Amicus Curiae Brief — Ricci v. Chicago Mercantile Exchange

Btatute iat

‘Interest of the United States.

© Introduction and summary 7 5

* I. The doctrine of primary jurisdiction is ap-

3 plied in an antitrust case involving a regu-

lated industry only if the regulatory

5 ee 8

B. The application of the doctrine in anti-

clare eacasena 14

The primary jurisdiction doctrine is in-

applicable in thiscase. = 20

create a pervasive regulatory scheme

and does not provide for administra-

tive authority to prohibit conduct which

violates antitrust policies or to immun-

ize such conduct from the operation

of the antitrust laws. 20

Argument—Continued Page

B. No need for agency expertise has

been shown here and resolution of the

issues in this case by the district court

will not interfere with the regulatory

scheme 26

Conclusion 28

CITATIONS

Cases:

California v. Federal Power Commission,

369 U.S. 482 14

Carey v. Westinghouse Electric Corp., 375

U.S. 261 12

Carnation Co. v. Pacific Westbound Con-

ference, 388 U.S. 213 10, 17, 18

Carter v. American Telephone & Tele-

graph Co., 865 F.2d 486 23

Chicago Board of Trade v. Olsen, 262 U.S.

1 21

Far East Conference v. United States, 342

U.S. 570 9-10, 11

Federal Maritime Board v. Isbrandsten

Co., 356 U.S, 481 10

J. I. Case Co. v. Borak, 377 U.S. 426 _____ 12

Keogh v. Chicago & N.W. Ry., 260 U.S.

156 22

Local Union No. 189 v. Jewel Tea Co.,

381 U.S. 676 12, 13

Northern Natural Gas Co. v. Federal

Power Commission, 399 F.2d 953______ 19

Pan American World Airways v. United

States, 371 U.S, 296 _______10, 14, 16, 20, 22, 28

Cases—Continued Page

Port of Boston Marine Terminal Ass’n v.

Rederiaktiebolaget Transatlantic, 400

US 9, 11

Silver v. New York Stock Exchange, 373

tt 13,17

Smith v. Evening News Association, 371

GB 0B 12

Texas & Pacific R. Co. v. Abilene Cotton

Oil Co, 204U.S. 426. 6, 11

Thill Securities Corp. v. New York Stock

Exchange, 438 F. 24 264, certiorari de-

nied, 401US.994..0 19

United States v. Board of Trade of City

of Chicago (N.D. Ill., No. 71 C 2875) _ 3,19

United States v. Borden, Co., 347 U.S. 514.

United States vy. Philadelphia National

Bank, 374 U.S. 321. 11, 14, 15, 16, 17, 18

United States vy. Radio Corporation of

Oe ON Pat ., 11.33

United States Navigation Co. vy. Cunard

Steamship Co., 284 U.S. ij, Spans 14, 22, 23

Vaca v. Sipes, 386 iS ; Seen 12

Statutes and regulations:

Bank Merger Act of 1960,.74 Stat. 129,

12 U.S.C. (1964 ed.) 1828 16, 18

Bank Merger Act of 1966, 80 Stat. Ae

OOS OMB is cr 18

Civil Aeronautics Act of 1938, as amend-

ed, 49 U.S.C. 1301 e¢ sg, 16, 23

Clayton Act, Section "28 USS 1-— 15, 18

IV

Statutes and Regulations—Continued

Commodity Exchange Act, as amended, 7

U.S.C. 1, et seg. : ra

7 U.S.C. 2

7 USC. 5

7 U.S.C. 6b, 6c.

7 U.S.C. 6d, 6f, 6g

7 US.C. 7

7 U.S.C. 7a(8)

7 US.C. 8

7 U.S.C. 13¢(b).

Federal Communications Act, 47 U.S.C.

151 et seq.

Interstate Commerce Act, as amended:

49 U.S.C. 1(18)

49 U.S.C. 2

49 U.S.C. 15a

49 U.S.C. 306

Natural Gas Act, as amended, 15 U.S.C.

717 et. seq. os

Vv

Statutes and Regulations—Continued

Congressional :

H.R. 11788, 89th Cong., 1st Sess., Section

oi ae

tions, To Amend the Commodity Ex-

change Act, House Committee on Agri-

culture, 89th Cong., 2d Sess,

S. Rep. No. 947, 90th Cong., 2d Sess

Miscellaneous:

- Jaffe, Primary Jurisdiction Reconsidered,

102 U. Pa. L.Rev. 577 (1954) _

Jaffe, Primary Jurisdiction, 77 Harv. L.

Rule 307

24

13-14

Ju the Supreme Court of the United Staten

OCTOBER TERM, 1971

No. 71-858

THOMAS RICCI, PETITIONER

Vv.

CHICAGO MERCANTILE EXCHANGE, ET AL.

ON WRIT OF CERTIORARI TO THE UNITED STATES

COURT OF APPEALS FOR THE SEVENTH CIRCUIT

BRIEF FOR THE UNITED STATES AS AMICUS CURIAE

OPINIONS BELOW

The opinion of the court of appeals (App. 32-45)

is reported at 447 F.2d 713. The district court ren-

dered no opinion in dismissing the complaint (App. -

22). :

JURISDICTION

The judgment of the court of appeals was entered

on June 17, 1971, and a timely petition for rehear-

ing was denied on October 5, 1971 (App. 58). The

(1)

a

2

petition for a writ of certiorari was filed on January

3, 1972, and was granted on February 28, 1972 (405

U.S. 953). The jurisdiction of this Court rests on

28 U.S.C. 1254(1).

QUESTION PRESENTED

Whether, in a private treble-damage antitrust ac-

tion alleging that a commodity exchange and others

violated Section 1 of the Sherman Act, 15 U.S.C. 1,

the doctrine of primary jurisdiction must be applied

to permit the Secretary of Agriculture or the Com-

modity Exchange Commission to consider whether

the defendants violated the Commodity Exchange

Act or the rules of the defendant commodity ex-

change.

STATUTE INVOLVED

The pertinent provisions of the Commodity Ex-

change Act, 7 U.S.C. 1, et 8eq., are set forth in the

addendum t@, petitioner's brief on the merits.

INTEREST OF THE UNITED STATES

This case raises an important question concerning

the proper scope of the doctrine of primary juris-

diction in antitrust cases. The United States is in-

terested in maintaining the proper division of re-

sponsibility between regulatory agencies and the fed-

eral courts in the antitrust area, since an improper

application of the primary jurisdiction doctrine could

seriously impede the enforcement of the fundamental

national economic policy which is expressed in federal

ing business and ‘which are likely to be affected by

the decision in this case.

STATEMENT

This private treble-damage antitrust suit was

brought by petitioner against respondents—the Chi-

cago Mercantile Exchange (a commodity exchange

under the Commodity Exchange Act, 7 U.S.C. 1 et

8eq.), three of its Officers, Siegel Trading Co., 2 mem-

ber firm of the Exchange, and the president of Siegel

Trading—to recover damages allegedly suffered by

petitioner from cancellation of his membership and

trading privileges in the Exchange. The complaint

alleged that respondents had violated Section 1 of

the Sherman Act, 15 U.S.C. 1, by conspiring to pre-

vent petitioner from maintaining his membership in

the Exchange, and had transferred his membership

in violation of the rules of the Exchange ( App. 6-

20)."

* United States v. Board of Trade of City of Chicago (N.D.

Ill., No. 71 C 2875). ;

ph 10 of the complaint sets forth the rules involved

. here (App. 8-10).

4

Specifically, the complaint alleged that Siegel in-

duced the Exchange to transfer petitioner’s member-

ship to a third party by use of a blank authorization

to transfer membership that petitioner had executed

in October 1967, but subsequently had revoked (App.

13). The transfer allegedly took place without no-

tice and hearing, and without consideration of peti-

tioner’s claim, known to the Exchange, that a debt

he owed to Siegel was more than offset by a debt

owed by Siegel to petitioner. As a result, petitioner

alleged, he was unable to conduct his business until

he purchased a new membership in the Exchange

(App. 11-13).°

The district court dismissed the complaint without

stating any reasons (App. 22). The court of appeals

treated the dismissal as based on failure to state a

cause of action under Section 1 of the Sherman Act

and reversed.* The court first held that “absent any

justification from the Exchange’s status as a board

of trade and a designated ‘contract market,’ the com-

plaint is sufficient to allege a group boycott, a per se

® The complaint also alleged tortious interference with ad-

vantageous commercial relationships, in violation of Illinois

law (App. 16-20).

* Although the district court had ordered certain depositions

taken prior to ruling on respondents’ motion to dismiss, the

court of appeals found that the district court had not consid-

ered the deposition testimony (reproduced in part at App. 23-

$1) in dismissing the complaint (App. 34-35). Accordingly,

for the purposes of reviewing the dismissal, the court of ap-

peals also disregarded the testimony and took the factual

allegations in the complaint as true (App. 35).

5

violation of section 1 of the Sherman Act” (Pet. App.

10a).

The court held, however, with one dissent, that

under the doctrine of primary jurisdiction the anti-

trust proceedings should be stay“d until the Commod-

ity Exchange Commission or the Secretary of Agri-

culture passed on the validity of the defendants’

conduct under the rules of the Exchange and the

Commodity Exchange Act, 7 U.S.C. 1, et seg. (App.

37-45). The court ruled that the facts alleged in the

complaint in support of the antitrust charge also

constituted violations of Exchange rules which the

Commission or the Secretary could investigate (App.

41). :

The dissent noted that although the Commission

and the Secretary might be able to determine whether

there had been violations of Exchange rules, they

had no jurisdiction to decide antitrust issues. The

dissent also stated that the district court was just

a8 competent as either the Commission or the Secre-

tary to resolve the factual questions involved in the

antitrust complaint (App. 45-52).

ARGUMENT

Introduction and Summary

In ordering the district court to stay its considera-

tion of petitioner’s antitrust suit until the Secretary

of Agriculture or the Commodity Exchange Commis-

sion considers the challenged conduct underlying the

suit, the court of appeals concluded that at least some

of the issues raised were within the primary juris-

diction of the Secretary or the Commission. In our

view, this conclusion is unwarranted and is based on

a faulty and incomplete analysis of the factors which

must be considered in determining whether the pri-

mary jurisdiction of an agency should be invoked.

We begin in Part I with.a general discussion of

the doctrine of primary jurisdiction—its effect when

invoked, its development over the years and its spe-

cifie application in antitrust cases. The fundamental

purpose of the doctrine is to allocate between courts

and agencies the authority to determine various fac-

tual and legal issues. For the most part, the doctrine

does not merely determine which forum should con-

sider a given issue in the first instance, but actually

allocates the decisional authority with respect to that

issue.

The doctrine of primary jurisdiction has its roots

in railroad rate cases in which this Court ruled that

the Interstate Commerce Commission alone was com-

petent to pass on the reasonableness of rates. See

Texas & Pacific R. Co. v. Abilene Cotton Oil Co., 204

U.S. 426. The early cases cited the need for uni-

formity as the basis for the doctrine, but later cases

stressed the need for agency expertise in the resolu-

tion of certain issues. Further refinement revealed

that expertise, while an important factor, was in-

sufficient standing alone to warrant invocation of the

doctrine. With respect to many issues within an

agency’s jurisdiction, for example, the courts might

be equally competent and specifically authorized to

act. And while an agency may possess relevant ex-

7

pertise, the absence of an agency procedure to con-

sider a controversy would be determinative. Thus,

application of the doctrine of primary jurisdiction

requires an examination of the particular regulatory

scheme involved and a determination whether the

exercise of normal judicial jurisdiction would inter-

fere substantially with the administration of the

scheme. -

In antitrust cases involving the conflicting juris-

dictional claims of courts and regulatory agencies,

this Court has focused sharply on the character of

the regulatory scheme. From a series of cases, the

test has emerged that only where a regulatory scheme

is*pervasive” and empowers an agency either to

grant effective relief against antitrust violations or

to immunize such conduct from the operation of the

antitrust laws, should the court in which the suit

was instituted defer to the jurisdiction of the agency.

In Part II of our argument, we apply the general

principles developed in Part I to this case. First, the

Commodity Exchange Act does not embody a perva-

sive regulatory scheme, but is concerned solely with

the prevention of manipulation and unsound practices

in commodities trading. The limited nature of the

regulation is particularly apparent when the Act is

compared with other regulatory statutes where pri-

mary jurisdiction has been applied in antitrust cases,

Moreover, under the Act, neither the Secretary nor

the Commission has broad or relevant powers to

remedy antitrust violations or authority to immunize

any practices from the operation of the antitrust laws.

8

In addition, other criteria for invoking the pri-

mary jurisdiction of an agency are not satisfied here.

No need for agency expertise has been shown, since

the issues raised concerning the validity of the trans-

fer of petitioner’s membership in the Chicago Mer-

cantile Exchange are issues the district court is com-

petent to consider. There has been no showing that

judicial resolution of the issues will interfere with

the administration of the Commodity Exchange Act.

Finally it is doubtful whether a procedure exists

under the Commodity Exchange Act whereby the

Secretary of Agriculture or the Commodity Exchange

Commission could consider any of the contentions

raised by petitioner in his antitrust suit.

I. THE DOCTRINE OF PRIMARY JURISDICTION IS

APPLIED IN AN ANTITRUST CASE INVOLVING

A REGULATED INDUSTRY ONLY IF THE REGU-

LATORY SCHEME IS PERVASIVE AND THE REG-

ULATORY AGENCY HAS POWER TO GRANT

EFFECTIVE RELIEF AGAINST THE ALLEGED

ANTITRUST VIOLATION OR TO IMMUNIZE THE

CONDUCT FROM THE OPERATION OF THE ANTI-

TRUST LAWS

A. The Meaning and Application of the Doctrine

1. The doctrine of primary jurisdiction has been

developed over the years in an attempt to allocate be-

tween courts ang agencies, when their jurisdictions

overlap, the authority to determine various factual

and legal issues. While recognizing the legitimate role

of the courts in resolving basic commercial disputes

and in enforcing the antitrust laws, the doctrine also

seeks to prevent unnecessary interference with the op-

eration of regulatory schemes enacted by Congress to

be administered by regulatory agencies. Although

sometimes described as merely requiring “prelimi-

when applied, more usually operates to give an agen-

cy the conclusive authority, subject only to normal

judicial review, to determine at least some of the is-

sues in a proceeding. As this Court has noted, appli-

cation of the doctrine “does ‘more than prescribe the

mere procedural time table of the lawsuit. It is a

doctrine allocating the law-making power over cer-

tain aspects’ of commercial relations, ‘It transfers

from court to agency the power to determine’ some

of the incidents of such relations.” United States v.

Western Pacific R. Co., 352 U.S. 59, 65, quoting

Jaffe, Primary Jurisdiction Reconsidered, 102 U. Pa.

L. Rev. 577, 583-584 (1954),

Normally, when an agency’s primary jurisdiction

is properly invoked prior to an agency determination,

the court in which the case was instituted should stay

the proceeding until the agency has acted. See, e.9.,

Port of Boston Marine Terminal Ass'n y. Rederiaktie-

bolaget Transatlantic, 400 U.S. 62.5 When the agen-

Rd

10

cy has power to determine all the issues in the pro-,

ceeding, however, the court should dismiss the case

since upon conclusion of the agency’s determination,

there would be nothing further for the court to de

cide. See, ¢.g., Pan American Airways, Inc. v. United

States, 371 U.S. 296. In such cases, the agency may

be said to have exclusive rather than primary juris-

diction.

Although the typical primary. jurisdiction case in-

volves a deferral of judicial action for an agency de-

termination, the primary jurisdiction doctrine may

be invoked after, as well as before, the conclusion

of an agency proceeding. In such cases, the party

invoking the doctrine may contend that the prior

agency decision has already determined some of the

issues in the judicial proceeding and that the court is

required to follow that determination. See, e.9., United

States v. Radio Corporation of America, 358 U.S. 334.

In short, the usual effect of deferring to an agency’s

primary jurisdiction is to deprive the court of au-

thority to make a de novo determination of the issues

referred and to channel judicial consideration of the

issues to appellate review of the agency’ decision—

decided not to immunize the conduct, the court was required

to dismiss the suit. A stay was deemed unnecessary in these

circumstances because the injunction suit could easily be re-

instituted if appropriate. 342 U.S. at 576-577. See also Car-

nation Co. V. Pacific Westbound Conference, 383 U.S. 218,

222-223. This Court later concluded, in reviewing a subse-

quent Commission decision through normal channels of ju-

dicia] review, that the Federa] Maritime Commission did not

have power to immunize the challenged activities. Federal

Maritime Board v. Isbrandsten Co., 356 U.S. 481.

1l

generally by a different court. See Port of Boston,

supra; United States vy. Philadelphia National Bank,

374 U.S. 321, 353-354, In part because of this signi-

ficant effect on a court’s power, the doctrine of pri-

Rather, a court must determine “whether the reasons

whether the purposes it Serves will be aided by its

application in the particular litigation.” United

States v. Western Pacific R. Co., supra, 352 U.S. at

ing that the rates charged by the railroad were un-

reasonable. This Court held that the action was

barred since Congress had given the Interstate Com-

merce Commission the exclusive authority to deter-

mine the reasonableness of rates; judicial interfer-

ence would destroy the uniformity in rates envisioned

by Congress,

In subsequent cases, the Court -has emphasized the

need to obtain the expert knowledge of the agency

in resolving “issues of fact not within the conven-

tional experience of judges” rather than the need for

uniformity as a reason for applying the doctrine, Far

East Conference v. United States, 342 U.S. 570, 574;

United States v. Western Pacific R. Co., supra, 352

12

U.S. at 64-65. In Western Pacific, for example, the

Court held that where words in a tariff are used in a

technical sense and their construction requires a

weighing of conflicting evidence and a familiarity

with transportation policies, it is for the Interstate

Commerce Commission, rather than the courts, to

construe the words. 352 U.S. at 65-66.

A determination that an agency has expertise with

respect to a given issue, however, does not necessarily

mean that the agency has primary jurisdiction over

that issue. The courts may be equally competent to

resolve it. See e.g., Local Union No. 189 v. Jewel Tea

Co., 381 U.S. 676, 684-687 (opinion of Mr. Justice

White). In some cases, Congress may have created a

statutory right of action under which the courts have

authority to decide certain matters without prior re-

sort to an agency, notwithstanding the fact that the

agency may itself have parallel jurisdiction over and

special expertise concerning the subject. Thus, the

federal district courts have jurisdiction under Sec-

tion 301 of the Labor-Management Relations Act

over suits by and against labor organizations relat-

ing to conduct which also is subject to the jurisdic-

tion of the National Labor Relations Board because

it is an unfair labor practice. See, e.g., Vaca v. Sipes,

386 U.S. 171, 176-188; Carey v. Westinghouse Elec-

tric Corp., 375 U.S. 261; Smith v. Evening News As-

sociation, 371 U.S. 195; cf. J. Case Co, v. Borak,

377 U.S. 426.

Application of the doctrine of primary jurisdiction

is inappropriate, regardless of agency expertise, where

13

no agency procedure exists for resolving a given issue

before a court. Thus, in Silver y. New York Stock

Exchange, 373 U.S. 341, a case involving a challenge

14

of agency regulation which tends to choke out the

normal jurisdiction of the courts.”

B. The Application of the Doctrine in Antitrust Cases

In antitrust cases involving conflicting jurisdic-

tional claims between courts and regulatory agencies,

this Court has held that, in view of the fundamental

nature of the antitrust laws and the role of the courts

in enforcing them, a court should defer to an agency

only if the agency has “pervasive” regulatory author-

ity over the industry involved, including the power

either to grant effective relief against conduct which

violates basic antitrust policies or to immunize such

conduct from the operation of the antitrust laws.

Where there is such “pervasive” regulatory authority,

the Court has concluded that particular remedies of

the antitrust laws have been superseded by the regu-

latory statute in question. See United States Naviga-

tion Co. v. Cunard Steamship Co., 284 U.S. 474, 485;

Pan American World Airways v. United States, 371

U.S. 296, 304-305.

In three leading cases involving the broadcasting,

natural gas and banking industries, however, regula-

tory agencies have been held not to have primary ju-

risdiction to determine antitrust issues because the re-

spective industries were not subject to “pervasive”

regulation. United States v. Radio Corporation of

America, 358 U.S. 384, 350; California v. Federal

Power Commission, 369 U.S. 482, 485; United States

v. Philadelphia National Bank, 374 U.S. 321, 352.

In Radio Corporation of America, the Court held

that the prior approval by the Federal Communica-

16

tions Commission of the exchange of television licenses

did not bar an antitrust action alleging that the li-

to restrain trade. Finding that in enacting the Fed-

eral Communications Act, 47 U.S.C, 151 ef 8eq., Con-

gress had not abandoned the principle of free compe-

tition in the broadcasting industry and that the scope

of Commission approval of the exchange of licenses

was limited to a determination whether the exchange

furthered the “public interest, convenience, and nec-

In California y. Federal Power Commission, this

Court held that the Federal Power Commission should

stay proceedings to approve a merger under the Na-

tural Gas Act, 15 U.S.C. 717 et 8eq., until the district

court determined the legality of the merger under

Section 7 of the Clayton Act. The Court found that

the antitrust suit was pending could have an unwar-

ranted influence on the suit. 369 U.S. at 485-486, 489.

Finally, in Philadelphia National Bank, the Court

rejected the contention that a judicial proceeding chal-

lenging a bank merger under Section 7 of the Clayton

Act could not be maintained because the prior ap-

proval of the merger by the Controller of the Cur-

rency constituted an exercise of the Controller’s pri-

Mary jurisdiction to determine the antitrust aspects

. of the merger,

16

In contrast, the Court concluded in Pan American

World Airways y. United States, supra, that the

Civil Aeronautics Act (now the Federal Aviation Act,

49 U.S.C, 1301 et seq.) gave the Civil Aeronautics

' Board basic and comprehensive regulatory authority

over the carriers’ limitations of air routes and divi-

sions of territories that were the basis of the antitrust

suit, including the power to prohibit unfair methods

of competition and to approve those very practices,

Accordingly, the Board had primary jurisdiction to

consider the challenged conduct and the civil suit was

ordered dismissed. 371 U.S. at 313. The Court did

not hold, however, that the antitrust laws were en-

tirely displaced with respect to the airline industry:

it stated that the enforcement of criminal antitrust

laws remained unaffected by the Civil Aeronautics

Act and that civil antitrust violations might arise

outside the scope of the Act and the Board’s primary

jurisdiction. 371 U.S. at 305.

Since the scope of the Board’s primary jurisdiction

to consider anticompetitive conduct was limited in the

Pan American decision to conduct the Board had

power to remedy or to immunize, it follows that stat-

utory authority to remedy or to immunize antitrust

violations is an essential element of primary jurisdic-

tion in the antitrust area. This Court so interpreted

Pan American in its subsequent decision in Philadel-

phia National Bank, supra. In holding that the Bank

Merger Act, unlike the Civil Aeronautics Act, does not

confer primary jurisdiction upon the regulatory agen-

cy, the Court observed (374 U.S. at 351):

17

* * * In Pan American, the Court held that

because the Civil Aeronautics Board had been

given broad powers to enforce the competitive

standard clearly delineated by the Civil Aero-

nautics Act, and to immunize a variety of trans-

actions from the operation of the antitrust laws,

the Sherman ‘Act could not be applied to facts

composing the precise ingredients of a case sub-

ject to the Board’s broad regulatory and reme-

dial powers; in contrast, the banking agencies

have authority neither to enforce the antitrust

laws against mergers, * * * nor to grant im-

munity from those laws.*

The Court’s reluctance to apply primary jurisdic-

tion in antitrust cases unless clearly mandated by the

regulatory statute involved reflects the fundamental

nature of the antitrust laws. As noted in Carnation

Co. v. Pacific Westbound Conference, 383 U.S. 213,

218:

We have long recognized that the antitrust laws

represent a fundamental national economic pol-

* An exemption from the antitrust laws may be implied from

a statutory scheme even though the agency involved has no

jurisdiction to consider the challenged conduct. In such a

case, of course, the exemption follows not because an agency

has primary jurisdiction, but because Congress in enacting -

the statute intended to remove the challenged conduct from

the operation of the antitrust laws.- In Silver v. New York

Stock Exchange, supra, for example, where it was acknow]l-

edged that the Securities and Exchange Commission had no

authority to consider certain challenged conduct (see p.

18, supra), the Court held that “[rJepeal [of the anti-

trust laws] is to be regarded as implied only if necessary to

make the Securities Exchange Act work, and even then only

to the minimum extent necessary.” 373 U.S. at 357. The recon-

ciliation of any conflict between a regulatory scheme and the

antitrust laws is a judicial function.

18

icy and have therefore concluded that we cannot

lightly assume that the enactment of a special

regulatory scheme for particular aspects of an

industry was intended to render the more gen-

eral provisions of the antitrust laws wholly in-

applicable to that industry. * * *

Although the existence of primary jurisdiction in

a regulatory agency does not necessarily involve a

repeal of substantive antitrust standards, it limits

the judicial remedies which Congress provided to en-

force that fundamental national economic policy.

This Court avoided this dilemma in the Philadelphia

National Bank case by holding that under the Clay-

ton Act and the Bank Merger Act of 1960 the bank-

ing agencies under the latter and the district court

under the former are required independently to con-

sider the anticompetitive effects of the merger.’

Similarly, in Carnation, the Court held that the ex-

istence under the Shipping Act of a reparations rem-

edy for overcharges should not preclude the injured

party from pursuing its treble damage remedy under

the antitrust laws for the same overcharges. In rul-

ing that alternate or even duplicate remedies existed

for the same conduct, the Court was simply imple-

menting the congressional purpose to further the fun-

"Congress subsequently expressly incorporated such dual

consideration of anticompetitive effects into the Bank Merger

Act of 1966, 12 U.S.C. 1828, which requires the agency to

determine anticompetitive effects of bank mergers and pro-

vides for a subsequent de novo judicial determination of such

anticompetitive effects under the identical standard.

19

damental national economic policy of competition by

maximizing its enforcement,®

Finally, the fact that a court should not defer to

a regulatory agency in an antitrust case in the ab-

sence of a pervasive regulatory scheme and agency

power to remedy or immunize the challenged conduct

does not foreclose the court from obtaining the bene-

fit of agency expertise. The court may request the

agency to participate as amicus curiae or as a party.

See Thill Securities Corp. v. New York Stock Ex-

change, 433 F. 2d 264 (C.A., 7), certiorari denied,

401 U.S. 994. Agencies also frequently themselves

take the initiative in so participating. A district

court has also requested, upon a motion of the United

States, a report from the Administrator of the Com-

modity Exchange Authority for use in a pending

antitrust proceeding involving the legality of com-

mission rate fixing by a commodity exchange. United

States v. Board of Trade of the City of Chicago

(N.D. Ill, No. 71 C 2875).

* Court decisions requiring regulatory agencies to consider

anticompetitive effects in administering statutes requiring

regulatory approval of particular transactions under the

“theory of complementary regulation” provide another ex-

ample of maximizing enforcement through dual remedies.

See Northern Natural Gas Co. V. Federal Power Commission,

899 F.2d 953 (C.A.D.C.), and cases cited therein. As the

court of appeals noted in Northern Natural Gas, the existence

of a duty to consider anticompetitive effects does not mean

that “agencies have jurisdiction to determine violations of

the antitrust laws.” 399 F.2d at 960. Cf. United States v.

Radio Corporation of America, supra, 358 U.S. at 351-352.

The existence of a duty to consider anticompetitive effects

under the theory of complementary regulation is not a broad

power to remedy antitrust violations which would satisfy the

requirements for the invocation of the primary jurisdiction

. doctrine in an antitrust case.

20

Il. THE PRIMARY JURISDICTION DOCTRINE IS

INAPPLICABLE IN THIS CASE

A. The Commodity Exchange Act Does Not Create

a Pervasive Regulatory Scheme and Does Not Pro-

vide for Administrative Authority to Prohibit Con-

duct Which Violates Antitrust Policies or to Im-

munize Such Conduct from the Operation of the

Antitrust Laws

The Commodity Exchange Act does not embody a

“pervasive” regulatory scheme within the meaning

of this Court’s decisions. The basic purposes of the

Act are to protect commerce and the public from the

adverse effects of sudden or unreasonable fluctua-

tions in the price of commodities sold on boards of

trade; to guarantee fair practices and honest dealings

on such markets; and to promote the orderly conduct

of future transactions on such markets.” The Con-

* The court of appeals conceded that the overall regulatory

scheme embodied in the Commodity Exchange Act was less

pervasive than the scheme involved in the Pan American

case (see p. 16, supra), but concluded that the specific

allegations in petitioner’s complaint related to powers of the

Secretary and the Commission which -are basic to the reg-

ulatory scheme (App. 43-44 n. 15). While we do not believe

that this is so (see pp. 26-27 infra), the court in any event

did not find that such powers include the power to remedy

antitrust violations. It held only that the Secretary and the

Commission could consider antitrust policies—but see p.

19 n. 8 supra—and expressly declined to determine whether

any administrative authority existed to immunize conduct

from the operation of the antitrust laws (App. 42, 45 n. 18).

% Section 3 of the Act, 7 U.S.C. 5, notes the large volume and

economic importance of commodity transactions and sets

forth the findings of Congress that “the transactions ‘and

prices of commodity on such boards of trade are susceptible

to speculation, manipulation, and control, and sudden or un-

21

gress which enacted the Act, originally called the

Grain Futures Act, was concerned with preventing

manipulations of the prices and the “cornering” of

the supply of agricultural commodities as had fre-

quently occurred in the late nineteenth century. See

Chicago Board of Trade v. Olsen, 262 U.S. 1.

The major features of the Act reveal its limited

scope and purpose to prevent manipulation and un-

sound practices in futures transactions. A board of

trade must register with the Secretary of Agricul-

ture as a “contract market” in order to conduct fu-

tures trading, must file required reports with the

Secretary, and must provide rules “for the preven-

tion of manipulation of prices and the cornering of

any commodity by the dealers or operators” on the

market. 7 U.S.C. 7. The Secretary has authority to

disapprove a rule of a contract market relating to

terms and conditions of contracts of sale or other

trading requirements if the rule violates the Com-

modity Exchange Act or any rule, regulation or order

promulgated thereunder. 7 U.S.C. 12a. The Act spe-

cifically prohibits certain types of trades which are

considered adverse to the public interest. 7 U.S.C.

reasonable fluctuations in the prices thereof frequently occur

a8 @ result of such speculation, manipulation, or control, which

are detrimental to the producer or the consumer and the per-

sons handling commodity and products and byproducts-there-

of in interstate commerce, and such fluctuations in prices are

an obstruction to and a burden upon interstate commerce in

commodity and the products and byproducts thereof and ren-

der regulation imperative for the protection of such com-

merce and the national public interest therein.”

22

6b, 6c. In addition, the Act requires futures com-

mission merchants and floor brokers to register with

the Secretary and to maintain minimum capital re-

quirements and authorizes the Secretary to suspend

or revoke the registration of a futures commission

merchant or broker who violates the Act or any rules

of the Secretary. 7 U.S.C. 6d, 6f, 6g.

The Act also creates the Commodity Exchange Com-

mission, which consists of the Secretary of Agricul-

ture, the Secretary of Commerce and the Attorney.

General, or their representatives. 7 U.S.C. 2. The

Commission is authorized to suspend the designation

of a board of trade as a contract market for a period

not exceeding six months for violations of the Act or

the rules of the Secretary or failure to enforce “its

rules of government made a condition of its designa-

tion,” 7 U.S.C. 8, and to issue cease-and-desist orders

to remedy such violations. 7 U.S.C. 13a.

The limited regulation of the commodities industry

to prevent price manipulation and cornering and to

assure financial responsibility of commission. mer-

chants and brokers is in marked contrast to the “per-

vasive character” of the economic regulation in in-

dustries in which the primary jurisdiction doctrine

has been applied in antitrust cases. See United

States Navigation Co. v. Cunard Steamship Co.,

supra; Keogh v. Chicago & N.W. Ry., 260 U.S. 156;

Pan American World Airways v. United States;

supra. The Shipping aw the Interstate Commerce

Act, and the Civil, Ae nautics Act (which were in-

\

|

+t

28

volved, respectively, in those cases) all evidence a

congressional intent either to limit or restrict com-

petition in particular circumstances under agency

supervision or to place definite antitrust powers in

the hands of the regulatory agency. Agency author-

ity to restrict competition is expressly provided in

the statutes and is not inferred from a general ref-

erence to the “purposes” of the statutes.

For example, the Interstate Commerce Act gives

the Interstate Commerce Commission power to set

“maximum and minimum” rates for interstate rail,

water and. motor vehicle transportation in conform-

ity with detailed standards. 49 U.S.C. 13(4), 15(1),

15a, 316(c), 318. Rebates are expressly prohibited

(49 U.S.C. 2). The Commission also controls entry

into the industry and extensions and abandonments

of service (49 U.S.C. 1(18), 306), and must approve

mergers and consolidations of carriers (49 U.S.C. 5,

312(b)). Transactions approved or authorized by the

Commission are expressly exempted from the anti-

trust laws (49 U.S.C. 5(11), 5b).

Act) ; Carter v. American Telephone & Telegraph Co., 865

carriers). Of course, the existence of pervasive regulatory

| in industries covered by. such

acts does not mean that primary jurisdiction sho d be in-

voked in all antitrust cases involving those industri

b |

vd

The contrasting lack of pervasive regulation in the

Commodity Exchange Act is apparent. Neither the

Secretary of Agriculture nor the Commodity Exchange

Commission can limit entry of commodity brokerage

firms into the commodities trading business, or has

authority over expansions, mergers or withdrawals

of firms from the business. The provision of particu-

lar services cannot be compelled. Moreover, new com-

modity exchanges may be organized and may with-

draw from the business without regard to the eco-

nomic consequences of these actions. Commission

rates on exchanges are not subject to administrative

approval and have never been regulated. Finally,

there is no statutory immunity from the antitrust

laws for actions of an exchange or its members.

Moreover, neither the Secretary nor the Commis-

sion is authorized to grant effective relief against

conduct which violates antitrust policies, except to

the extent of their specific regulatory authority to

prevent manipulations and cornerings in the commodi-

ties trading business which may also constitute un-

reasonable restraints of trade.” The boycott alleged

+2 Congress substantially amended the Commodity Exchange

Act in 1968. See P.L. 90-258, 82 Stat. 26 et seg. The original

version of the bill the Secretary of Agriculture proposed

would have given him authority to issue a complaint if any

person “has taken any action with the intent or having the

effect of restraining trade in connection with the sale of any

commodity, for future delivery or in interstate commerce,

under contracts made on or subject to the rules of any board

of trade * *.” H.R. 11788, 89th |Cong., Ist Sess., Section

20(a). Representatives of the commodity exchanges opposed:

this provision in een _—— See, e.g., Hearings

be ed

!

25

ir this suit, however, is not related to price manipu-

lation or cornering restraints,

Finally, the Commodity Exchange Act does not con-

suggested that the power to immunize might be im-

pled from 7 U.S.C. 13e(b). That Section, however,

merely states that neither the Secretary nor the Com-

mission is required to report “minor violations” of

the Act for prosecution when it would not be in the

pudlic interest to take such action. The provision

trading industry.

erred in invoking the primary jurisdiction doctrine

in this antitrust case.

ea

Before the Subcommittee on Domestic Marketing and Gon

sumer Relations To Amend Commodity Exchange

Houle Committee on Agricultufe, 89th Cong., 2d Sess., p. 52.

The proposed provision was not adopted.

26

B. No Need for Agency Expertise has been Shown

Here and Resolution of the Issues In this Case by

the District Court Will Not Interfere With the

Regulatory Scheme

As we have noted, primary jurisdiction is generally

applied in cases involving regulatory agencies only if

there is a need for agency expertise in resolving an

issue central to a dispute, resolution of the issue by

the courts will interfere significantly with the admin-

istration of the regulatory scheme, and an agency

procedure exists for resolving the issue. The first

two of these criteria are missing here; the existence

of the third is in doubt.

1. There has been no showing of any need for ad-

ministrative expertise to resolve the issues surround-

ing the alleged wrongful membership transfer.

Whether petitioner had revoked the blank authoriza-

tion to transfer his membership in the Exchange and

whether the transfer took place improperly without

notice or hearing and without consideration of peti-

tioner’s claim against Siegel (see p. 4, supra) are

issues well within the competence of the district

court to determine.

2. There is no indication that resolution of the is-

sues by the district court will interfere with the regu-

latory scheme embodied in the Commodity Exchange

Act. There are no provisions in the Act which spe-

cifically govern membership transfers and neither the

tary nor the Commission has adopted rules on

the subject. Moreover, it appears that no formal pro-

dings have'ever been conducted before th } Secre-

27

tary or the Commission on membership transfers,”

Thus, at most, the policing of exchange membership

practices is peripheral to the administration of the

(see 7 U.S.C. 7) is obligated to enforce its rules or

regulations which relate to “trading requirements,”

7 U.S.C. 7a(8). If an exchange fails to comply with

this or any other provision of the Act, the Secretary

or the Commodity Exchange Commission may insti-

tute enforcement proceedings.* 7 U.S.C. 8, 9, 18a.

of memberships and may not be rules relating to

“trading requirements” within the meaning of 7

" The formal proceedings through June 30, 1971, are sum-

marized in a Department of Agriculture publication entitled

legal status ‘in any proceedings which might be instituted,

unless permitted to intervene.

Ai

TE

28

U.S.C. 7a(8).” In that event, neither the Secretary

nor the Commission would have any authority over

their enforcement.

CONCLUSION

For the foregoing reasons, the judgment of the

court of appeals should be reversed insofar as it di-

rects ‘the district court “to stay the proceedings until

such ‘time as the Commodity Exchange Commission

and/or the Secretary of Agriculture may act upon

it” (App. 45).

Respectfully submitted.

ERWIN N. GRISWOLD,

Solicitor General.

WALKER B. CoMEGys,

Acting Assistant Attorney General.

SAMUEL HUNTINGTON,

Assistant to the Solicitor General.

CaRL D. LAWSON,

SEYMouR H. DussMAN,

Attorneys.

JUNE 1972.

4*7 U.S.C. 7a(8) was added to the Act in 1968 together

with a provision authorizing the Secretary to disapprove cer-

tain exchange rules (see 7 U.S.C. 12a(7)). In commenting

en the additions, the Senate committee report states: “These

\ provisions do not apply to bylaws, rules, regulations and

resoluitions, such as those covering the organization and gov-

‘erament of the exchange, which are unrelated to contract |

(had pe conditions, trading ts and financial re-,

_ \quirements.” S. Rep. No, 947, 90th Cohg., 2d\Sess., p. 9. | |

it ©. S. GOVERNMENT PRINTING Orricz; 1972 | 467877 908

EES