Under § 15 of the Clayton Act, the United States sued in a
federal district court to enjoin an individual and six corporations
from violating § 8 through the holding by the individual of
interlocking directorates in three pairs of competing corporations.
Thereafter, the individual resigned his directorship in one out of
each pair of corporations and filed affidavits disclaiming any
intention of resuming such directorates. On motion of the
defendants, the court then granted summary judgment dismissing the
suit.
Held:
1. The power of the Federal Trade Commission under § 11 to
enforce § 8 is not exclusive, and the court had jurisdiction under
§ 15 to entertain the suit. Pp.
345 U. S.
631-632.
2. The termination of the interlocking directorates did not
render the case moot. Pp.
345 U. S.
632-633.
3. The court did not abuse its discretion by refusing to grant
injunctive relief. Pp.
345 U. S.
632-636.
112 F.
Supp. 336, affirmed.
The District Court dismissed the Government's suit to enjoin
violations of § 8 of the Clayton Act, 15 U.S.C. § 19.
112 F.
Supp. 336. On direct appeal to this Court under 15 U.S.C. § 29,
affirmed, p.
345 U. S.
636
Page 377 U. S. 630
MR. JUSTICE CLARK delivered the opinion of the Court.
For the first time since the enactment of the Clayton Act in
1914, the Court is called upon to consider § 8's prohibitions
against interlocking corporate directorates. [
Footnote 1] The Government appeals from judgments
dismissing civil actions brought against Hancock and three pairs of
corporations which he served as a director, W. T. Grant Co. and S.
H. Kress & Co., Sears Roebuck & Co. and Bond Stores, Inc.,
and Kroger Co. and Jewel Tea Co., Inc. Alleging that the size and
competitive relationship of each set of companies brought the
interlocks within the reach of § 8, the complaints asked the court
to order the particular interlocks terminated and to enjoin future
violations of § 8 by the individual and corporate defendants. Soon
after the complaints were filed, Hancock resigned from the boards
of Kress, Kroger, and Bond. Disclosing the resignations by
affidavit, all of the defendants then moved to dismiss the actions
as moot. Treated as motions for summary judgment, [
Footnote 2] they were granted by the District
Judge. His concluded that there is not "the
Page 345 U. S. 631
slightest threat that the defendants will attempt any future
activity in violation of § 8 [if they have violated it already]. .
. ."
112 F.
Supp. 336, 338. The Government brought this direct appeal under
§ 2 of the Expediting Act, 32 Stat. 823, as amended, 62 Stat. 989,
15 U.S.C.(Supp. V) § 29, contending that the cases were not
rendered moot by Hancock's resignations, and that it was an abuse
of discretion for the trial court to refuse any injunctive
relief.
Appellees suggest, without arguing the point
in
extenso, that the judgment should be affirmed because § 11 of
the Clayton Act vests exclusive § 8 enforcement powers in the
Federal Trade Commission. [
Footnote
3] Section 11 does authorize the Commission to enforce § 8. But
any inference that administrative jurisdiction was intended to be
exclusive falls before the plain words of § 15:
"The several district courts of the United States are hereby
invested with jurisdiction to prevent and restrain violations of
this
Page 345 U. S. 632
Act. . . ."
15 U.S.C. § 25. And the cases have spoken of Congress' design to
provide a scheme of dual enforcement for the Clayton Act.
United States Alkali Export Ass'n v. United States,
325 U. S. 196,
325 U. S. 208
(1945);
Standard Oil Co. v. United States, 337 U.
S. 293,
337 U. S. 310
(1949), note 13. Appellees' failure to press the point denotes its
merits. The District Court properly entertained the suits.
Both sides agree to the abstract proposition that voluntary
cessation of allegedly illegal conduct does not deprive the
tribunal of power to hear and determine the case,
i.e.,
does not make the case moot.
United States v. Trans-Missouri
Freight Ass'n, 166 U. S. 290
(1897);
Walling v. Helmerich & Payne, Inc.,
323 U. S. 37
(1944);
Hecht Co. v. Bowles, 321 U.
S. 321 (1944). A controversy may remain to be settled in
such circumstances,
United States v. Aluminum Co. of
America, 148 F.2d 416, 448 (1945),
e.g., a dispute
over the legality of the challenged practices.
Walling v.
Helmerich & Payne, Inc., supra; Carpenters Union v. Labor
Board, 341 U. S. 707,
341 U. S. 715
(1951). The defendant is free to return to his old ways. [
Footnote 4] This, together with a
public interest in having the legality of the practices settled,
militates against a mootness conclusion.
United States v.
Trans-Missouri Freight Ass'n, supra, at
166 U. S. 309,
166 U. S. 310.
For to say that the case has become moot means that the defendant
is entitled to a dismissal as a matter of right,
Labor Board v.
General Motors Corp., 179 F.2d 221 (1950). The courts have
rightly refused to grant defendants such a powerful weapon against
public law enforcement. [
Footnote
5]
Page 345 U. S. 633
The case may nevertheless be moot if the defendant can
demonstrate that "there is no reasonable expectation that the wrong
will be repeated." [
Footnote 6]
The burden is a heavy one. Here, the defendants told the court that
the interlocks no longer existed, and disclaimed any intention to
revive them. Such a profession does not suffice to make a case
moot, although it is one of the factors to be considered in
determining the appropriateness of granting an injunction against
the now-discontinued acts.
Along with its power to hear the case, the court's power to
grant injunctive relief survives discontinuance of the illegal
conduct.
Hecht Co. v. Bowles, supra; Goshen Mfg. Co. v. Hubert
A. Myers Mfg. Co., 242 U. S. 202
(1916). The purpose of an injunction is to prevent future
violations,
Swift & Co. v. United States, 276 U.
S. 311,
276 U. S. 326
(1928), and, of course, it can be utilized even without a showing
of past wrongs. But the moving party must satisfy the court that
relief is needed. The necessary determination is that there exists
some cognizable danger of recurrent violation, something more than
the mere possibility which serves to keep the case alive. The
chancellor's decision is based on all the circumstances; his
discretion is necessarily broad, and a strong showing of abuse must
be made to reverse it. To be considered are the
bona fides
of the expressed intent to comply, the effectiveness of the
discontinuance and, in some cases, the character of the past
violations.
The facts relied on by the Government to show an abuse of
discretion in this case are these: Hancock's three interlocking
directorates viewed as three distinct violations, his failure to
terminate them until after suit was
Page 345 U. S. 634
filed despite five years of administrative attempts to persuade
him of their illegality, his express refusal to concede that the
interlocks in question were illegal under the statute, and his
failure to promise not to commit similar violations in the
future.
Were we sitting as a trial court, this showing might be
persuasive. But the Government must demonstrate that there was no
reasonable basis for the District Judge's decision. [
Footnote 7] In this, we think it fails. An
individual proclivity to violate the statute need not be inferred
from the fact that three violations were charged, particularly
since it is only recently that the Government has attempted
systematic enforcement of § 8. [
Footnote 8] The District Court was not dealing with a
defendant who follows one adjudicated violation with others. The
only material before the District Judge on the supposed five years
of administrative persuasion could easily support an inference
that, during that time, the defendant and the Department of Justice
were each trying to determine the legality of his directorships.
The Government's remedy under the statute was plain. Postponement
of suit indicates doubt on the prosecutor's part as much as
intransigence on the defendant's. How much contrition should be
expected of a defendant is hard for us to say. This surely is a
question better addressed to the discretion of the trial court. The
same can be said of the limited disclaimer of future intent.
Assuming with the Government that the corporations were properly
joined as defendants, [
Footnote
9] the conclusion that there was no abuse of discretion in
refusing injunctive relief against Hancock applies
a
fortiori in their case.
Page 345 U. S. 635
None of the corporations appeared to have engaged in more than
one alleged violation. And affidavits filed with the motions to
dismiss indicated that these defendants were ignorant of the
Government's interest in the interlocks until the suits were filed.
Indeed, the emphasis on this branch of the case is placed on the
refusal of relief against Hancock. The failure to point to
circumstances compelling further relief against the corporations
speaks for itself.
Essentially, the Government's claim is that it was deprived of a
trial on the relief issue. But at no time was objection raised to
the procedure by which the case was handled. Of course summary
judgment procedure could not have been employed were there a
"genuine issue as to any material fact". Fed.Rules Civ.Proc. 56.
However, after the defendants had moved to dismiss, the Government
elected not to file any countervailing affidavits or amend its
complaint and stated on oral argument that the truth of the
defendants' affidavits was not questioned. To frame a factual
dispute, that left the complaint, the only relevant paragraph of
which reads:
"16. The defendants have threatened to continue and will
continue
the aforesaid violation of Section 8 of the
Clayton Act unless the relief prayed for herein is granted."
(Emphasis added.) "The aforesaid violation[s]," the specific
interlocks, had been voluntarily terminated and intention to resume
them had been negatived under oath. As to the prayer that the
defendants be enjoined from any future violations of § 8, the
complaint alleged no threatened violations other than those
specifically charged. In these circumstances, the District Judge
could decide that there was no significant threat of future
violation, and that there was no factual dispute about the
existence of such a threat.
We conclude that, although the actions were not moot, no abuse
of discretion has been demonstrated in the trial
Page 345 U. S. 636
court's refusal to award injunctive relief. Moreover, the court
stated its dismissals "would not be a bar to a new suit in case
possible violations arise in the future." The judgments are
affirmed.
Affirmed.
[
Footnote 1]
Sec. 8. . . .
"No person at the same time shall be a director in any two or
more corporations, any one of which has capital, surplus, and
undivided profits aggregating more than $1,000,000, engaged in
whole or in part in commerce, . . . if such corporations are or
shall have been theretofore, by virtue of their business and
location of operation, competitors, so that the elimination of
competition by agreement between them would constitute a violation
of any of the provisions of any of the antitrust laws. . . ."
38 Stat. 730, 15 U.S.C. § 19.
[
Footnote 2]
Fed.Rules Civ.Proc. 12(b)(6), 56.
[
Footnote 3]
"SEC. 11. Authority to enforce compliance with sections two,
three, seven, and eight of this Act by the persons respectively
subject thereto is hereby vested . . . in the Federal Trade
Commission where applicable to all other character of commerce to
be exercised as follows:"
"Whenever the Commission . . . shall have reason to believe that
any person is violating or has violated any of the provisions of
sections two, three, seven, and eight of this Act, it shall issue
and serve upon such person and the Attorney General a complaint
stating its charges in that respect, and containing a notice of a
hearing. . . . If upon such hearing the Commission . . . shall be
of the opinion that any of the provisions of said sections have
been or are being violated, it shall make a report in writing, in
which it shall state its findings as to the facts, and shall issue
and cause to be served such person an order requiring such person
to cease and desist from such violations, and divest itself of the
stock, or other share capital, or assets, held or rid itself of the
directors chosen contrary to the provisions of sections seven and
eight of this Act, if any there be, in the manner and within the
time fixed by said order. . . ."
64 Stat. 1126, 15 U.S.C., Supp. V, § 21.
[
Footnote 4]
Cf. United States v. Hamburg-Amerikanische
Packet-Fahrt-Actien Gesellschaft, 239 U.
S. 466 (1916).
[
Footnote 5]
"When defendants are shown to have settled into a continuing
practice or entered into a conspiracy violative of antitrust laws,
courts will not assume that it has been abandoned without clear
proof. . . . It is the duty of the courts to beware of efforts to
defeat injunctive relief by protestations of repentance and reform,
especially when abandonment seems timed to anticipate suit, and
there is probability of resumption."
United States v. Oregon State Medical Society,
343 U. S. 326,
343 U. S. 333
(1952).
[
Footnote 6]
United States v. Aluminum Co. of America, supra, at
448.
[
Footnote 7]
Cf. United States v. United States Gypsum Co.,
340 U. S. 76,
340 U. S. 89
(1950), on review of particular anti-trust decree provisions.
[
Footnote 8]
See Kramer, Interlocking Directorships and the Clayton
Act After 35 Years, 59 Yale L.J. 1266.
[
Footnote 9]
We should not be understood as deciding whether corporations can
violate § 8 or, for other reasons, be enjoined under the
statute.
MR. JUSTICE DOUGLAS, with whom MR. JUSTICE BLACK concurs,
dissenting.
Monopoly and restraints of trade are sometimes the products of
practices and devices as ingenious as the minds of men. Sometimes
they follow a blunt and direct course, as is involved in the
acquisition of the assets of a competitor -- a way of growth of
monopoly power to which the decisions of the Court have given a
powerful impetus and encouragement.
See especially United
States v. Columbia Steel Co., 334 U.
S. 495. More subtle are interlocking arrangements
between directorates. This can accomplish disastrous consequences,
as Mr. Justice Brandeis pointed out forty years ago. Interlocking
directorates between companies which compete stifle the
competition. Or, to use the words of Mr. Justice Brandeis, the
practice substitutes "the pull of privilege for the push of
manhood." [
Footnote 2/1] Moreover,
those entwined relations are the stuff out of which concentration
of financial power over American industry was built and is
maintained. Mr. Justice Brandeis gave one example: [
Footnote 2/2]
"They, the bankers, control the railroads, and controlling the
railroads, they were able to control the issue and sale of
securities. Being bankers, they bought those securities at a price
which they had a
Page 345 U. S. 637
part in fixing or could have a part in fixing. They sold those
securities, as bankers, to insurance companies in which they were
able to exercise some control as directors. They got the money with
which to buy those securities from railroads through their control
of the great banking institutions, and then, in their capacity of
having control of the railroads, they utilized that money to
purchase from great corporations, like the Steel Corporation, what
the railroads needed, and, in their capacity as controlling other
corporations, they bought from the Steel Corporation again, and so
on until we had the endless chain."
The web that is woven may tie many industries, insurance
companies, and financial houses together into a vast and friendly
alliance that takes the edge off competition.
That condition is aggravated here. The interlocking control in
the present case is not indirect. Mr. Hancock served as a director
for each of three sets of companies which, on the state of the
pleadings before us, we must assume to have been competitive. The
fact that he resigned under the pressure of these proceedings
should not dispose of the case. We are dealing here with
professionals whose technique for controlling enterprises and
building empires was fully developed and well known long before Mr.
Justice Brandeis was crying out against the evils of "the money
trust." Mr. Hancock is and has been for some years a partner in the
investment banking firm of Lehman Bros. In 1940, he testified that,
when Lehman Bros. did financing for a company, it was their
"traditional practice" to ask for representation on the board of
directors. [
Footnote 2/3]
It therefore seems to me that a District Judge, faced with
violations such as were involved here, would want
Page 345 U. S. 638
to know first, how investment bankers built their empires;
second, how this particular firm built its own empire; third, the
effect of these banker empires on competition between the companies
which are tied to them.
The fact that the Lehman partner resigned to avoid a decision on
the merits has little, if any, relevancy to the issue in the case,
for we are here concerned with the proclivity of the house to
indulge in the practice.
The relevant issues have never been weighed in this case. The
District Court's ruling would be entitled to a presumption of
validity if those various factors had been considered. But the
District Court made no such considered judgment. It disposed of the
case on the basis of mootness, a ruling now conceded to be
erroneous. The case should go back for a consideration of the
nature and extent of the web which this investment banking house
has woven over industry and its effect on the "elimination of
competition" within the meaning of § 8 of the Clayton Act.
[
Footnote 2/4] Unless we know that
much, we are in no position to judge the service an injunction
against future violations may do. Unless we know that much, we are
in no position to carry out Woodrow Wilson's policy, expressed in §
8 of the Clayton Act, that those interlocking directorates should
be prevented which make "those who affect to compete in fact
partners and masters of some whole field of business." Message,
Joint Session of the Houses of Congress, Jan. 20, 1914.
[
Footnote 2/1]
See Brandeis, The Endless Chain, Harpers' Weekly, Dec.
6, 1913, p. 13, quoted in Lief, The Brandeis Guide to the Modern
World, p. 111.
[
Footnote 2/2]
See his testimony in Hearings, H.R.Committee on the
Judiciary, 63d Cong., 2d Sess., on Trust Legislation, vol. 2, p.
922, quoted in Lief,
op. cit., supra, note 1, p. 113.
[
Footnote 2/3]
Hearings, Temporary National Economic Committee, 76th Cong., 3d
Sess., Pt. 24, p. 12400.
[
Footnote 2/4]
In
United States v. Sears, Roebuck &
Co., 111 F.
Supp. 614, decided April 28, 1953, the court ruled that
Congress intended by § 8
"to nip in the bud incipient violations of the antitrust laws by
removing the opportunity or temptation to such violations through
interlocking directorates."