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.
Held:
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.
Page 387 U. S. 486
(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.
Page 387 U. S. 487
MR JUSTICE BRENNAN delivered the opinion of the Court.
The question in this case is whether the Interstate Commerce
Commission complied with its statutory responsibilities under § 20a
of the Interstate Commerce Act [
Footnote 1] when it approved, without consideration of
control or anticompetitive consequences, the issuance to appellee
Greyhound Corporation of 500,000 shares of the common stock of
appellee Railway Express Agency, Inc. (REA).
REA provides railroad express service and is also a motor common
carrier. The approximately 2,000,000 shares of REA common stock
outstanding are entirely owned by railroads, and no railroad
stockholder may dispose of its shares without first offering them
to the other railroad stockholders. REA also is authorized,
however, to issue 500,000 additional shares of common stock without
first offering them to its stockholders. Greyhound, which operates
an express carrier service through its wholly owned subsidiary
Greyhound Lines, Inc., a motor carrier of passengers and express
subject to the Interstate
Page 387 U. S. 488
Commerce Act, agreed to purchase these 500,000 shares. REA
thereupon applied to the ICC for an order under § 20a approving the
transaction. Minority railroad REA stockholders, motor bus
competitors of Greyhound, motor carriers, and freight forwarders
intervened in the proceeding to protest against approval of the
transaction. They alleged, among other things, the necessity of a
hearing on the questions whether Greyhound's acquisition of the
stock was in the "public interest" and for a "lawful object," as
those terms are used in § 20a. The ICC approved the acquisition
without a hearing. A three-judge District Court for the District of
Colorado sustained the ICC order. 255 F. Supp. 704. We noted
probable jurisdiction. 385 U.S. 897. We reverse with direction to
the District Court to enter a new judgment remanding the case to
the ICC for further proceedings consistent with this opinion.
I
REA was organized in 1929, and, until 1961, operated on a
nonprofit basis under a pooling agreement with the railroads.
See Securities and Acquisition of Control of Railway Express
Agency, Inc., 150 I.C.C. 423. Financial difficulties forced
abandonment of the nonprofit operation, and REA was converted to a
profit and loss basis in order to effect more efficient and
economic operation.
See Express Contract, 1959, 308 I.C.C.
545, 549-550. In addition, REA was released from restrictions
against use of carriers other than railroads. In 1963, REA's bylaws
were amended to eliminate a limitation against stock ownership
except by railroads; the disposition of shares by a railroad,
however, was made subject to the right of first refusal of the
other railroad stockholders. The issuance of 500,000 additional
shares not subject to the right of first refusal was also
authorized, but only upon the consent of two-thirds of the railroad
stockholders.
Page 387 U. S. 489
Greyhound, principally a passenger carrier, became interested in
expanding its growing express business. In January, 1964, Greyhound
offered to purchase, subject to ICC approval, at least 67% of REA's
stock, of which Greyhound intended to offer 16% to major airlines.
Greyhound also agreed to finance part of REA's capital requirements
as part of a plan to coordinate the express services of both
companies. This proposal was defeated by railroad stockholders.
REA and Greyhound persisted in their efforts to coordinate their
operations. Greyhound proposed to acquire a 20% interest in REA
through acquisition of REA's 500,000 authorized but unissued
shares, stating that its
"interest in REA . . . stems primarily from our views as to the
improvements . . . which could be realized through combination and
correlation of certain of our facilities and services."
Greyhound offered to pay $16 per share if permitted to name
one-fifth of the REA Board of Directors and if the REA Board would
declare its intention "to consider seriously and work toward a
long-term agreement between REA and Greyhound to consolidate
operating functions and facilities . . . ," and if, further, the
REA Board would agree "to consider seriously at a later time . . ."
the sale of REA stock to airlines and the general public. Finally,
Greyhound offered, if permitted to acquire the 500,000 shares, to
purchase enough additional shares at $25 each to give it 50% of the
stock of REA, the offer to remain open for 60 days following
Greyhound's acquisition of the 500,000 shares. It expressed
willingness, however, to purchase the 500,000 shares and leave
"to the future the question of the acquisition of additional
shares by Greyhound and giving the railroads an opportunity to
reconcile their views on this question."
REA countered with an offer to sell the 500,000 shares at $20
per share provided Greyhound would agree to
Page 387 U. S. 490
offer within the 60-day period to purchase an additional
1,000,000 shares of the outstanding stock at the same price. The
agreement was consummated on this basis subject to ICC
approval.
REA's application to the ICC sought approval only of the
issuance to Greyhound of the 500,000 shares. The application was
supplemented with detailed data reviewing the negotiations, a
statement of REA's financial condition, and a statement of the
purposes to which the $10,000,000 realized from the sale of the
500,000 shares would be applied. The burden of the protests of
numerous intervenors was that the transaction was not in the
"public interest" and for a "lawful object," but rather was the
first step toward establishing a virtual monopoly of express
transportation, and would result in "control" by Greyhound of REA,
necessitating a hearing under § 5 of the Act. [
Footnote 2] The Department of Justice also
intervened. It urged the ICC to conduct a hearing to determine
whether the transaction would violate § 7 of the Clayton Act,
[
Footnote 3] suggesting that,
while a § 5 proceeding might be
Page 387 U. S. 491
unnecessary, one might be instituted and consolidated with the
recommended Clayton Act § 7 proceeding, since the anticompetitive
issues involved would be virtually identical.
Division Three of the ICC approved the application without
hearing, ruling that investigation into the "control" and
"anticompetitive" issues "would not be appropriate at this time. .
. ." After the ICC denial of petitions for reconsideration, this
action to enjoin and set aside the ICC order was filed. The full
Commission meanwhile reconsidered and affirmed the action of
Division Three, but postponed the effective date of the order
pending the conclusion of judicial proceedings.
In the District Court, the parties adhered basically to the
positions maintained before the ICC, except that the Department of
Justice abandoned its position urging a hearing on the § 7 question
and declined either to support or to oppose the ICC order. In
sustaining the order, the District Court reasoned that, while the
ICC might be required in some circumstances to consider "control"
and "anticompetitive" issues before approving a stock issuance
under § 20a, the ICC properly exercised discretion to defer
consideration of such questions in this case until after it was
determined whether and to what extent Greyhound would succeed in
purchasing additional shares from railroad stockholders; only then
would the "chain of events started by the stock issuance . . . [be]
ascertainable, rather than conjectural." 255 F. Supp. 704, 709.
In this Court the Government concedes, and the other appellees
assume
arguendo, that important issues of "control" and
"anticompetitive" effects were involved in the application before
the ICC. The Government has completely reversed its position from
what it was before
Page 387 U. S. 492
the ICC, arguing here that § 20a was designed to accomplish only
the limited objective of protecting stockholders and the public
from fiscal manipulation, and that, in any event, postponement of
consideration of "control" and "anticompetitive" issues was
justified in this case because the facts relevant to both issues
might be wholly different at the end of the 60-day period, and
because no prejudice to any party's interests could result from the
delay.
II
We do not agree that Congress limited ICC consideration under §
20a to an inquiry into fiscal manipulation. [
Footnote 4] Even if Congress' primary concern was
to prevent such manipulation, the broad terms "public interest" and
"lawful object" negate the existence of a mandate to the ICC to
close its eyes to facts indicating that the transaction may exceed
limitations imposed by other relevant laws. Common sense and sound
administrative policy point to the conclusion that such broad
statutory standards require at least some degree of consideration
of control and anticompetitive consequences when suggested by the
circumstances surrounding a particular transaction. Both the ICC
and this Court have read terms such as "public interest" broadly,
to require consideration of all important consequences including
anticompetitive effects. Thus, the ICC is required to weigh
anticompetitive effects in approving applications for merger or
control under § 5 of the Act, authorizing the ICC to grant such
applications
Page 387 U. S. 493
only if "consistent with the public interest."
McLean
Trucking Co. v. United States, 321 U. S.
67. And similarly broad responsibilities are encompassed
within like broad directives addressed to other agencies.
E.g.,
National Broadcasting Co. v. United States, 319 U.
S. 190,
319 U. S. 224;
FCC v. RCA Communications, Inc., 346 U. S.
86,
346 U. S. 94;
California v. FPC, 369 U. S. 482,
369 U. S.
484-485.
It is true that the requirement that the ICC consider
anticompetitive effects is more readily found under § 5, since §
5(11) enables the ICC to confer immunity from the antitrust laws
for transactions approved under § 5(2). [
Footnote 5] But the foundations of the ICC's obligation
under § 5 are largely applicable to 20a as well. Section 20a, like
§ 5, must, after all, be read in the context of overall ICC
responsibilities. The responsibility under § 11 of the Clayton Act
[
Footnote 6] to enforce that
Act's provisions is one of them. The responsibility to advance the
National Transportation Policy, read into the "public interest"
standard of § 5, is another persistent and overriding duty, equally
applicable to § 20a. In sum, as we said in
McLean Trucking,
supra, while transportation
"legislation constitutes the immediate frame of reference
within
Page 387 U. S. 494
which the Commission operates . . . and the policies expressed
in it must be the basic determinants of its action . . . , in
executing those policies, the Commission may be faced with
overlapping and at times inconsistent policies embodied in other
legislation enacted at different times and with different problems
in view. When this is true, it cannot, without more, ignore the
latter."
321 U.S. at
321 U. S.
80.
In proceedings under § 20a(2), the ICC itself has not acted as
though it lacks the power or responsibility to weigh
anticompetitive consequences. In
Columbia Terminals Co. --
Issuance of Notes, 40 M.C.C. 288, 293, an application to issue
notes under § 20a(2) was granted in part only on the condition that
the notes be made the subject of competitive bidding. The ICC
explicitly rejected the argument that § 10 of the Clayton Act, 15
U.S.C. § 20, requiring competitive bidding in certain situations,
was superseded by § 20a. In
Stock of New Jersey, I. & I. R.
Co., 94 I.C.C. 727, 729, the Commission said, in considering
an application to issue stock:
"[I]t cannot be said that, in the performance of the broad duty
imposed upon us by the statute, we must confine our investigation
and consideration to the effect of proposed issues upon the carrier
immediately involved. In any application to us for authority to
issue securities, we are bound to measure the proposal by the test
of public interest in whatever phase that interest may appear to be
affected."
This "broad duty" was significantly adhered to in
Chesapeake
& O. R. Co. Purchase, 271 I.C.C. 5. There, the C & O
sought modification of an earlier order so as to enable it to
acquire and exercise 400,000 shares of New York Central, and two of
C & O's directors sought authority under § 20a(12) to hold
seats simultaneously on the Central Board. C & O and its
directors alleged, in terms strikingly similar to the claims in
this case, that Central
Page 387 U. S. 495
needed funds and new management, and that the two companies were
contemplating plans of mutual advantage and ultimately a merger
under § 5(2). The ICC took a broad view of its power and
responsibility. It found, as to the § 20a(12) issue, that an
insufficient showing had been made that "neither public nor private
interests . . ." would be adversely affected by the proposed
interlocking directorate, citing its own cases to the effect that
authority would be granted under § 20a(12) only where no lessening
of competition or independence occurred, 271 I.C.C. at 18, and
pointing out that, even if the Central were strengthened, an
interlocking directorate might injure other railroads in which the
"public has just as great an interest . . . ," 271 I.C.C. at 40. In
treating the request that it approve the stock acquisition, the ICC
referred in great detail to the facts that (1) the acquisition,
when considered along with long-range plans, would result in C
& O control of Central; (2) extensive competition between C
& O and Central would be eliminated, and (3) cooperation
between C & O and Central would pose a substantial threat to
another railroad, 271 I.C.C. at 24-29. It refused to authorize the
acquisition, concluding that it was in effect being asked
"to sanction a violation of the provisions of section 5(4)
[requiring carriers to request authority under § 5(2) before
acquiring control of another carrier] and also a violation of
section 7 of the Clayton Antitrust Act."
271 I.C.C. at 39, 43. It stated that, if the applicants were so
confident that their long-run aims would be in the public interest,
they should seek authority for control under § 5(2). These
principles and arguments relied upon by the ICC in rejecting C
& O's application are equally applicable here. The economic
consequences do not differ because we are concerned here with the
issuance of stock, rather than an acquisition on the open
market.
Page 387 U. S. 496
Appellees argue, with some ambivalence, that it would be
anomalous to require the ICC to consider anticompetitive issues
under § 20a(2). The ICC is authorized under § 5 to grant antitrust
immunity for consolidations. No such power exists under § 20a,
[
Footnote 7] and the Government
contends therefore that to require consideration of § 7 issues
under § 20a would lead to the
"anomalous conclusion that a securities issue may have to be
disallowed even though it might be the first step in an acquisition
of control that the Commission could, on proper findings, authorize
under section 5 notwithstanding antitrust considerations."
REA advances a variant of this argument pointing out that the
Sixty-sixth Congress, which passed both § 5 and § 20a, would not
have
"adopted the erratic policy of relaxing enforcement of the
antitrust laws when competition was eliminated, but requiring
strict enforcement when lesser competitive harm might occur."
First, it is by no means true that greater competitive harm
necessarily results from consolidations than from stock issuances
under § 20a. A particular consolidation may be in the public
interest because it increases competition in some respects, while a
stock issuance, even though not involving control, may have no
similar redeeming feature. Second, any anomaly which may be created
by the juxtaposition of §§ 5 and 20a stems not
Page 387 U. S. 497
from the fact that no immunity may be granted under § 20a, but
from the ICC's special power under § 5. The obligation to enforce
the Clayton Act is the rule, and § 5 is the exception. Finally,
there are good reasons upon which Congress may have relied in
providing that immunity might be conferred under § 5, but not under
§ 20a. Congress recognized in the Transportation Act of 1940, 54
Stat. 898, as it had in the Act of 1920, that railroad
consolidations often result in benefits for the national
transportation system as well as for the railroads involved.
Consequently, it authorized the ICC to approve consolidations and
to immunize them from the antitrust laws when they were found to be
in the public interest. The special benefits sometimes realized
from carrier consolidations are less likely to come about through
the mere issuance of stock, unless the issuance results in control
or merger, and, when control or merger does result, the party
acquiring control may invoke the Commission's power under § 5 to
immunize the consolidation from the antitrust laws.
Appellees' reliance upon
Alleghany Corp. v. Breswick &
Co., 353 U. S. 151,
355 U. S. 355 U.S.
415, is misplaced. That litigation stands, at most, for the
proposition that the ICC has discretion in some circumstances to
consider § 20a issues without coming to grips with the question
whether control of one carrier by another may be unlawful.
Alleghany had acquired control of the New York Central without ICC
approval. It applied to the ICC, rather than to the Securities and
Exchange Commission, for approval of an issue of preferred stock.
The ICC took jurisdiction on the ground that, while Alleghany was
an investment company normally under the jurisdiction of the SEC,
its control of Central made it a carrier subject to ICC regulation.
The District Court set aside the order approving the issuance on
the ground
Page 387 U. S. 498
that ICC jurisdiction to act under § 20a could not rest upon a
control it had not approved. This Court reversed, pointing out that
it would be contrary to the policy of the statute to oust the ICC
of regulatory jurisdiction because a noncarrier had failed to abide
by the law. On remand the District Court considered the illegality
of Alleghany's control as relevant to the merits of the issuance
under § 20a, and we reversed again, stating simply that the only
issue left open on remand was whether the stock issue "as approved"
was unlawful.
355 U. S. 355 U.S.
415,
355 U. S. 416.
However this litigation may be interpreted, it wholly fails to
support the proposition that, because § 20a was designed primarily
to protect against fiscal manipulation, the ICC is relieved of the
necessity of considering other issues germane to the
transaction.
We conclude, therefore, that 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 the
control and anticompetitive consequences before approving stock
issuances under § 20a(2). This does not mean the ICC must grant a
hearing in every case, or that it may never defer consideration of
issues which arise when special circumstances are present. But it
does mean that, when the ICC exercises its discretion to approve
issuances without first considering important control and
competition issues, the reviewing court must closely scrutinize its
action in light of the ICC's statutory obligations to protect the
public interest and to enforce the antitrust laws. Whether or not
an abuse of discretion is present must ultimately depend upon the
transaction approved, its possible consequences, and any
justifications for the deferral. We turn now to this question,
first with respect to the deferral of the control issue and second
with respect to the deferral of the anticompetitive issues.
Page 387 U. S. 499
III
REA's proposed issuance of a 20% stock interest to Greyhound
undoubtedly raised a serious question whether control of its
operations might pass to Greyhound. Control under § 5 must be
judged realistically, and is a matter of degree.
See Rochester
Tel. Corp. v. United States, 307 U. S. 125.
Even the 20% acquisition standing alone might raise an issue of
control necessitating greater consideration than given it by the
ICC, but it is clear from REA's own evidence that the purpose of
its negotiations with Greyhound was to bring the two companies into
a joint alignment. The 20% stock issuance was treated by both as
the first step of a more ambitious project, and as evidence of the
seriousness of each other's intentions to that end.
What the ICC has done must, however, be placed in perspective.
It has not denied that a substantial issue of control is present,
and it has not refused to consider the issue. It has held only that
consideration should be deferred for the 60-day period during which
Greyhound has agreed to extend to REA stockholders an offer to
purchase up to 1,000,000 shares. We have stressed the
unsatisfactory consequences which often occur when agencies defer
action and leave parties uncertain as to their rights and
obligations.
United States v. Chicago, M., St. P. & P. R.
Co., 294 U. S. 499,
294 U. S. 510.
We might also observe that the ICC apparently could have avoided
the deferral by requiring REA and Greyhound to reform their
contract so that all the facts relevant to the control issue could
be ascertained before approval was given under § 20a(2). [
Footnote 8] Nevertheless, we cannot say
that the
Page 387 U. S. 500
ICC exceeded its discretion when it deferred consideration of
the control issue; radical changes in the relevant facts may take
place during the 60-day period, and it is highly unlikely that any
harm can flow to appellants or to the public interest from a
deferral limited to that issue.
Resolution of the "public interest" issue under § 5, requiring
consideration of anticompetitive and other consequences, is
required when the threshold fact of control or merger is
established. But in this case, even assuming that the 20% purchase
may amount to "control" under the existing stock distribution,
events may occur during the 60-day period which might negate this
possibility. Some railroads have indicated their intention to sell
their REA holdings, but whether Greyhound or the dissident
railroads wind up in a controlling position may depend on the
extent to which the latter exercise their right of first refusal.
The dissident railroads have made clear their intention to prevent
Greyhound from acquiring any additional shares, but even if they
obtain one-third of REA's stock, they will be able to determine the
composition of REA's Board of Directors. In either case, the added
power in the hands of the dissident roads may, depending on the
circumstances, lead the ICC to find that Greyhound had not acquired
control. [
Footnote 9] Thus, the
control question can more realistically be resolved with finality
after the 60-day period.
Moreover, the ICC reasonably concluded that allowing Greyhound
tentatively to acquire the 20% stock interest would not prejudice
appellants as to the control issue
Page 387 U. S. 501
in light of the dissident railroads' position that Greyhound
would not acquire "one additional share under the offer to purchase
up to one million shares . . . ," and because Greyhound would be
unable under REA's bylaws to control the board, since its five
directors would be faced by 18 railroad directors, any 13 of whom
would have the power to prevent any action proposed by
Greyhound.
IV
The action of the Commission in deferring consideration of the
anticompetitive issues stands on a different footing. The
Commission's responsibility under § 5 and under the Clayton Act
differs markedly, and the reasons which support an exercise of
discretion as to the control issue are wholly inapplicable to the
anticompetitive questions. There is, in short, no reasonable
justification for deferring the Clayton Act questions.
The Commission is, of course, required to consider
anticompetitive issues under the public interest standard of § 5,
just as it must under the public interest standard of § 20a. But
the duty under § 5, as we point out above, arises only after the
threshold fact of control is established. No such preliminary
finding need be made to trigger the ICC's duty under the Clayton
Act. A company need not acquire control of another company in order
to violate the Clayton Act.
See, e.g., United States v. du Pont
& Co., 353 U. S. 586;
American Crystal Sugar Co. v. Cuban-American Sugar
Co., 152 F.
Supp. 387 (D.C.S.D.N.Y.1957),
aff'd, 259 F.2d 524
(C.A.2d Cir.1958). Section 7 proscribes acquisition of "any part"
of a company's stock where the effect "may be substantially to
lessen competition, or to tend to create a monopoly." Moreover, the
purpose of § 5 is significantly different from that of the Clayton
Act. Section 5 is designed to enable carriers to seek and obtain
approval of consolidations with other carriers, with immunity from
the antitrust
Page 387 U. S. 502
laws. When a carrier effects a consolidation without ICC
authority, the Commission can, of course, act under § 5(4). But, as
the Commission has often held, the carrier must initiate
consolidations under § 5, and it is reasonable to expect that
carriers will seek the benefits of that provision. In contrast, the
Clayton Act is prohibitive, and imposes a positive obligation upon
the ICC to act. The Commission is directed, whenever it has reason
to believe any carrier within its jurisdiction is violating § 7, to
"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. . . ." 15 U.S.C. § 21(b). Section 16, 15
U.S.C. § 26, excepts from the power of private persons to bring § 7
suits for injunctive relief all cases involving matters subject to
ICC jurisdiction. By thus limiting the authority of private persons
to institute court proceedings to enjoin § 7 violations, this
provision underscores the ICC's responsibility to act when such
violations are brought to its attention. One of the principal
justifications advanced for the ICC's deferral of the control issue
is that the facts relevant to that issue may change so
significantly during the 60-day period that the control question
could be settled either way. No such possibility exists with
respect to at least some of the anticompetitive issues presented by
REA's application. We need not accept the argument of appellants,
based upon the distinction between "express" and other forms of
transport,
see, e.g., Railway Express Agency, Inc., Extension
-- Nashua, N.H., 91 M.C.C. 311, 322,
sustained sub nom.
Auclair Transportation, Inc. v. United States, 221 F.
Supp. 328 (D. Mass.),
aff'd, 376 U.
S. 514, that the 205 stock acquisition would itself
violate § 7 because REA controls 88% and Greyhound 7% of the
"express" market. For if appellees REA and Greyhound are correct
that, because of the increasing cross-competition among groups
carrying
Page 387 U. S. 503
transport, it is impossible to categorize REA as a carrier of
"express," then the claims of appellant truck lines, freight
forwarders and trucking associations take on added significance. It
is precisely the increasing diversification of REA's transport
activity, together with Greyhound's considerable capacity and the
economics and efficiencies the two companies intend to effectuate
jointly, that concerns these appellants.
It is clear that REA and Greyhound contemplate major changes in
their operation which could have a significant impact upon
competition for express and other types of transport which they
seek to carry. The "Memorandum of Understanding" into which the
companies entered about three weeks before REA agreed to
Greyhound's 20% stock acquisition contemplates efficiencies and
savings through consolidation of facilities for terminal service,
of garages, and of communications, advertising and sales forces.
These changes might therefore realize large savings for both REA
and Greyhound, and in this way and other ways significantly
strengthen their competitive position. And the Memorandum expresses
a determination to engage in aggressive action to capture larger
shares of express and transport business, especially by utilizing
Greyhound's bus operations as a complement to REA's air and rail
service. "The consolidation of effort by the two companies," the
Memorandum states, "would create a new market with revenue
opportunity arising from a complete package express service to the
public." The "new ability" of the air express service to reach
off-airline points would add significantly to REA and Greyhound
revenues, and the new market would have an estimated growth
potential of 10% per year. Similarly, rail-bus service was expected
to generate millions in "new business," and to
"create a new capability for the two carriers to compete in the
ltl [less-than-load] market. The only foreseeable limitation to
the
Page 387 U. S. 504
growth of this service would be the physical space limitations
of Greyhound's fleet."
There is nothing in the record to rebut the allegations of many
of the appellants that cooperation between Greyhound and REA of the
sort contemplated by the Memorandum aided by the 20% stock
acquisition will result in serious harm to appellants individually
and to the public interest which they serve. The freight forwarders
fear a great reduction in their business, as do the bus companies.
Some of the bus companies, which engage in commuter transport,
claim that Greyhound-REA cooperation would deprive them of their
express business, and that, since that business makes economically
feasible their commuter operations, would compel the termination of
services essential to the public interest.
It cannot be said with assurance that deferral of consideration
of the anticompetitive issues will in no way prejudice appellants
or the public interest. The fact that the railroads presently
control the REA Board of Directors is hardly relevant to that
question. It is not the possibility of control that may prejudice
appellants and the public interest, but simply the fact that with
Greyhound holding 20% of REA's stock there is likely to be
immediate and continuing cooperation between the companies,
cooperation which appellants claim will be to their detriment and
which the Government concedes may be against the public interest.
If appellants are correct, and if such an alliance would, in fact,
be against the public interest, then § 7 of the Clayton Act
requires that it be stopped in its incipiency.
Cf. FTC v. Dean
Foods Co., 384 U. S. 597,
384 U. S. 606,
n. 5.
We are told that REA is in need of funds, and that ICC approval
of the 20% stock acquisition assures that REA will obtain capital
and gain a measure of independence from the railroads. There is
certainly support for the position that REA needs to free "itself
from the
Page 387 U. S. 505
control and domination previously exercised by its railroad
shareholders over its operations." 80 ICC Ann.Rep. p. 22 (1966).
The strong ties between REA and the railroads led to the operation
of REA in the railroads' own interests, without regard to their
coincidence with REA's best interests or the public interest. Prior
to a 1959 agreement, generated in large part by REA losses,
see
Express Contract, 1959, supra, 308 I.C.C. at 546, REA was
required to distribute traffic among carriers on the basis of
existing traffic patterns, and the consent of rail carriers
operating between given points was required before REA could
utilize carriers other than railroads between those points. Changes
in these limitations have enabled REA to finance some improvements
and steadily to increase its corporate surplus. Study of REA
Express, Staff Liaison Group V-C, CAB, FMC & ICC 24-26 (1965).
But it does not follow that REA will be any better off in the long
run, or that the public interest will be advanced, if its ownership
shifts in part or entirely to Greyhound.
While the history of REA does not, in itself, provide a
blueprint for its future, it does "afford a basis for considering
the lawfulness of REA's status and activities, and the economic
desirability of its apparent direction of growth." Study,
op.
cit. supra, at 3. That history indicates that there may be
some relationship between REA's depressed state and its close ties
with railroads. Before acting on this premise, however, the ICC
must at least consider the question whether a given course of
action will, in fact, alleviate the problem. If railroad ownership
operated in the past to deprive REA of an opportunity to prosper
and serve the public interest, it is not inconceivable that partial
ownership by Greyhound will have the same result. Greyhound,
presumably, is no less likely to act in its own interest. If the
railroads operated REA, as appellees contend, to minimize
competition for
Page 387 U. S. 506
transport generally between REA and the railroads, and for
express between the railroads themselves and between railroads and
other modes of transport, how will partial or complete ownership by
Greyhound change things? Even if only partial ownership results,
may Greyhound and the railroad owners operate REA so as to minimize
competition between REA and themselves for transport generally?
What effect, for example, would partial ownership by Greyhound have
upon the recent efforts of REA to add to its express operations the
hauling of larger and more varied volumes of freight, efforts which
bring it into competition with Greyhound and other bus lines, as
well as with truck lines and freight forwarders? Moreover, what
assurance is there that REA will not tend to route shipments via
Greyhound in preference to more efficient or economical carriers or
modes, just as the railroads bound REA to use their lines, as
opposed to other modes, absent their approval? We assume that REA
needs funds, and would be better off more independent from the
railroads, but before the ICC can use these reasons to justify a
diversification of ownership it must at least consider whether the
specific action approved may operate to the detriment of REA or the
public interest.
There is, finally, little merit to the Government's argument
that deferral of the anticompetitive issues is strongly supported
by considerations of administrative convenience. The only
circumstance in which the anticompetitive issues may be eliminated
from the case is if Greyhound, thwarted at the end of the 60 days
in its plans to control REA, were to dispose of its 20% interest.
But the ICC can hardly justify deferral of consideration of the
consequences of a transaction on the possibility that the problems
its approval creates may shortly vanish by a reversal of the
transaction itself. Of course, if, as appellees claim, it is most
likely that Greyhound will
Page 387 U. S. 507
acquire no further stock, then consideration of those
consequences now would not be wasted effort. And the argument of
wasted effort is still less persuasive if appellees are proved
wrong and Greyhound does acquire more stock. For the most
significant question which the ICC must face is whether it is in
the public interest that REA continue to be owned by other
transport companies, and specifically by Greyhound. Once this
question is resolved as to the 20% stock acquisition, and the
consequences of that acquisition are fully weighed, the ICC's task
in any subsequent proceeding if Greyhound enlarges its stock
interest will be far more manageable.
We therefore conclude that, although the possibility that
Greyhound may not increase its holdings within the 60-day period
may justify deferral of resolution of the control issue, it does
not justify delay in consideration of the anticompetitive effects
of the 20% transaction. The Government was correct in its position
before the ICC that this record placed "before the Commission
serious questions under section 7 of the Clayton Act," requiring a
hearing.
The judgment of the District Court is reversed with direction to
enter a new judgment remanding the case to the Interstate Commerce
Commission for further proceedings consistent with this
opinion.
It is so ordered.
[
Footnote 1]
Section 20a of the Interstate Commerce Act, as amended, 41 Stat.
494, 49 U.S.C. § 20a, provides in pertinent part:
"(2) It shall be unlawful for any carrier to issue any share of
capital stock . . . even though permitted by the authority creating
the carrier corporation, unless and until, and then only to the
extent that, upon application by the carrier, and after
investigation by the Commission of the purposes and uses of the
proposed issue and the proceeds thereof, . . . the Commission by
order authorizes such issue. . . . The Commission shall make such
order only if it finds that such issue . . . (a) is for some lawful
object within its corporate purposes, and compatible with the
public interest, which is necessary or appropriate for or
consistent with the proper performance by the carrier of service to
the public as a common carrier, and which will not impair its
ability to perform that service, and (b) is reasonably necessary
and appropriate for such purpose."
Common carriers by motor vehicle are made subject to the
provisions of § 20a(2) by § 214 of the Act, as amended, 49 Stat.
557, 49 U.S.C. § 314.
[
Footnote 2]
Section 5(2)(a)(i) of the Act, as amended, 41 Stat. 480, 482, 49
U.S.C. § 5(2)(a)(i), authorizes any carrier, with the approval and
authorization of the Commission, "to acquire control of another
through ownership of its stock or otherwise. . . ." Upon
application of a carrier seeking such authority, the Commission
"shall afford reasonable opportunity for interested parties to be
heard," and if
"the Commission finds that, subject to such terms and conditions
and such modifications as it shall find to be just and reasonable,
the proposed transaction is within the scope of subdivision (a) . .
. and will be consistent with the public interest, it shall enter
an order approving and authorizing such transaction, upon the terms
and conditions, and with the modifications, so found to be just and
reasonable. . . ."
§ 5(2)(b).
[
Footnote 3]
Section 7 of the Clayton Act, as amended, 38 Stat. 731, 15
U.S.C. § 18, provides in pertinent part:
"No corporation engaged in commerce shall acquire, directly or
indirectly, the whole or any part of the stock. . . 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."
[
Footnote 4]
Section 20a was originally § 437(1) of H.R. 10453, 66th Cong.,
which was almost identical to earlier legislation passed by the
House in 1910 and 1914.
See 58 Cong.Rec. 8317-8318 (1919).
The 1910 version led to a study which condemned as a "public evil"
intercorporate holdings of railroad stock. Report of the Railroad
Securities Commission, H.R.Doc. No. 256, 62d Cong., 2d Sess., 21
(1911). These findings were part of the background against which
Congress eventually passed § 20a, along with the Federal Trade
Commission and Clayton Acts.
[
Footnote 5]
Section 5(11), 49 U.S.C. § 5(11), provides that
"any carriers or other corporations, and their officers and
employees and any other persons, participating in a transaction
approved or authorized . . . shall be and they are relieved from
the operation of the antitrust laws. . . ."
[
Footnote 6]
Section 11 of the Clayton Act, 15 U.S.C. § 21, provides in
pertinent part:
"(a) Authority to enforce compliance with . . . [§ 7] by the
persons respectively subject thereto is vested in the Interstate
Commerce Commission where applicable to common carriers subject to
the Interstate Commerce Act, as amended. . . . (h) Whenever the
Commission . . . shall have reason to believe that any person is
violating . . . [§ 7], it shall issue . . . a complaint . . .
containing a notice of a hearing. . . . The person so complained of
shall have the right to . . . show cause why an order should not be
entered by the Commission . . . requiring such person to cease and
desist from the violation. . . ."
[
Footnote 7]
In
Pan American World Airways v. United States,
371 U. S. 296, we
held that Congress had entrusted the narrow questions there
presented to the CAB; but the violations alleged were of the
Sherman Act, which, unlike the Clayton Act, 15 U.S.C. § 21,
supra, n 6, contains
no provision imposing an affirmative duty upon the agency to
enforce the Act's provisions. The industry there was one "regulated
under a regime designed to change the prior competitive system,"
id. at
371 U. S. 301,
and the CAB could have retained power and granted antitrust
immunity for the actions involved had they occurred after passage
of § 411 of the Civil Aeronautics Act of 1938, 52 Stat. 1003,
id. at 312.
[
Footnote 8]
A change in the agreement providing that Greyhound should offer
to purchase the stock held by the railroads before the issuance of
the 500,000 shares would have developed the relevant facts, and
made unnecessary postponement of the determination of either the
control or competition issue.
[
Footnote 9]
If the dissident REA railroad stockholders exercised their right
of first refusal to buy the 1,000,000 shares the other railroad
stockholders might sell, their combined stockholdings would be
increased to over 50% of the REA shares.
See Brief for the
United States and ICC, p. 18, n. 9.
MR. JUSTICE WHITE, concurring in part and dissenting in
part.
I agree with most of the Court's opinion, with its holding that
competitive factors must be considered in a § 20a proceeding and
with its ruling that a hearing should have been held by the
Commission in this case before approving the issuance of the
securities by Railway Express Agency, Inc., to Greyhound
Corporation.
Page 387 U. S. 508
But I am doubtful about those parts of the Court's opinion which
indicate that, although the public interest requires the
consideration of competitive factors in connection with the
issuance of stock under § 20a, the public interest also demands
that, if a lessening of competition is found or threatened within
the meaning of § 7 of the Clayton Act, the issuance must be
disapproved. Under § 5 of the Interstate Commerce Act, competitive
factors must also be considered in determining the public interest,
but there a balanced view of the public interest permits the
approval of a merger or consolidation despite any actual or
probable competitive impact. Mergers which would violate § 7 are
thus permissible under § 5 if found in the public interest, but
only those acquisitions of stock which are not suspect under § 7 of
the Clayton Act are permissible under § 20a.
In the last analysis, the Court rests this rather odd
distinction on the Act itself -- that is, Congress is said to have
intended this very result because it provided in 5(11) that the
approval of a transaction under § 5 relieves the parties from
antitrust liability, and did not so provide in connection with §
20a transactions. I do not think. however, that this ends the
matter, and I find unconvincing the speculative reasons the Court
gives for suggesting that Congress intended any such result.
Much more persuasive to me is the approach of
Pan American
World Airways v. United States, 371 U.
S. 296. That case involved the Civil Aeronautics Act of
1938, 52 Stat. 973, reenacted as the Federal Aviation Act of 1958,
72 Stat. 731, 49 U.S.C. § 1301
et seq., which provided
antitrust immunity for transactions approved by the Civil
Aeronautics Board under § 408, 409, and 412. The course of conduct
attacked by the United States under § 1 of the Sherman Act in
Pan American was not, however within any of these
sections. The Court, nevertheless, held that the conduct was
clearly of the kind
Page 387 U. S. 509
specifically committed to regulation by the Board under other
sections of the Act, and was unassailable in an independent civil
action brought by the United States under § 1 of the Sherman
Act.
In the case before us, § 20a(2) provides that it shall be
unlawful for any carrier to issue securities unless approved by the
Commission after finding that the issuance:
"(a) is for some lawful object within its corporate purposes,
and compatible with the public interest, which is necessary or
appropriate for or consistent with the proper performance by the
carrier of service to the public as a common carrier, and which
will not impair its ability to perform that service, and (b) is
reasonably necessary and appropriate for such purpose."
The Commission may grant an application under § 20a in whole or
in part with such modifications and on such terms and conditions as
the Commission may deem appropriate, and it may from time to time
make such supplemental orders with respect to the transaction as it
may deem necessary. § 20a(3). Moreover, it is expressly provided
that
"[t]he jurisdiction conferred upon the Commission by this
section shall be exclusive and plenary, and a carrier may issue
securities and assume obligations or liabilities in accordance with
the provisions of this section without securing approval other than
as specified herein."
§ 20a(7).
Having these powers conferred upon it in the name of the public
interest, the Commission may, in my view, approve the issuance of
stock by a carrier if it deems the public interest requires it even
though there may be a probable lessening of competition which
otherwise would violate § 7 of the Clayton Act. This seems to be
precisely what Congress intended by expressly providing in § 7 of
the Clayton Act itself that
"Nothing contained in this
Page 387 U. S. 510
section shall apply to transactions duly consummated pursuant to
authority given by the . . . Interstate Commerce Commission . . .
under any statutory provision vesting such power in such
Commission. . . ."
15 U.S.C. § 18.
It makes very little sense to me to hold that a stock
acquisition involving control may be approved if the public
interest requires it, despite any actual anticompetitive impact,
and yet to forbid the approval of an acquisition which falls short
of control but which "may" injure competition within the meaning of
the Clayton Act.
Thus, while I agree that a hearing should be required before the
Commission approves the issuance of the securities in this case, I
would make it clear that competitive considerations are only some
of the factors to be weighed in reaching a decision concerning the
public interest, much as the Court has viewed the proceedings under
§ 5.
McLean Trucking Co. v. United States, 321 U. S.
67. At the very least I would not now decide that the
Commission is powerless to approve the issuance of securities under
§ 20a if it determines that the impact on competition would
otherwise be barred by the Clayton Act.
MR. JUSTICE HARLAN, whom MR. JUSTICE STEWART joins,
dissenting.
This case involves a proposed stock issue by appellee Railway
Express Agency, Inc. (REA), of 500,000 shares of previously
authorized but unissued shares of its common stock. Under § 20a(2)
of the Interstate Commerce Act, 49 U.S.C. § 20a(2), this type of
stock transaction must be authorized by the Interstate Commerce
Commission, which must determine whether the issue is "for some
lawful object within . . . [the applicant's] corporate purposes,
and compatible with the public interest. . . ."
Page 387 U. S. 511
Under the proposed transactions, REA contracted to sell this
block of shares for $10,000,000 to the Greyhound Corporation, which
would then offer to purchase within a 60-day period an additional
1,000,000 shares from existing stockholders, all of whom are
railroads and all of whom hold rights of first refusal as to the
sale of existing REA shares. Some of these railroad stockholders
have been opposed to Greyhound's entry into REA, and have expressed
their intention to exercise their preemptive rights. It is
undisputed that, if Greyhound nevertheless succeeds in purchasing
these additional shares it would be in a position to exercise a
substantial degree of control over REA,
cf. Rochester Tel.
Corp. v. United States, 307 U. S. 125,
307 U. S. 145,
and that such control would require the approval of the ICC under §
5(2) of the Interstate Commerce Act, 49 U.S.C. § 5(2). It was also
alleged by the United States as an intervenor before the ICC that
the possible exercise of control by Greyhound over REA and an
anticipated coordination of certain services by the two carriers
[
Footnote 2/1] raised serious
antitrust questions under § 7 of the Clayton Act, 15 U.S.C. 18,
which the ICC is bound to enforce as to regulated carriers, Clayton
Act § 11, 15 U.S.C. § 21.
The Interstate Commerce Commission did not deal with the
substance of these "control" and "antitrust" issues. It found that
REA "urgently needs the proceeds of $10,000,000 . . . ," [
Footnote 2/2] and that it was not
necessary, given
Page 387 U. S. 512
the uncertainty as to the future relationship of Greyhound and
REA, to deal with the control issue at that time. The Commission
noted specifically that
"if in the future the acquisition of control or power to
control, or other matter or transaction to which section 5 of the
act applies, becomes imminent or apparent, the opportunity will be
available for all interested persons to interpose their opposition.
. . ."
On review, a three-judge District Court for the District of
Colorado sustained the Commission's order, 255 F. Supp. 704. It
read the ICC's decision, as does this Court, as saying only
"that in the circumstances presented the public interest
requires the issuance of the stock and that determination of the
competitive effects will be appropriate for consideration after the
chain of events started by the stock issuance is ascertainable,
rather than conjectural."
Id. at 709. The District Court then held that
"[i]n the circumstances it is not our prerogative to interfere
with what we deem to be a reasonable exercise by the Commission of
its discretionary powers."
Id. at 710.
I would affirm this judgment of the District Court, and
therefore must dissent from today's decision. The Court holds
that
"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 the control and
anticompetitive consequences before approving stock issuances under
.§ 20a(2)."
Ante, p.
387 U. S. 498.
The Court notes, however, that
"[t]his does not
Page 387 U. S. 513
mean the ICC must grant a hearing in every case, or that it may
never defer consideration of issues which arise when special
circumstances are present,"
ibid., but concludes that, while it was not an abuse of
discretion to defer consideration of the "control" question raised
by the intervenors, it was improper to refuse to deal with the
"anticompetitive" issues at this stage. I believe that this
decision misapplies the relevant statutes and seriously impedes
sound administrative practice.
I
Section 20a(2) of the Interstate Commerce Act is concerned with
new stock issues. Congress' dominant concern was "to maintain a
sound structure for the . . . support of railroad credit," 1
Sharfman, The Interstate Commerce Commission 190 (1931), [
Footnote 2/3] and nothing in the
legislative background of the section indicates that the words "for
some lawful object within its corporate purposes, and compatible
with the public interest" were intended to encompass issues of
antitrust law. Of course, the phrase "the public interest" is
broad, and in the context of other legislation comparable terms
Page 387 U. S. 514
have been held to embrace antitrust matters.
E.g.,
Federal Communications Act, § 307, 48 Stat. 1083, 47 U.S.C. § 307,
as construed in
FCC v. RCA Communications, Inc.,
346 U. S. 86. But
the mere inclusion of such language in this instance is not the end
of our inquiry, for § 20a must be read in its entirety and
interpreted in conjunction with other sections of the Act.
In contrast to § 20a, which, by its detailed and explicit terms,
deals only with the problem of fiscal responsibility, [
Footnote 2/4] § 5 of the Act, enacted at
the same time, [
Footnote 2/5] deals
specifically with problems of "control." Indeed, the standards laid
out in § 5 are directly relevant to the various factual issues
hypothesized by the Court in
387 U. S.
Section 5 does not deal solely with transfers of shares, but with
any lease or contract between two carriers for the operation of
their properties, §§ 5(2)(a)(i), 5(4);
see
Page 387 U. S. 515
Gilbertville Trucking Co. v. United States,
371 U. S. 115,
371 U. S. 125.
It would thus appear that any type of agreement between Greyhound
and REA for the integration of their operations would -- with or
without the sale of shares -- fall within the purview of § 5.
Section 5 not only deals explicitly with problems of control,
but it establishes the public interest criteria which the ICC is
bound to use in making that type of inquiry. For example, the
Commission must consider
"(1) The effect of the proposed transaction upon adequate
transportation service to the public; . . . (3) the total fixed
charges resulting from the proposed transaction, and (4) the
interest of the carrier employees affected."
§ 5(2)(c). This Court has recognized that standards of market
control in the transportation industry are different from those
governing other business transactions: the ICC must take account of
antitrust policy in judging the control questions under § 5,
McLean Trucking Co. v. United States, 321 U. S.
67, but this interest is simply one of the relevant
criteria, and if, on balance, the Commission finds a proposed
undertaking to be in the public interest, the statute authorizes a
grant of antitrust immunity to the transaction. § 5(11);
Seaboard Air Line R. Co. v. United States, 382 U.
S. 154;
Minneapolis & St. L.R. Co. v. United
States, 361 U. S. 173;
McLean Trucking Co. v. United States, supra. Section 5
thus covers fully the problems of control; likewise, the antitrust
issues are dealt with specifically in § 11 of the Clayton Act,
which authorizes the ICC to enforce § 7 of that Act, forbidding the
acquisition of stock the effect of which "may be substantially to
lessen competition, or to tend to create a monopoly." Hence, these
sections, and not § 20a, are the substantive provisions governing
the Commission's jurisdiction in respect to the anticompetitive
aspects of this case.
Page 387 U. S. 516
For procedural reasons, too, § 20a seems inappropriate as a
vehicle to replace or augment § 5 of the Interstate Commerce Act
and §§ 7 and 11 of the Clayton Act. When a carrier applies for
authorization to issue stock, the Commission must give notice to
the various States in which the carrier operates so that relevant
state regulatory agencies, which also supervise the finances and
corporate structure of these companies, may raise objections to the
proposed transaction. The Commission need not, however, hold a
hearing before approving the transaction. § 20a(6). In contrast,
when the ICC deals with problems of control under § 5, it is bound
not only to notify the various state authorities, but also to
"afford reasonable opportunity for interested parties to be heard."
§ 5(2)(b). And § 11 of the Clayton Act requires the Commission to
notify the Attorney General if it believes that any carrier is
violating § 7, and the Attorney General has the statutory right to
intervene in the mandatory hearing on the question.
Given the complexities of control and antitrust problems in the
transportation field, and given the specific and detailed
provisions of the statute in § 5, and in § 11 of the Clayton Act,
devoted particularly to them, it seems to me quite evident that the
sounder view of the statutory scheme is to regard § 20a as being
limited to matters of corporate financing and § 5 and § 7 as being
the source of the Commission's authority and duty to deal with
these other matters.
None of the Commission cases cited by the Court in support of
its position that § 20a was envisioned as also encompassing control
and antitrust considerations is apposite.
Columbia Terminals
Co. -- Issuance of Notes, 40 M.C.C. 288, dealt, as the Court
notes, with § 10 of the Clayton Act, 15 U.S.C. § 20, which
specifically requires common carriers in certain situations to sell
securities "by competitive bidding under regulations to be
prescribed by
Page 387 U. S. 517
rule or otherwise by the Interstate Commerce Commission." The
ICC merely held that this statute had not been repealed by § 20a.
The general language cited by the Court from Stock of
New
Jersey, I. & I. R. Co., 94 I.C.C. 727, was written in a
case in which the issue was whether the applicant railroad could
pay an indebtedness to its sole stockholder, another railroad,
through a distribution of stock as a dividend. The ICC held this
method of financing acceptable; antitrust considerations were in no
way involved.
The third ICC decision cited by the Court,
Chesapeake &
O. R. Co. Purchase, 271 I.C.C. 5, would seem, if anything,
inconsistent with its view of § 20a. There, the Commission was
requested to approve an interlocking directorate, which is
forbidden unless authorized by the Commission pursuant to § 20a(12)
of the Interstate Commerce Act, 49 U.S.C. § 20a(12). In making its
decision, the Commission did not incorporate § 5 control standards
into § 20a(12). Quite the contrary, it noted that
"[t]he policy of the Congress as to consolidations, mergers, and
other forms of corporate unification and association is now to be
found in the provisions of section 5,"
id. at 12; that no application under § 5(2) had been
filed, and that
"[i]t follows that the evidence pertaining to control of the New
York Central or ultimate unification of the two carriers is
irrelevant to the principal issues before us, and may not be
considered in disposing of those issues."
Ibid. The Commission then determined, under its
established standards for judging the acceptability of an
interlocking directorate,
id. at 18, that such an
authorization would be improper, but observed that
"[i]f the applicants are firmly of the opinion that the proposed
association will result in the benefits to the carriers and to the
public which they contend we should find on the showing that they
have made in this proceeding, there is no reason why they should
not
Page 387 U. S. 518
file an application for some form of association under section
5(2) of the act."
Id. at 41-42.
The lack of authority for the Court's view of § 20a is not
limited to administrative decisions. In the complex
Alleghany
Corp. litigation, summarized by the Court,
ante, pp.
387 U. S.
497-498, this Court sustained the ICC's determination
that it could act upon a § 20a application without involving itself
in difficult issues of intercorporate control as the District Court
had ordered. The protracted and tangled character of that
litigation, until resolved in the interests of simplicity by this
Court's affirmance of the ICC's approach, should be a warning of
the unfortunate consequences that may follow judicial requirements
complicating and proliferating administrative hearings in
unfamiliar fields; this is especially so where there are, as here,
numerous parties some of whom have a strong interest in achieving
delay.
II
Although not accepting the reading of the Act which I have
urged, the Court nonetheless appears to recognize that the issue of
"control" is a separate one from that of financial regularity, and
one that can appropriately be dealt with in a separate and
subsequent proceeding. Since the Court also acknowledges, as it
must, that, at this later hearing REA and Greyhound may request a §
5(11) exemption, and thus bring into play all the standards of § 5,
I find the Court's insistence that this issue falls within the
purview of § 20a, rather than § 5 essentially an academic one. The
ICC will still be able to conduct its hearings just as it wished to
do here, except that its subsequent "§ 5 proceeding" will
henceforth be labeled a "§ 20a and § 5 proceeding."
Given the Court's recognition that the ICC has discretion to
postpone the "control" determination, I find
Page 387 U. S. 519
it difficult to accept its argument that "antitrust" factors may
not similarly be postponed.
It should be recalled that the only matter raised in this
application is REA's desire to issue 500,000 shares of its stock to
"a non-railroad purchaser," which concededly would bring to the
issuer capital funds required for investment purposes. Under the
proposed transaction, after Greyhound purchases these shares, it
will extend an offer to purchase within 60 days an additional
1,000,000 shares, as to which other shareholders hold rights of
first refusal. All parties are in agreement that control and
antitrust problems will be raised if Greyhound is ultimately
successful in effecting these additional purchases. The only
question is whether the Commission can leave these questions for a
later determination. Because of the uncertainty as to the outcome
of the further stock purchase offer, the Court agrees that
postponement of the control issue was proper. But this uncertainty
is equally crucial to the Clayton Act issues. The likelihood of a
Clayton Act violation will, of course, be increased if Greyhound
obtains these additional shares and is in a position to control,
and to consolidate operations with, REA. On the other hand, if the
shares are bought by some of the appellants whose interests appear
to be adverse to Greyhound, the possibility of substantial harm to
competition will be minimal. The core of the Clayton Act question,
then, is inexorably tied to the control question, and the Court
does not deny that these problems overlap. In these circumstances,
I find it impossible to follow the Court in holding, on the one
hand, that the control hearing was permissibly postponed, but, on
the other, that the ICC abused its discretion in similarly
deferring any Clayton Act hearing.
To require such a proliferation of hearings as to a single
transaction -- one involving a straightforward business
Page 387 U. S. 520
transaction negotiated in terms of existing market conditions
and the existing needs of the parties -- is bound to obstruct the
smooth workings of the administrative process. The penetrating
observations of Professor Jaffe seem to me especially pertinent in
this situation:
"I gather the impression that some judges who quite insistently
display a 'correct' attitude of deference on substantive issues
apply a different standard to procedural decisions: they do not
hesitate to protract and to complicate the administrative process.
Their premise may be that the considerations that dictate deference
to substantive decisions are inapplicable to procedural ones. This
is only partly true. . . . Since procedural decisions should be
made to serve the substantive task, it follows that expertness in
matters of substance are relevant to the exercise of procedural
discretion."
". . . [An agency] must ration its limited resources of time,
energy and money. It must devote them to those exigent and soluble
problems which
are most nearly related to its core
responsibility. What problems are most exigent, how they can best
be solved . . . are questions the solution to which peculiarly
demands a feeling for the whole situation. . . . If a court is not
as well fitted to solve substantive problems as the agency, if on
this level intermittent, disjected criticism disperses
accountability, how much more is this true where the deployment of
forces is involved."
Jaffe, Judicial Control of Administrative Action 566-567
(1965).
The courts have traditionally permitted busy agencies
substantial flexibility in formulating their internal procedures,
and encouraged their efforts to eliminate duplicative action and
repetitive hearings.
See, e.g., Chicago & N.W. R. Co. v.
Atchison, T. & S.F. R. Co., ante pp.
Page 387 U. S. 521
341-343;
Federal Power Comm'n v. Tennessee Gas Co.,
371 U. S. 145,
371 U. S.
153-155, where the Court approved a "two-step procedure"
as "not only entirely appropriate, but in the best tradition of
effective administrative practice";
United States v. Pierce
Auto Lines, 327 U. S. 515,
327 U. S.
534-536;
Baltimore & O. R. Co. v. United
States, 386 U. S. 372,
386 U. S. 459
(dissenting opinion);
cf. Fahey v. Mallonee, 332 U.
S. 245;
Opp Cotton Mills v. Administrator,
312 U. S. 126,
312 U. S.
152-154;
United States v. Illinois Central R.
Co., 291 U. S. 457.
The allowance of such flexibility, and the exercise of prudence
by the courts, is especially appropriate where, as here, the issue
is not whether to hold a hearing, but when to do so, and where
there has been no showing that harm would come from deferring
consideration of the antitrust issues. This is not a case in which
a merger is about to be consummated, and in which it might be
feared that the integration of two businesses will be impossible to
"unscramble" at some future time.
Compare FTC v. Dean Foods
Co., 384 U. S. 597.
These issues concern, as the Court's parade of speculative examples
indicates,
ante pp.
387 U. S.
505-506, the implications of a possible future
coordination of some carrier services between REA and Greyhound.
But these matters will only crystallize for purposes of legal
analysis when it is ascertained (1) what type of control, if any,
Greyhound will have over REA, and (2) what type of coordinated
activities are planned. None of these issues has been prejudged,
and provisional relief can be granted by the Commission, if
necessary, §§ 5(2), (7), (9);
cf. Gilbertville Trucking Co. v.
United States, 371 U. S. 115,
371 U. S.
129-131. The district courts likewise have authority to
grant injunctive relief on application of the Commission. §
5(8).
In these circumstances, I do not believe it was an abuse of
discretion for the ICC to authorize the issuance
Page 387 U. S. 522
of stock, postponing consideration of the control and antitrust
issues until the transaction was completed some 60 days later. It
is regrettable that the Court's preoccupation with the future
antitrust possibilities of this situation, fully acknowledged by
all but still entirely speculative, should have led it to
interfere, so unnecessarily, with the obviously sensible course of
procedure adopted by the Commission.
I would affirm the judgment of the District Court.
[
Footnote 2/1]
The Commission found that REA had agreed
"to consider seriously and work toward a long-term agreement
between applicant [REA] and Greyhound to consolidate operating
functions and facilities, and to cooperate in all lawful, feasible
and jointly advantageous ways to effect economics, improve service
and increase public receptivity and patronage. . . ."
A "Memorandum of Understanding" between an official of each of
the two companies contained some suggested methods for achieving
these goals.
[
Footnote 2/2]
The ICC's order dealing with the legitimacy of this transaction
said:
". . . applicant urgently needs the proceeds of $10,000,000 in
its program of acquiring and modernizing terminals and equipment in
order to keep operating costs at a reasonable level; that it is
handicapped in borrowing to finance capital improvements because of
its unfavorable debt-equity ratio; that the proposed issue will
improve its ratio as well as reduce to some extent the amount of
future borrowing required; that the price of $20 per share is fair
and reasonable, and that the expenses of the issue are estimated at
$15,000. . . ."
[
Footnote 2/3]
The "public interest" of concern to Congress was the problem of
watered stock.
See, e.g., statement of Congressman
Rayburn:
". . . if we write into the law of the land a statute to the
effect that, before a railroad can issue new securities, before it
can put them on the market, it must come before the properly
constituted governmental agency, lay the full facts of its
financial situation before that body, tell that body what it
intends to do with the money derived from the sale of the issue of
securities, and after it has received the approval of that
regulating body and it goes out and puts those securities on the
market, then the Interstate Commerce Commission by this law is
empowered at any time to call it to account and have it tell to
that regulating body that it expended the money, the proceeds of
the sale of securities, for the purposes for which it had made the
application."
58 Cong.Rec. 8376 (1919).
See also statement of
Congressman Esch,
id. at 8317-8318.
See generally
MacVeagh, The Transportation Act of 1920, at 486-492 (1923).
[
Footnote 2/4]
Section 20a(2) reads in its entirety:
"It shall be unlawful for any carrier to issue any share of
capital stock or any bond or other evidence of interest in or
indebtedness of the carrier (hereinafter in this section
collectively termed 'securities') or to assume any obligation or
liability as lessor, lessee, guarantor, indorser, surety, or
otherwise, in respect of the securities of any other person,
natural or artificial, even though permitted by the authority
creating the carrier corporation, unless and until, and then only
to the extent that, upon application by the carrier, and after
investigation by the Commission of the purposes and uses of the
proposed issue and the proceeds thereof, or of the proposed
assumption of obligation or liability in respect of the securities
of any other person, natural or artificial, the Commission by order
authorizes such issue or assumption. The Commission shall make such
order only if it finds that such issue or assumption: (a) is for
some lawful object within its corporate purposes, and compatible
with the public interest, which is necessary or appropriate for or
consistent with the proper performance by the carrier of service to
the public as a common carrier, and which will not impair its
ability to perform that service, and (b) is reasonably necessary
and appropriate for such purpose."
[
Footnote 2/5]
Both sections were parts of the Transportation Act of 1920, 41
Stat. 480, 494.