# Brief for the United States — Federal Maritime Comm'n v. Seatrain Lines, Inc. > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386414_0144%3A09 ## Record - **Collection:** Supreme Court brief - **Document type:** Brief for the United States - **Published:** January 1, 1973 - **Citation:** 411 U.S. 726 ## Text 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 --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386414_0144%3A09. Public record. Not legal advice.