Brief for the United States — Federal Maritime Comm'n v. Seatrain Lines, Inc.

P

—— before the Federal Maritime

7 N 1 A

3: The proceedings in the court of appeals.

— —:. ... iy a a

a e antitrust laws, certain agreements

hg water carriers does not cover the

8 by one carrier of the assets of

—— and — leg-

ets __islation OR CRE Pip Se, Sites "SE Reet pe PR

CITATIONS

ited: States Lines, Ine. & Sea-Land Serv-

io , Ine, F. M. C. Nos. 69-56 and 70-51,

i 1 10733. =

Nos. 9827 and 9827-1 Between

ar ace Cerone |

Ona on

Teged. Rebai e Goi Tit 1 3

F. M. C. 248. * ——— — — — ** 33

Armement Deppe, 8. A. v. "United States, 399

F. 2d 794, certiorari denied, 393 U.S. 1094. 33

- California v. Federal Power Commission, 360

US. 482 rr „55 28, 36

. Carnation Co, v. Pacific Conjerens, 383 US.

BIB achat areas T 24, 36

Colorado Intersta: Gas Co. v. ‘Federal Power

Commnitnon, $24 Us. —— ois - 13

val. Maritime. Board v,..Isbrandtsen. Co.,

85 5, ae 12, 14, 15, 23, 29

“Federal. " Maritime, Commission v. ä

a Amerika Linien, 390 VS. 8 wer de di .

Federal. Power Commission v. Panhandle Easit-

en Pipe Lans Co,, 387 U.S. 408. 13

Latin Ameries ning ot 33 Con-

5 i i, cena 2

30, 31

e a ORE ee 27

Me * 1 Pte Far.

East Line, 11 F. M. C. 53, reversed sub nom.

5 n Association v. United States,

7 362 US. 88 RCS ph ot hiligs gratis ot is ees Sa mw 28, 35

our Tell Power Co. v. United. States, No. |

71901, on Word Ai 2, . ee 35, 36

*

*

+s

‘Statutes:

m

tinued

Silber v. Neu York Stock U 373 US. eels

B a 35

United States v. Borden Co., 308 UB . 36

United States v. “McKesson & Nobbens, 351

. 205. R 35

374 US. 321. cc 00 25 35, 38

United States v. R. J. Reynolds Tobacco Com-.

pany; 325 F. Supp. 656, certiorari denied

March 5, N Fhe hh ce af ee ee 12,

* 13, 16, 17, 19, 22, 23, 32, 33, 34, 37, 38

United States v. Trans- Missouri Freight Asso-

ciation, 166 U.8. 290. V 35

—— v. Federal Matisime Commis-

sion, 390 U.S. 261. ==2-2-----2- 10, 14, 15, 34

28

Stat.-1001, now 49 U.S.C. 1382 1 26, 27

27

24

566; 49 U.S.C. 5. sisi 21, 22, 23,

Shipping Act of 1916, wis 728, et seq___ 11

Shipping Act of 1916, 9

Ses. 14, 46 U.S.C. r —＋ 12, 29

, 30

30

Ser. 15, 46 U.S.C. 814 T 2, 6,

5 . 8, 10, 11, 12, 13, 23, 24, 25, 27, 28, 20,

si 30, 31, 32, 88, 34, 35, 36, 37, 38

Sec. 17, 46 U.S.C. 816 ee. 36

Rec. 18, 40 U.S.C, 817 36

26

48 Stat. og CRB Da . eee

fai Be Soe Raided — „

J eK CIE. cs noes buen 1

Transportation Act of 1920, Sec. 407, 41 Stat.

a — 5 25, 26 ;

5 4 * >

2 7

a ‘Bap. No. 1775, 81st Cong, 2d Sess... 3

8. 1 ane. 15

% 5

Fortune, Directory f 500 U.S. 8 Cor-

poration and 50 Largest Banks, Retailing,

Transportation, etc. . (May 1970) 4

G22

us—Continued

Gorter, United States Shipping Policy (1956) -

Kaysen and Turner, Antitrust Policy (1959)

Marx, International Shipping Cartels (1953).

Moody, Transportation Manual (1970)

Note, The Shipping Industry Seeks a Safe

Haven: Merger Jurisdiction for the FMC, 5

Law & Pol. Int’l. Bus. 274 (1973)

wel tof

Pore te at ge

‘Octoser TERM,’ 1972

ue No. 71-1647

FeperaL MART COMMISSION, PETITIONER

v.

SEATRAIN Lins, ‘Inc, Paciric Fur Easr Lives, Inc.

| Axo tae Uran Srares ov M

Sh

ow writ or ORRTIORARI ro THE UNITED STATES couRT OF

rt eee 1 THE mer or OOLUMBIA CIRCUIT

‘mr vx a aoe au. |

bey: | OPINIONS BELOW

5 Ane opinion of the court of appeals (Pet. App. 17-

50) is reported at 460 F. 2d 982. The memorandum

a of’ the Federal Maritime Commission, approv-

ement No. 9903 and denying a request for

deen and hearing (Pet. App. 51-54), is not

poet JURISDICTION

!!. —

n March 23, 1972. The petition for a writ of cer-

Boruri wus filed on June 20, 1972; it was granted on

Debember 11, 1972. Thie jutisdiction of this Court

feats on 28 U. S. C. 125400) and 2.

2

| QUESTION PRESENTED

. Whether Section 15 of the parla ae We

n A d. fl e es Mar

time Commission and, if approved by the Commis-

sion, are immune from the antitrust laws, covers an

agreement for the acquisition of one carrier's assets

ee, eae bes-

eee 5 ee ping Aet, 1916, 39 Stat. 783,

aniended, 46.8.0. $14, provides in pertinent part:

That every common carrier by water, or

no eee e Spams Act, shall file im-

media à true copy,

or, if poh a true and complete memorandum,

of every. nen

or other pe

tion or cancellation thereof, to which it may

be a party or conform in whole or in part,

troy. or apportion-

ing ö allotting ports

or restrieting ar otherwise regulating the num-

ber and character f , Sailings between ports;

limiting or — ane way the volume

or character of freight or passenger traffic to

1) Ybéi carried; ior in any manner providing for an

Rt: exclusive, x

3

The Commission shall by order, after notice

and hearing, disapprove, cancel or modify any

Agreement, or any modification or cancellation

thereof, ‘whether or not previously approved

by it, that it finds to be unjustly diserimina-

"tory or unfair as between carriers, shippers,

u. rt 8. 1 p rters or ports or between ex-

Porters from the United States and their for-

eign competitors, or to operate to the detriment

of the commerce of the United States, or to be

contrary to the public interest, or to be in

violation of this Act, and shall approve all

“other agreements, modifications, or cancella-

tions. PA os

*

* * * * *

The Commission shall disapprove any such

agreement, after notice and hearing, on a find-

ing of inadequate policing of the obligations

under it, or of failure or refusal to adopt and

maintain reasonable procedures for promptly

and fairly hearing and considering shippers re-

quests and complaints.

Any agreement and any modification or can-

cellation of any agreement not approved, or

disapproved, by the Commission shall be un-

lawful, and agreements, modifications, and can-

| eellations shall be lawful only when and as long

„approved by the Commission

88 „ 44 10 ‘nny #

eereti providing Tur We sale by

ets itd E App. 2505 Under

e compact ‘to ‘PFEL its

then — eee e and its ‘shoreside: property

and equipment.“ The agreement also provided for the

transfer of Ocaania’s employees. (App. 11-15) ; how-

ever; Oceanic, a wholly-owned subsidiary of Matson

Navigation Company, was permitted to retain its cor-

porate ‘existence and was not foreclosed by the agree-

ment from reentering the trade in the future and

competing with PF'EL (Pet. App. 19).

¥ PFEL,"the acquiring firm, is a subsidiary’ of Consolidated

Fecighverjey Qe.) —— involved here,

had acquired 51 per cent of PFEL’s stock. Moody, Transpor-

tation hag nyo (1970) | hick baa e —.— Consolidated Freight-

1969, the last full year priot to the PFEL-Oceanic agreement,

i ere men i $450, ee and —

ato an nied. Fortune, Dire mee Us, saree Cor

ee es

By letter dated October 6, 1970, the parties trans-

mitted the agreement to the Federal Maritime Com-

mission, stating (App. 33) that they had been ad-

vised dy their respective counsel that the Contract

of! Sale does not require approval of the * * Com-

mission under the provisions of Section 15 of the

Shipping Act, 1916 . They requested, however,

that the letter be eonsidered as an application for

such approval“ eee if’ the enn should be

of a eontrary view. 8

8 5 Proceedings before the Federal Maritime Com-

The Commission published notice of the agreement,

d gi ignated Agreement No. 9903, in the Federal Regis-

r on October 14, 1970 (38 Fed. Reg. 16114), allow.

ing ten days for interested parties to comment or

request a hearing. On October 21, 1970, respondent

Seatrain Lines, Inc. (“Seatrain”), a common carrier

y water serving certain Pacific, Hawaii, and Guam

trades, filed a protest and requested a hearing to ex-

plore the “anticompetitive and prejudicial conse-

“quences”® . of the agreement (App. 35). The protest

alleged that Seatrain was “considering: entry” into

routes in which PFEL, and Qeeanic: operate

‘pp. 35); it objected. to the agreement on Drodneing

4: “concentration, of competition on these, rou

Mareby; erecting a formidable barrier to the entry of

5 : prospective competitor such as Seatrain” (App.

. “Agreement No. 9903,” it further asserted, “will

to fie ater af the dees of; sae

8 7

K rr > - . 2 2 ,

bh onatexinir:

PPC

terest (ibid.)

8 “Sis ae Naber Wcheein receipt ot PEL's re

sponse (App. 38-40), the Commission, on October 27,

1970, issued a memorandum order approving the

agreement and denying Seatrain’s request for an in-

vestigation and hearing. It concluded that Seatrain

had failed to present “sufficient information” to re-

quite a Section 15 hearing; since, in the Commission’s

view, the carrier had not indicated that it was in

competition with either of the parties, that the agree-

ment prevented it from competing with PFEL in the

future, or that PFEL and Oceanic were foreclosed

“from competing with each other anywhere at any

future time’ (Pet. App. 53). The Commission

held that Seatrain had “no standing in this matter”

and dismissed. the protest as without substance“;

without discussing the question of its jurisdiction, it

approved the agreement under section 15 of the

Shipping Act, 1916“ (id. at 53-54). Seatrain’s petition

to reopen was denied (Pet. App. 55-57).

C. The proceedings in the court of appeals

Seatrain filed a petition for review in the United

States Court of Appeals for'the District of Columbia

Cirvitit, The United States, which was a statutory

respondent; contended that the Commission had no

jurisdietion to approve ‘this particular acquisition

rn.

e ebenes üpinben ue salt of appeals

held that the Federal Maritime Commission lacks

- jurisdiction under Section 15 of the Shipping Act of

1016, to approve arrangements of the type involved

here” (Pet. App. 40). It concluded that “both the

language ‘and context of Section 15 itself and the

legislative history accompanying it demonstrate that

this particular agreement is not eovered’’ (id. at 20-

N). The court also rejected the Commission’s argu-

ment that congressional enactments subsequent to the

Shipping Act reflect a legislative recognition or grant

of Commission jurisdiction in this area (id. at 33

3

~ . SUMMARY OF ARGUMENT

In the Shipping Act, 1916, Congress gave the Fed-

‘etal Maritime Commission jurisdiction to supervise

and control ‘‘agreements’’ between common carriers

by water. It provided in Section 15 that the Com-

mission's approval of arrangements within any of

even enumerated categories would exempt the trans-

“action from the operation of the antitrust laws. The

language of the statute shows that the types of agree-

ments covered are those which contemplate ‘exclu-

ive, preferential, or cooperative working arrange-

ments (46 U.S.C. 814). As the Commission acknowl-

‘edges (FMC Br. 14), “ ‘acquisition, merger or consolida-

tion’ agreements are not specifically enumerated * * *.”’

Having concluded that Section 15 does not confer juris-

ion upon the Commission to approve the agreement in-

red. here, the court of appeals found it unnecessary to

sider the other issues presented. It simply noted that the

mission’s peremptory denial of Seatrain’s protest and its

r of the agreement on the basis of the pleadings alone

an adequate exploration of the problems presented

the proposed acquisition either by the agency in the first

hee or by the court on review (Pet. App. 48-40).

8

he legislative history of the Act demonstrates

that Congress did not intend to bring transactions of

the latter sort within the ‘Commission ’s jurisdiction.

The statute was based on à comprehensive study of

thé shipping industry by the House Committee on

Merchant Marine and Fisheries, culminating in the

Alexander Report which contained specifie recom-

mendstions the Shipping Act was designed to imple-

ment. The Report shows that Congress use of the

term agreement“ in Section 15 was meant to en-

compass understandings, conferences and other

arrangements (46 U.S. C. 814) among steamship lines

characterized by their continuing nature, that is, agree-

ments ‘contemplating the continued ‘existence of the

parties and their active participation in the on-going

arrangement for a period of time.

Mergers and aequisitions of control or ownership do

not fit this description. They do not anticipate a

continuing working relationship; the transaction is

essentially a single event which is complete upon con-

Summation. The Alexander Committee recognized this

difference; in referring to such arrangements it con-

-sistently desertbed them as ‘‘mergers”’, “acquisitions .

of ‘control,” and the like; never did it use the word

aagreements“ in this context.’ Moreover, the Commit

tee, pointing out that Congress had only a few years

earlier enacted legislation directed to mergers and

Rather, it recommended that, only ‘agreements,’ of a

continuing and on-going nature, i. e., cooperative work-

48

bPertison and control. The Shipping Act, 1916,

asomplished that objective

The suggestion that eee by implication. i in-

tended to.confer on the Commission broader authority

than indicated by the language of the statute or its

legislative history is dispelled by looking to contem-

Poraneous and subsequent legislation conferring on

other agencies jurisdiction. over corporate amalga-

mations. Whenever Congress has authorized agency

approval over acquisitions of control or ownership,

and provided for antitrust immunity for the approved

transactions, it has done so in explicit language. Never

has it extended jurisdiction in ee

the rubric agreement.

Neither the decisions of the 8 nor the

better reasoned decisions of the federal courts sup-

Port a reading of the Shipping Act as authorizing

the Commission to approve an acquisition by one car-

rier of the assets of another, thereby removing the trans-

wan ro

en anl. MARITIME Web AUTHORITY TO

8 AND THEREBY TO IMMUNIZE FROM THE ANTI-

per Laws, CERTAIN AGREEMENTS AMONG WATER CAR-

{ RIEBS DOES NOT COVER THE ACQUISITION BY ONE

__ CARRIER OF THE ASSETS OF ANOTHER

* The arrangement between PFEL and Oceanic, how-

ever characterized by the parties (“ Contract of

Sale“), the Federal Maritime Commission (Agree-

ment“) or the United States (“Merger”), undeniably

iontemplates the sale of all the assets of one common

10

barrier by water to another’ (Pet. App. 22). While

the acquired carrier, Oceanic, is permitted to retain.

its corporate existenes to enable it to reenter the trade

in the future, the asquisition for all practical pur-

Poses eliminates it as u viable competitor of PFEL.

‘The arrangement involves 4 single transaction which

is complete upon ‘consummation and does not require

‘of totitemplate any further joint action by the parties

kor its implementation. This transaction thus is dif-

ferent’ from the agreements for cooperative working

relationships ‘among shipping lines, which this Court

examined in Votkewagenwerk v. Federal Maritime

Commibston, 300 U.S. 261, and Federal Maritime Com-

mission v. hse pagina Ane reeves 300 US. 238,

241248. |

The nage ie as the court below stated (Pet.

App. 19; footnotes omitted), is whether acquisitions

‘Of this sort “falls within the scope of the Commission’s

‘Jurisdiction’ as defined by the Shipping Act of 1916.”

We agree with the court of appeals that (1) the lan-

guage of Section 15, (2) its legislative history, (3)

contemporaneous and subsequent congressional enact-

ments, and (4) the Commission’s own interpretation

of the statute and the better-reasoned court decisions,

all indicate thet they do not.‘

»The question whether the — accquisitibn by PFEL

violates the antitrust laws was not considered by the court of

appeals (Pet, App. 7) and is not before this Court. The

United States has taken no position on that issue in this or any

ee ee

A -S

„ originally \eriacted in 1916, Section 15 of the

Shipping Act, 39 Stat. 733, provided for submission to

tte Commission’s predecessor’ of every agree-

ment — including “understandings, conferences and

ether arrangements“ —among common carriers by

water:

t 3

th ‘S|

1] fixing or regulating transportation rates

e ates 4) 7

2] giving or receiving special rates, accom-

modations, or other special privileges or ad-

[3] controlling, regulating, preventing, or

destroying competition;

[4] pooling or apportioning earnings, losses,

or traffic;

151 allotting ports or restricting or otherwise

regulating the number and character of sailings

between ports;

[6] limiting or regulating in any way the

volume or character of freight or passenger

‘traffic: to be carried;

(7] or in any manner providing for an ex-

elusive, preferential, or cooperative working

arrangement.“

es *The predecessors to the present Federal Maritime Commis-

The 1961 amendments to the Shipping Act did not alter

t language. To the extent that the amendments have any

On the manner in which Section 15 should be oon.

Mi, ‘they ure discussed infra, at pp. 28-31.

496-03¢—1s_-3

2

_ As the court below ‘observer (Pet. ‘App. 21), what

ence:.of ‘the. ee ‘andebsiy: participation: in such

agreements “over time #3? The language speaks

in terms of om going arrangements, primarily those

“regulating” various aspects of the shipping trade.

Ses United States v. R. I Reynolds Tobacco Company,

325 F. Supp. 656, 659 (D.NJ.), certiorari denied No.

71-157, March 5, 1973. The seventh ry differs from

the others only in that it is framed in more general terms

When read in context, its clear import is to include

within the Act's coverage those working arrange-

ments“ not specifically within the foregoing enumer-

ated categories. It is in this respect no different from

the fourth, and final, category of prohibited practices

listed in Section 14 of the same statute—i.c, “resort

to other diseri a er unfair methods

whieh this Court beld in Federal Maritime Board v.

Isbrandtsen Co., 356 L. S. 481, 492, must be con-

strued as oontituting a catchall clause by which Con-

gress meant to [oover] other devices not specifically

enumerated but similar in e and off =e

(emphasis added). a

his from the face of the statute, it appears that

the lission’s jurisdiction under Section 15 was

intended 10 extend generally to pooling, rate and

other-cooperative working agreements, which by their

very nature require the continued and active partici-

pation. of the parties: thereto. That this is what Con-

gress’ had in mind is’ confirmed’ dy the authority it

ee dn Hq. Coreg nission ee A. The

13

ee eee

. ‘to; däsapprove covered agreements (whether

4 The fourth paragraph states that 1 A0

ments subsequently entered into shall be lawful only

when and, as long as approved.“ These. provisions

further indicate that the jurisdiction Congress gave

the Commission was over. only those agreements

which are, as the court of appeals stated (Pet. App.

22), “amenable to. continuing Commission. supervi-

sion, that is, “on-going”? arrangements susceptible

to cancellation or modification “‘Ti]f changing. condi-

tions warrant it“ (ibid.). See Current Legislation

government Regulation of Private Shipping, 17

Colum; I. Rev. 357, 358 (1917).

This is not the character of the present “‘agree-

pont,” which, as stated at the outset, provides for

the transfer of all of Oceanic’s assets to PFEL in a

_ Single transaction, thereby “transform[ing] the rela-

tionship of the merging parties at the instant of

merger (United States v. E. J. Reynolds Tobacco Com-

pong, supra, 325 F. Supp, at 659), A “subsequent Com-

mission cancellation or modification“ of such an ar-

Fangement would, in the words of the eourt below, “be

bannt z, e and — —

5 is not questioned. Compare Federal: Power Commission

¥. Panhandle Eastern Pipe Line Co., 387 U.S. 498, 514; Col-

o Interstate Gas Co. v. Federal Power Commission, 324

„ 581, 602.

: 3 (Pet. App

22). JA Joquisition; merger or cdtisblidation’ agres-

ments“ of this" ort, the Commission ‘acknowledges

(FO Br. 14), are not „speeifleally enumerated in the

language of Section 18. But, it contends (FMC Br. 7,

13), they should be brought within the awer net

This ditegry of Gobind, 4s Bone was no more

intended to be read in isolation than were the rest,

and thus it, too, is subject’ to the qualification which

the court of appeals correctly held to be implicit in

“T]he whole strtéture of Section 15,” that the agree-

ments covered mtist be of a continuing nature” (Pet.

App. 22). To the extent that the language used in

the third of the enumerated statutory categories of

covered “agreements” admits to any ambiguity in

this regard—which we dispute—the- Commission’s

argument for a broader construction in this area is

refuted by the legislative history of the ee

At, 1916.

B. THE LEGISLATIVE HISTORY OF SECTION 15

The Shipping Act was passed as the result of 4

exhaustive investigation of the shipping industry by

the House Committee on the Merchant Marine and

Fisheries under the Chairmanship of Oongressman

Alexander, See Federal Maritime Board v. Isbrandt-

sen Co., supra, 356 U.S. at 487-490; Volkswagen werl

v. Federal Maritime Commission, supra, 390 US. at

ar Report,” ' which coneluded with a number

presentations Asee PHEL’s Br., pp. 1a-10a)

* the basis for the 1916 legislation.“

be Alexander Report discussed the different types

ct arrangements then being used by American ship-

5 pers in both the foreign and the domestic trade. Based

on responses to questionnaires and circulars distrib-

ied to. the shipping industry, and on two volumes

3 and a volume of diplomatic and consular

“feports, the Committee found that “it is the almost

universal practice for steamship lines engaging in the

- American foreign trade to opera g under the terms

of written agreements, conference arrangements or gen-

emen’s understandings“ that provide for“ or

" tegulation of ra ” “allotting the ports of sailing,“

—— of earnings, or “meeting the competition of

Amaia eee manatee ita. te

id Cong, 94 Seams (2014),

Senate Heport on HLR. 1545, the bl finally enactd

reprints the recommendations and indicates the

o that Congress placed on them. S. Rep. No. 689,

% 1st Seas. (1916): See Federal Maritime Board v.

ladrond Co., supra, 856, U.S. at 400, n. 115. Volkewagenwerk

Peder se ai ol at 276, n. 25,

1 a tic ne questionnaires and circulars dre répro-

CW

of Section 15 of the Shipping Act of 1916,” at

i

aten ee —

i i mn F * F. J.

ws Tobaced Company, wipré, da F. Supp. at

Win ere bo ne andes tipping trade, the

Hotise Oommittse observed . ee =

tation. Tn addition ts the cooperative agreements so

o

ee kront a a number of mergers, consolidations

seas ‘Dritaatily “by ‘railroads seeking to

trol Gf Cen on carriers by ‘water (Alexander

Rel agile ‘ist 404°406). “The Alexander Report stated

(eet os tmp iia added):

athods of controlling’ competi-

tion between water carriers in the. domestic

trade, referred to in the preceding pages, may

———

trol ‘of wate:

SO

“Mi Aistinetion ‘been “anuisitions” or “owner

ship,” on the one hand, and what the House Commit-

tes referred to as “agreements or understandings, on

the ‘other, is ‘observed “[¢)émaintently throughout the

Report” (United States v. E. J. Reynolds Tobacco

_ Company, supra, 325 F. Supp. at 659) ; “mergers and

: ae is used, or a variant thereof

bor hey or understanding), it is only in con-

e with working arrangernaria of an an gun

nature calling for the cooperative participation of the

Parties for an extended period of time. Ibid.*

Ping tinction is made in the recommenda-

8 the Jommittee, which Congress effectively

mented in the Shipping Act, 1916. The principal

t these recommendations was on “the agree-

eI and understandings _ 60 universally

1 in. the foreign trade (Alexander Report,

5 p. 415) Faced with the alternative of outlawing such

_ [cooperative working arrangements altogether or plac-

‘ing some restrictions on their continued use, the Com-

m elected the latter course, It pointed out (td. at

18

‘the elimination of the weak and the survival of

* my 2

e the

IN

duch iit form of rate and pooling

ae t under Government supervision and con-

74), Tt proposed that this be eecomplished

by requiri “all carriers 1 in the foreign

trade of the United Sta to file for approval with

the appropt iate Sovernmnent au 1 0 “any .

ents, understandings, ‘or ‘conference arrangements

W entered into (59 with any other steamship com-

panies’ * - or (2) with American shippers, rail-

roads ok other . agencies” (id. at 419-

eee eee eee eee eee

that a flat F .

As the court of appeals: correctly observed (Pet.

App. 22), “[t}he clear tenor of the Committee 's anal-

is, the problems it faced and the solution it pro-

posed, all. related to agreements of a continuing na-

turs The recommendation that such agreements

de preserved under some form of effective govern-

went supervision“ (Alexander Report, p. 417) did

not contemplate similar approval for acquisitions,

eonsolidations or mergers; To the contrary, the latter

type of arrangement was an “anathema to the Com-

mittee” (United States v. R. J. Reynolds Tobacco

Comp ing, Supra, 325 F. Supp. at 660 0).

Ine it was the determination to avoid forcing

just such Permanent and irretrievable combinations

etween h and among carriers that prompted the Com-

mittee. to recommend against a complete ‘prohibition

8 working agreements, Her the on-going

et eo n with respect to rates, still leaves, as

ted out below (Pet. App. 38), “ample room for

mpetit in a Fariety of areas other than rates,

cially those which relate to the quality of service

ded by the various steamship lines“ Thus,

ng Tange of non · pries competition“ (Pet. App. 38,

if e Gorter, United State Shipping Policy, 148

assume, theoretically, that the members of a conference

strictly to their agreement, then they must compete

structure? of, the industry is left intact and the par-

ties to the continuing agreements survive to con-

tinue their competitive “conduct.” See Marx, Inter.

national Shipping Cartels, 250-251 (1953). The leg-

islative ‘history: reflects no intent to commit to simi-

lar a ive’ supervision “arrangements of a

wholly | different: character, ‘such as involved here,

whieh have thé immediate effect of changing the

competitive structure of the industry by eliminating

Sere ae ad rey e W

e snonprica basis. Batter service

_ would appear to eee

8 faye ama ne inp in cn ato

rr Wee eee slower the

e eee,

ee 3 eden win deen

=

21

ms to the domestio shipping trade

1a~10a). It is in this area that

Alexander Report (pp. 404-405) revealed that,

kürough che acquisition of carriers by water, the

railroads ‘then accounted for about 50 percent of all

tonnage moving by water in the coastwise and Great

The Committee, however, did not recommend new

legislation to deal with this situati ion. It pointed out

- that the recently enacted Panama Canal Act of 1912,

5 tending the ‘jurisdiction of the Interstate Commerce

Volves the carriage of property by rail and water,”

bent “far toward eliminating some of the undesirable

Practices which were found by the Committee to exist

ti the domestic commerce of the United States“ (Alex-

_ ander Report, p. 22). Section 11 of that Act (37 Stat.

0 U.S. 0. 814) -(16)) specifically forbade, after

J., 1914, any railroad: or other common carrier

et to the jurisdicti on of ‘the 100 “to o-

*

r r ATS. f 54 '

ts and conferences analyzed by the

9%

22

control, or have any interest whatsoever (by stock

ownership or otherwise, either. directly, or indirectly

in any: common.;earrier by vater operated

through the Panama Canal or elsewhere“ with which

FFC

things, that port to · port rate and traffic arrangements

ol domestio water carriers be brought within the su-

pervision and contral of the government, that all

agreements or arrangements affecting interstate trans:

portation”, be filed, for approval, and that all [inter-

state] traffic associ or conferences’? be super

vised. by ,apptopriate..government. authorities. (Alex.

ander Report, pp. 142-423), Thus in the domestic

trade context, as Well, It Ihe clear tenor of the Com-

mittoa s oposed]. solution 7 7 7 related to

agreements of a continuing nature“ (Pet. App. 32),

In fact, in the single Te (No. 12) ad-

dressed to arrang ts of the sort at issue here, the

Committee, us it: had done “throughout: the .Report”

(United States v, R. J. Reynolds Tobacco: Company; .

supra, 325 F. Supp. at 659), made no mention of agree

ments, hut urged f. that the mihadg be probibited in

Set" Wes: 1 2 nd eon S

— n N

renne n

am. ne are used in interstate transportation” (Alex-

oR port, p. 424; emphasis added).

it legislative background shows that Congress,

in enaeting the Shipping ‘Act, 1916, “to carry out [the

Alexander! recommendations” (Federal Maritime

: Board v. Isbrandtsen Co., supra, 356 U.S. at 490, n.

1 ), intended to subject to federal supervision under

Section 15 only cooperative working arrangements

"of the sort the House Committee had indicated

3 he nid be brought under general government con-

trol. The statute used the word “agreement” with

the same meaning as in the Report, namely, to de-

ibe practices or regular activities in which two or

re shipping companies have agreed to participate

* a considerable period of time“ (United States v.

. J. Reynolds Tobacco Company, supra, 325 F. Supp.

A $50). To the extent that such a continuing “agree-

went“ is one “controlling, regulating, preventing, or

t ~oying competition” (46 U.S.C. 814), it falls

the third category listed in Section 15. But

ers, acquisitions, and consolidations, although

erhaps in some instances having a destructive effect

n competition, are not for that reason also within

Aet's coverage; such arrangements represent “a

„ diserete event, which transforms the relation-

of the merging parties at the instant of merger”

ited States v. R. J. Reynolds Tobacco Company,

24

supra, 325 F. Supp. at 659). As such, they are outside

the scope of “(government supervision of anticompeti-

tive. working: arrangements, (Pet. App. 32) as con-

ee eee

ais of the Shipping Act. of: 1916.

—— —

gusge of Section 15 of

used in contemporaneous

enactments which onfer

risdietion ever corporate emnalgamations further in

ate thal Lende e aot mongers are not trae

actions that were intended to be encompassed within

the term s cements” in the instant statute. When

‘determined to reach by legislation ‘arrange-

ments of the sort involved here—the acquisition of all

FFV

nd sy gan a i

and SES: on Ove 2

1 . e ‘railroad acquisitions of water

. e in the Panama Canal Act of 1912,

“ol e e vines, (by stock

nt ma tip or otherwise, bon 8 indirectiy,

Stat. pay ‘Similarly, the. same Congress which

conducted the'exhaustive ration 0, ar eg of

ference, 383 U.S. 213, 218), when it enacted the pro-

hibition against mergers in Section 7 of the Clayton

Act in 1914, employed the terms “acquire, directly or

indirectly, the whole or any part of the stock or other

_ share capital of another corporation“ (38 Stat. 731).

As the court of appeals observed (Pet. App. 26),

fit is highly unlikely, in view of this specifie [con-

temporaneous] statutory treatment by Congress of

the antitrust implications ‘of acquisitions of corporate

‘control, that Congress originally intended to exempt

duch acquisitions under Section 15 of the Shipping

‘Act by making no specific reference to them but simply

by ineluding them under the rubric agreement.

That term does not even reach consolidations of cor-

‘porate control by direct purchase from stockholders,

wich was the most prevalent type of acquisition at

tte time the Shipping Act was passed. See, e. g.,

United States v. Philadelphia National Bank, 374 U.S.

- $21, 338. See Note, The Shipping Industry Seeks A

Safe Haven: Merger Jurisdiction for the FMC, 5

Lew & Pol. Int 1 Bus. 274, 280-281 (1973).

5 Moreover, such a legislative approach would have

5 er | inconsistent with the congressional method of

dealing with anticompetitive practices in other areas

mmercial activity. In Section 407 of the Trans-

ation Act of 1920, 41 Stat. 481-482, for example,

lich further amended Section 5 of the Interstate

ine erce Act, Congress dealt separately with co-

iti ive working arrangements and with consolida-

orf ownership. It used the term “agreement”

tye

26

only in describing the former (Sec. 5(01)).“ With

respect to interlocking ownership, the amendment

spedifically authorized the Interstate Commerce Com-

‘mission to approve, inter alia, the acquisition [by

ons carrier!“ of the control fof another} * ** under

a lease or by the purchase of stock in any other man-

ner not involving the consolidation of such carriers

e e e ee eee

N 5@)).”

ee 8 Sectibn, 412 of the Oivil Aerunautie

Act: of 1938, (now the Federal Aviation Act, 49

SG. 1882), Congress differentiated between work-

ing agreements (52. Stat. 1004), on the one hand,

and airline mergers or acquisitians (52 Stat. 1000),

on the other. Both types of arrangements were made

subject: to the jurisdiction of the Givil Aeronauties

Board, and: if approved by that agency were aecorded

ape f soe . mesa N PHS ae

che provisions df for fe ee (2) and 0) preg

‘Section 54) standards for approval of non-

eee eee eee (48

Stat. 217). In 1940, Sections 5(1), 5(2) and 5(11) were en-

acted in their present form (54 Stat. 905).

1

4

.

27

me deseribing the types of cooperative working

5 that were covered, Congress employed

e the same language in the Civil Aeronautics

Aet (40 U.S. C. 1382) that it had earlier used in Sec-

tion 15 of the Shipping Act (McManus v. Civil Aero-

vauties Board, 286 F. 2d 414 (C. A. 2); Mediterranean

Pools Investigation, 9 F. M. C. 264, 290, n. 13), while

it used the terms “merger,” ownership, and “aequi-

tion of control” when ‘referring to airline “ acquisi-

tions“ (49: U.S. C. 1378). Cf. Pan American World

BS Airways v. United States, 371 U.S. 296, 301-304.”

In sum, at no time to our knowledge has Congress

ned the word “agreement” when it intended to give

regulatory agency jurisdiction over transactions

er than cooperative working arrangements of a con-

ung nature. Where it has made the determina-

to authorize an agency to approve acquisitions

control or ownership and to, confer antitrust im-

lity upon the approved acquisitions, it has 80

ted in explicit language. Here, however, as even the

umission acknowledges. (FMC Br. 14), “‘acquisi-

„ merger, or consolidation’ agreements are not

cally enumerated in the language of Section

A App. 32) that: It hey were neither part

problem [with Which Congress was concerned]

t of the solution. Instead, the legislative

e Federal 79 Act (47 U.S. C. 221, 992)

y are the Federal Communications Commission juris-

ction ov “consolidation, sequisition, or control” of talephone

— and over “consolidation or merger”. of telegraph

dompa and immunizes from the antitrust. laws euch af

ee tran s that the Commission approves,

28

focus Was essentially on agreements which the statute

: itself describes as “exclusive, preferential, or eoοοEera-

tive working arrangements (46 U. S. C. 814). It was in

this area alone that Congress gave the Commission its

approval authority under Seetion 15. As the court below

stated (Pet. App. 22), “Congress intended to tolerate

only the minimum anticompetitive behavior nee-

essary to preserve un essentially competitive struc-

ture in the maritime industry by striving to avoid

either the failure or consolidation! of independent

steamship lines 0. %% 2

2. The Commissions excerpts from legislative re-

ports published in connection with the 1961 Amend -

ments to the Shipping Act, 1916 (PMO Br. 38-41)

do not undermine that conclusion: To the contrary,

even assuming that later congressional pronounce-

ments are relevant to the question of what the legis-

latortz intended in 1916 (compare United States v.

Wise, 370 US. 405, 4 #14), the clear understanding of

"The Comin V contention that 8 contrary’ reading of the

Shipping Act can be ‘gleaned from the 1950 Amendment to the

Olayten: Act: (18 U.S. C. 18)—which exempted from Section 7

coverage “transactions. consummated pursuant to authority |

given b TTT

ers- is, as the court’ of appeals stated (Pet. App. 36), “s

‘bootstrap attempt to derive a positive statutory grant of author-

sory mga a td le, terra

authorit — — either affirmatively

or nogatively sre aioe eed tx ‘Section 7 to the Mari.

or power ‘which the respective agency

ee

v. Tete Power Commission, 369 US.

12 ny

4 1 noe cs United States, 202 US.

456, 100-270.

CRAG i NER De gid erry

*

y

— — — a) — te oO @ =

Vongress in 1961 was that Section 15 had always con-

templated, and would continue to contemplate, that

the Commission has jurisdiction only over on-going

working arrangements of the sort we have already

described. f

7 “The 1961 Amendments were in part a response to

‘this: Oourt's decision in Federal Maritime Board

¥,Lsbrandteen Co., 356 U.S. 481, which cast doubt upon

the Commission’s authority under Section 15 to ap-

prove exclusive-patronage-dual-rate agreements be-

tween independent shippers and a shipping confer-

ende.“ Following that decision, both the Senate Com-

mere Committee, through its Subcommittee on

Merchant Marine and Fisheries, and the House

Merchant Marine and Fisheries Committee, through

its Subcommittee on Steamship Conferences, con-

ducted exhaustive investigations into the operation

ot. Shipping conferences in international. trade. A

rie of this legislative history reveals that the

entire focus was on the various conference agreements

and devices used by water carriers as cooperative

Working arrangements; acquisitions and mergers were

r ofthe and thus that the Com-

—— 8. nt 491-

k to the Lagidlative: History of thé

a / Dual Rate Law. d De No, 100, 87th Gong,

isi, whieh contains ——

live history accompanying the 1961 amendments.

30 |

Both Houses reported ‘out bills’ to amend the 1916

Act. The bin us reported out by the Senate [S. Rep.

Nes 860% 87th Cong. ist See Was more ‘antitrust

exeitiption’ oriented wm that which ‘passed’ the House

[H. Rep. No. 498, 87th Cong, Ist Sess. ]’? (Latin

Americ Pacific Coast Steamship ‘Conference v. Fed-

oral Maritinie Cominitesion, 465 F. 2d 542, 550 (C. A.

DOH, dertiotitrt denied; No! 72-213, October 24,

1972) and was eenéritidlly The one which was ‘endcted

into Aw. To the extent ‘relevant here, it amended Sec-

tion 15 400 pibbvide Conlsiderubly broader Commission

authority Kid. at 580-551) to ' disapprove conference

agredinents ‘against the puplie interest (15 Stat. 763,

46 U.. O. 814), and added to Section 14 a new pro-

vision permitting the Sean to approve dual rate

Wee. the 1961 Amendments to the Shipping Act,

is, we stibmit, entirely consistent’ with the intent of the

1016 legislators, a8 demonstrated above, to grant the

Commission authority ‘to’ deal only with agreements

of a continuing nature (Pet. App. 22). As Senator

eee eee eee ab tho Senate in sup-

eee Wa ie. based

; W 4 ra ai roe. er 5 N

e e e bee e

f Tae e eine # eee e (NL) bee, yi

Annen AML edd priv αẽeν 33 oeh

a the 1962 Report of the Antitrust Sub-

ebthmiittes of the House Judiciary Committee,“ to

‘whieh the Commission refers (MIC Br. 40); contra-

diet this understanding, That Report also deals with

the activities of shipping conferences in the foreign

trade, and devotes much’ attention to “the predatory

antiedmpetitive devices of the conferences” (Latin

Aerion / Pabiſio Ooust Steamship Conference v. Fed-

cal Maritime Oommiseiony supra; 468 F. 2d at 550).

But nomhere does it suggest that Section 15 of the

Shipping Act confers authority on the Commission to

approve ‘acquisition agreements of the sort involved

here. ‘Do: the contrary, in the section of the Report

which ‘specifically discusses the types of agreements

covered by Section 15, no mention is made of mergers

> aces of control or ownership, and the word

8 is used consistently in a context. connot-

tive working arrangements of a continuing

oo (Report, pp. 333.3353 and see id. at 5-18).

» 0 COMMISSION’ 8 DVTERPHETATION AND RELEVANT COURT

0 re die DECISIONS

MSA LLY AR,

Not until its recent divided decision (3-2) in

Le

Freight Industry, 1. Rep. Wo. 1419,

mmiss: e than Mee indicates a

6 redding” of ‘Sectidn 15 is based en u single ref-

Gis port to" specif weer tenieacion Bacre

Line, 11 F. M. C. 53, reversed. on other grounds, Matson |

peo Co. v. Federal. Maritime Commission, 405

F. 2d 796 (C. A. 9), did the Commission. take the po-

sition that its Section 15 jurisdiction applies to acqui-

sitions of control or ownership as well as to eoopera-

tive working agreements: And see Agreement Nos. 9827

and 9827-1 Between United States Lines, Inc. and Sea-

Land Service; Inc, F.C. Nos. 69-56, 70-51, decided

February 12, 1973. Prior to 1967, the Commission had

exercised jurisdiction only over arrangements which, as

the court of appeals observed (Pet. App. 38-39), were

“of a: continuing nature calling for the supervision

of the Commission, not a single transaction such as a

ee ieee eee e

— n 9 a

N various oe decisions which, it is argued, in-

Ane d ebase exertion “ot jurisdiction ure issued in bos

detail by the court below, with particular attention to the con-

tinuing ‘nature of the relationship between the parties to the

arrangement and the need for continuing supervision by the

Commission (Pet. App. 39-41, n. 39).

. ds murs set areas in wn Saw wi cos

to the pure present case in

guishable from its situation, allegedly involving a merger by stock

acquisition whieh, a6 modified by Commission order, requires the

acquired carrier to continue to compete with a a subsidiary of the

scquiring carrier ofthe Commission. The agree-

ebene .

relating tothe manner in which the parties may hold or pene

8

on eR AR A

by. the Commission, the decisions of that agency

during the first 50 years of enactment do not support

tus bunten ion that Section 15 was understood by the

Dommission to cover à single sale by one common

ner of all its assets to another The fact: that a

mio majority of the: Commission now appears: ta

dos of the view that mergers and acquisitions involving

- othestiv carriers are encompassed. within: the. statu-

torycterm agreements thus provides little guidance

en ho ee of eee rden

bntrued “

ben. Nor, we e should athens: — be

_ gecbrded’to. the decision by a divided panel of the

Wann Oireuit in Matson Navigation’ Co. v. Federal

“Maritime Commission, 405 F. 2d 796, whieh is in con-

: 2

» Company, supra. As the court of appeals ob-

; Companiés after the merger or acquisition is con-

ed provi oa for — fh can

n under Section 15. To the extent that the Commission

carriers which ‘serve the United States. See

tes of Miteut S. &. Co. Lid.,7 F. MC. 948, 258; Arme-

8.4. v. United: ‘Btates, 890 F. dd 74 (C. A. 3),

dented, 806 US, 1004, Thus, while ‘exercising its

110

115

1125

K.

i

34

served (Pat App. 46), the Matson court did not engage

in thie careful ahalysis.of the begislative history: which

characterised: f ifthe}: opinion: in dee ere

Patties entre he en e e ee

ing that the e eee 15 t bes given the

babadest! of rendings (405 F.2d at 800) . But Volks-

davehwerk ‘involved an agreement by members of an

emp οο,ỹ]wm shipping: association: to allocate among

themsetves a commom assessment to finanee a union

trust ‘fund. That arrangement, the Oourt beld (390

U.S. at 276), was dne of the myriad of renatrietive

agreements in the maritime industry which Oongress

intended the Commission to Serutinise under Section

15idt: was in response to the Commission's extremely

narrote view!? (390 U. S. at. 28) of chat types of “coopt

erative working agreement[s]’.(390 1,8, at 271), came

under its: jurisdiction that the Court, emphasiged the

instve langt e dal ies Sat ni

of beet aue oerperstlens, (hade

a 4 Sevres oes ee ige & *

— to poly neiertns relied ug.

e distriet- court in Jeynolde Toben 7

ear ie Se hy Dyas day ee Ray? nt e Wi. bs

1 N Congress never intended te bring within

— categories in the statute, Giving such

Abroad reading: to the substantive provisions of that

Section and thereby to! the antitrust immunity also

-Beovided, would be ‘inconsistent; with the firmly. estab-

a 18 ö iple that legislative grants of immunity

km the titrust laws are to be“ bonstruefd! .*..*

dhe, Basted States x; McKesson. & Robbins, $51

US. 806, 46, ‘and: see Milks: Producers Association v.

3 Stabes, 362 UV. S. 458, 463-466. Aw this Court

beit recently in Otter Tail Power Co. v. United

2 „ Na. 71-091, decided February 22 1973, slip. op.

1 quoting United States v. Philadelphia National

Bank; 8740S. 221, 350-361; „ Repeals of the anti-

bust laws by implication from a regulatory statute

ate strongly disfavored, and have only been found in

tases of plain repugnaney between the antitrust and

ilatory' provisions“ v. See also Silver v. New-York

Nachange, 378 U.S. 341; United States v. Trans-

ri oe Association, 166 . 215.

86 <=

g ch “reprigniy” has ben demonstrat in

thb Present ease (See n. 21, sup rs). In such eircum-

Stents this Court has stated, with specifle referens

to situations swell as invotved here, that it enn

lightly assume that the enactment of a special vegun!!“

intentled to render ‘thé more genbral provisions of che

antitnist laws Wholly applicable to that industry“

Carnation Go,. Sued Conference, supra, 388 U

tinte And see Califoniia V Hederul Power Commis: —

don, suiprej*369- U. S at 485. „I Congress had de-

Side Eriht any urtbör immunity, Congress would —

dotbtiess habe aid wo" (United States v Borden Co,

808° 8:' 188, 201). We agree with ‘the deurt of ap

penis (Pet! App. 26) that its „ ilenes in Sectin

If with respect to the subjedt of ** * vontr̃ol or owner-

ship cam only be taken to mean that Congress had no in

tention dy the Shipping Aet of 1916 to éxempt such

arrimgementa . the: e e of the

cater Ha? | 8

Fun enen ec thats —— 7

Besen holding of thas cthint: eee

div: Commission ‘has ‘no: jurisdiction under Section 15

of eee ee ee eg re a ee tp

by another. In distinguishing certain

decisions (see n. 26, supra), however, the

court that the Commission might have juris-

— —»—„—— timid

mple acquisition of assets, as in the present case,

bit also contemplated some continuing relationship

between the parties, such as a covenant eee

vt to compete (Pet. App. 43, 40 n. 30). The amicus

4 ouride, R. J. Reynolds; Tobaeco Company, which is

a party: to an acquisition recently approved by the

@omniission which. purportedly provides for such a

eontinuing relationship (See the amious Motion to

‘Grant: Writ of Certiorari and Consolidate for Oral

Argument, filed in No. 71-157, supra, at pp. la-177a),

‘atgues. in its brief that, whether or not the Commis.

dien has jurisdiction. over the PFEL-Oceanic trans-

action it does have jurisdiction over the Reynolds’

A the extent that the * of appeals determined

‘thatthe Commission has jurisdiction of acquisitions

ithey contain ancillary agreements of an on-going

ature, we submit that the court was in error. In our

no valid distinction can be drawn between the

tien (whether it be of assets, stock, or

and an identical transaction Which is

ec with some further agreement envisior

ing relationship between the parties. 0

v covenants do not alter the fundamental char-

5 ‘the basic transaction, or make less applicable

wy define the Commission’s jurisdiction under

on 16 to exclude acquisitions, mergers or consoli-

38

The acquisition by ond carrier of the ownership or

Citi Eo dnbttieltiinintos chs former carrier aa

am independent ‘competitive factor in the trade br

United Statee’vi-Philadelphia National Bank, ou

874 US. at 336-349); this: tra

the structure of the market is no different: because the

earriets simultaneously’ ieee, tate eerie agree-

e ee waded ee ober dhe latter

anvillary agreement If the underlying transaction is

valid under ‘thie untitrüst laws, cen though it has no

tion over the Visio acquisition itself; but there

is ho ‘warrant either int the langunge or the legislative

histoty of: the statuts for such litnited jurisdiction to

de nenden in the manner suggested by the amicus.

The distinctien thé. oourt of appeals: drew between

einpde, acquisitions and those that are accompanied by

ts. which envision continuing relationships is

bound ‘to ereate uncertainty over the scope of ‘the

idinission’s: jwrisdiction,. and to result an attempts

to! change the form of aquisitions 80 as to subject

them te Commission approval! and thus obtain anti-

wan nee Acud this) Court ordinarily does.

en the E. 5 ‘Reynolds’ base,” *

Mission approval of an- agreement te ‘acqitire all the stock of the

‘ 227 as skit g. 8 . bis

Ho. Tilly eps Vein 1a end n. 92 1722.

/-

on questions unnecessary to the decision of

efore it, it has occasionally done so in order

rrrvtrs PAE Oe Meee eons

the foregoing reason, the judgment of the

+ of appeals should be affirmed.

Wm. Braprorp RRT NOL,

Assistant to the Solicitor General.

Irwin A. Sze,

: Attorney.

U.S. GOVERNMENT PRINTING OFFICE: 1973