18 (1946 ed.). The statute was amended in 1950 to
provide:
"No corporation engaged in commerce 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 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."
15 U.S.C. § 18. While the change in the wording is substantial,
no reason suggests itself why the meaning of "acquire" and
"acquisition" should differ in the two versions.
Du Pont
was decided several years after the 1950 amendments, and makes not
the slightest suggestion that the result pertinent here would not
obtain under the new version.
[
Footnote 14]
The dissent in
Du Pont recognized that this was the
import of this holding, with which it disagreed.
353 U.
S. 586,
353 U. S.
619-621 (1957) (Burton, J., dissenting).
Some lower federal courts have also recognized that the status
approach to acquisition is the proper one.
See Gottesman v.
General Motors Corp., 414 F.2d 956, 965 (CA2 1969):
"[T]he very acquisition and position of potential control which
was found violative of the Clayton Act as of 1949 [in
Du
Pont] continued through 1961. . . . [W]hat was unlawful was du
Pont's
status as stockholder in General Motors, and that
status continued until divestiture."
(Emphasis supplied.)
See also United States v. Schine,
260 F.2d 552, 555-556 (CA2 1958):
"[I]t is the
maintenance of conditions in violation of
the decree [prohibiting acquisitions, among other things] which is
the charge against the respondents."
Therefore, the court in
Schine concluded, it was
irrelevant that the initial transactions occurred prior to the
statutory limitations period.
MR. JUSTICE STEWART, with whom THE CHIEF JUSTICE, MR. JUSTICE
POWELL, and MR. JUSTICE REHNQUIST join, dissenting.
The respondent's predecessor, Continental, made corporate
acquisitions in violation of a 1962 consent order that, in
pertinent part, prohibited Continental from "acquiring" described
baking companies. The Government
Page 420 U. S. 244
sought to impose daily penalties upon Continental for the
continued holding of those assets. The Government's theory was that
daily penalties were appropriate because Continental's retention of
the assets was a "continuing failure or neglect to obey a final
order" within the meaning of the relevant civil penalties statutes,
15 U.S.C. §§ 21(
l), 45(
l). [
Footnote 2/1] The issue in this case is whether the
consent order can be so construed. [
Footnote 2/2] The District Court and the Court of
Appeals ruled that the consent order prohibited only the distinct
acts of "acquiring" the bakeries, not the "retaining" or the
"holding" of the assets after acquisition. The Court of Appeals
indicated that an order to divest would have been an appropriate
remedy for the unlawful acquisitions, but held that the retention
of the assets was not, in itself, a continuing refusal to obey the
consent order such as would support the sanction of daily
penalties. I think that, under our controlling precedents, the
District Court and the Court of Appeals were clearly correct.
The governing rule of construction, and its rationale, were
stated plainly and aptly by this Court in
United States v.
Armour & Co., 402 U. S. 673,
402 U. S.
681-682 (1971):
"Consent decrees are entered into by parties to a case after
careful negotiation has produced agreement on their precise terms.
The parties waive their right to litigate the issues involved in
the case, and thus save themselves the time, expense, and
inevitable risk of litigation. Naturally, the agreement reached
normally embodies a compromise; in exchange for the saving of cost
and elimination of risk,
Page 420 U. S. 245
the parties each give up something they might have won had they
proceeded with the litigation. Thus, the
decree itself
cannot be said to have a purpose; rather the
parties have
purposes, generally opposed to each other, and the resultant decree
embodies as much of those opposing purposes as the respective
parties have the bargaining power and skill to achieve.
For
these reasons, the scope of a consent decree must be discerned
within its four corners, and not by reference to what might satisfy
the purposes of one of the parties to it. Because the
defendant has, by the decree, waived his right to litigate the
issues raised, a right guaranteed to him by the Due Process Clause,
the conditions upon which he has given that waiver must be
respected, and the instrument must be construed as it is written,
and not as it might have been written had the plaintiff established
his factual claims and legal theories in litigation."
(Emphasis added; footnote omitted.)
See also United States
v. Atlantic Refining Co., 36 U. S. 19
(1959);
Hughes v. United States, 342 U.
S. 353 (1952).
The application of this straightforward standard to the consent
order here is hardly a difficult task. The order literally
prohibits only the "acquiring" of the forbidden assets. Once an
acquisition was consummated, the violation was complete. A
prohibition on the retention of assets cannot be found in any
provision of the order. Because the order is a compromise agreement
negotiated without any adjudication of antitrust liability, we are
not at liberty under
Armour to construe the unambiguous
term "acquiring" in the light of conjecture or argument about the
"purposes" of the decree or of the parties. We may not, consistent
with
Armour, conclude that the Government intended that
the order should prohibit as a continuing offense the retention of
unlawfully acquired
Page 420 U. S. 246
assets, when the Government did not insist upon language
objectively manifesting that intention. Nor may we conclude that
Continental agreed the restrict its future business conduct or
become subject to penalties in any manner not clearly delineated in
the order itself. The provisions of the order are something less
than the Government could have sought and might have obtained. The
rule of construction of consent decrees, however, depends, not upon
an expedient construct of what the parties are thought to have
intended, but upon the explicit provisions to which the parties
have agreed.
After giving a casual nod in the direction of the standard of
construction required by
Armour, the Court embarks upon a
laborious search for "purposes" that are "incorporated in" the
consent order in order to change the meaning of the unambiguous
term "acquiring." We are led through the antecedent complaint,
through an appendix to the consent order, through the intricacies
of an opinion of this Court construing the term "acquisition" in
light of the policies underlying the Clayton Act, and through the
legislative history of the statutory provisions that impose daily
penalties for continuing refusals to obey Commission orders.
Drawing upon these disparate sources, the Court determines that the
consent order, despite its literal language, must be construed to
prohibit not only the proscribed acquisitions, but also the
"retention" of unlawfully acquired assets. [
Footnote 2/3] One is reminded
Page 420 U. S. 247
of an observation once made by Mr. Justice Grier in a somewhat
different context:
"[T]he fact that it required so ingenious and labored an
argument by my learned brother to vindicate such a construction . .
. seems to me, of itself, conclusive evidence that the construction
should not be given to it."
The Binghamton
Bridge, 3 Wall. 51,
70
U. S. 83 (dissenting opinion).
What the Court does today is to proclaim a new rule of
construction for consent orders or decrees totally at odds with our
previous decisions:
"Since a consent decree or order is to be construed for
enforcement purposes basically as a contract, reliance upon certain
aids to construction is proper, as with any other contract. Such
aids include the circumstances surrounding the formation of the
consent order, any technical meaning words used may have had to the
parties, and any other documents expressly incorporated in the
decree."
Ante at
420 U. S. 238.
This novel approach, for which the Court cites not a single
supporting precedent, is directly contrary to the "four corners"
rule of
Armour. For an inquiry into the purpose of a
consent decree is precisely what that rule forecloses:
"[T]he scope of a consent decree must be discerned within its
four corners, and not by reference to what might satisfy the
purposes of one of the parties to it."
402 U.S. at
402 U. S. 682.
The Court today thus indulges in precisely the exercise that
Armour sought to preclude:
Page 420 U. S. 248
a wide-ranging search for a "purpose" in a decree that, as
explained in
Armour, cannot be said to have a purpose
except to delineate explicitly the terms and provisions of the
settlement that the parties negotiated. [
Footnote 2/4]
Before straining to pull the Government's chestnuts out of the
fire, the Court should count with greater care the costs of
abandoning the rule stated in
Armour. Until today, the
parties to any consent decree could have confidence that its
explicit terms alone would control the judicial construction of its
prohibitory language. Now, otherwise unambiguous terms of a consent
decree may be construed in light of such considerations as the
antecedent
Page 420 U. S. 249
complaint, the "meaning" of antitrust decisions, and the
policies said to underlie the statutory provision for daily
penalties. Certainty and reasoned reliance have always been the
sine qua
non of the consent orders that terminate
about 70% to 80% of the antitrust complaints that are filed by the
Justice Department. [
Footnote 2/5]
But after today's decision, that kind of certainty will no longer
exist. For there will be no apparent limit on the power of the
judiciary to alter the plain language of an order in light of the
"circumstances surrounding the order and the context in which the
parties were operating."
Ante at
420 U. S. 243.
If a negotiated consent decree fails to leave a dispute clearly and
firmly settled, the necessary result will be that those charged
with antitrust violations will be less inclined to settle their
cases and more apt to insist upon time-consuming and costly
litigation. Today's decision will also pose serious difficulties
for the enforcement of all existing and all future consent decrees.
For, as Mr. Justice Jackson once observed, "the validity of a
doctrine does not depend on whose ox it gores." [
Footnote 2/6] The same purpose-oriented techniques
of construction that the Court today serves up to expand this
consent order beyond its terms can be expected to be availed of by
alleged violators of consent orders who will seek to narrow, and
thereby to evade the plain language of, any prohibition.
The Court concludes that
"if violation of an order prohibiting 'acquiring' assets were
treated as a single violation, any deterrent effect of the penalty
provisions would be entirely undermined, and the penalty would be
converted into a minor tax upon a violation which could reap large
financial benefits to the perpetrator."
Ante
Page 420 U. S. 250
at
420 U. S. 232.
This is not merely overstatement; it is incorrect. Both the parties
agree, and the Court of Appeals held, that an order to divest
unlawfully acquired assets is an appropriate remedy for violation
of a consent order barring acquisition. Moreover, the
Armour rule of construction would not impair in any way
the power of the Government, in future cases, to obtain, through
negotiations, consent orders that contain a clear and explicit
description of the conduct that is prohibited. [
Footnote 2/7]
In my view, the Court's departure from precedent threatens to
retard significantly the effective use of consent decrees in the
administration of the antitrust laws. I would adhere to the rule
stated in
Armour that
"the scope of a consent decree must be discerned within its four
corners,
and not by reference to what might satisfy the
purposes of one of the parties to it."
402 U.S. at
402 U. S. 682
(emphasis added). Applying this standard, I would affirm the
considered judgments of the District Court and the Court of
Appeals.
[
Footnote 2/1]
These provisions are set out in full in the Court's opinion,
ante at
420 U. S.
228-229, nn. 5, 6.
[
Footnote 2/2]
For the reasons stated by the Court, I agree that the other
issues that the respondent seeks to raise in this case need not and
should not be addressed.
[
Footnote 2/3]
Upon this premise, the Court then proceeds to hold that the
conjured-up "continuing offense" of retaining these assets is a
"continuing failure or neglect to obey a final order" within the
meaning of the daily penalty statutes. 15 U.S.C. §§ 21(
l)
and 45(
l). But even if the consent order could be
correctly read to prohibit not only the acquisition of the
described assets, but also the retention of assets unlawfully
acquired, it is far from crystal clear that the "continuing
offense" of retaining the assets would be a "continuing failure or
neglect to obey a final order" within the meaning of the daily
penalty statutes. Penalty provisions must be strictly construed,
and due process requires that such provisions must give fair
warning of the conduct that invokes their extraordinary sanction.
Cf. Giaccio v. Pennsylvania, 382 U.
S. 399. The legislative history of the daily penalty
statutes, as recited in the Court's opinion, shows that the
mischief sought to be remedied was precisely the mischief to which
Congress addressed its language: a "continuing failure or neglect
to obey a final order," as, for example, the refusal to divest
after a specific order of divestiture has been entered.
[
Footnote 2/4]
Whatever the utility of extrinsic aids in construing a typical
commercial contract, this technique is singularly inappropriate in
an area where certainty of prohibition is necessary and where, as
Armour makes clear, there can be found no guiding purpose
underlying a negotiated decree. Moreover, even assuming,
arguendo, that such aids might be admissible to construe
borderline issues of application -- for example, whether a
particular acquired company was engaged in the production of
"bread-type" rolls within the meaning of the consent order -- such
aids must not be used to impose a wholly separate prohibitory
requirement upon a company that consented to be bound only by the
plain language of the consent order. This is demonstrably not a
case of ambiguity, or of borderline construction. It is a case,
instead, where the Court has used extrinsic aids to alter a term
that is, on its face, wholly unambiguous.
The Court relies upon the decision in
United States v. Du
Pont, 353 U. S. 586, for
the proposition that the term "acquire" in a consent order is a
term of art that prohibits a "status which continues until the
transaction is undone."
Ante at
420 U. S. 242.
But the Court's reliance on the policy considerations discussed in
the
Du Pont opinion is wholly inconsistent with the
Armour rule. The opinion in
United States v. Du
Pont does not, in any event, render the term "acquiring" in a
consent decree a term of art. That case addressed the positive
reach of the Clayton Act under certain circumstances. The Court
fails to explain how its opinion there has served to transform the
plain term "acquiring" into a "term of art" that would, by common
understanding, have the meaning that the Court today ascribes to
it.
[
Footnote 2/5]
Note, 73 Col.L.Rev. 594 (1973).
[
Footnote 2/6]
Wells v. Simonds Abrasive Co., 345 U.
S. 514,
345 U. S. 525
(dissenting opinion).
[
Footnote 2/7]
The Government informs us that, as of May, 1974, there were
outstanding 54 consent orders with language that prohibits
acquiring certain assets but does not expressly prohibit the
retaining of these assets. This Court need not assume that flagrant
violations of consent orders will occur or that the remedies of
divestiture and fine for the single offense of acquisition will not
adequately deter unlawful conduct.