384 U.S. 597 (1966), 970, Federal Trade Commission v. Dean Foods Co.

Docket Nº:No. 970
Citation:384 U.S. 597, 86 S.Ct. 1738, 16 L.Ed.2d 802
Party Name:Federal Trade Commission v. Dean Foods Co.
Case Date:June 13, 1966
Court:United States Supreme Court
 
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Page 597

384 U.S. 597 (1966)

86 S.Ct. 1738, 16 L.Ed.2d 802

Federal Trade Commission

v.

Dean Foods Co.

No. 970

United States Supreme Court

June 13, 1966

Argued March 28, 1966

CERTIORARI TO THE UNITED STATES COURT OF APPEALS

FOR THE SEVENTH CIRCUIT

Syllabus

Respondents, two substantial competitors in the sale of packaged milk in the Chicago area, signed a merger agreement following meetings with representatives of the Federal Trade Commission (FTC) who indicated that the merger would raise serious questions under the antitrust laws. At the time of the merger, one of the respondents was the third or fourth largest packaged milk distributor in the area, the other at least the second largest, and together they accounted for 23% of area sales of packaged milk. The FTC filed a complaint charging that the agreement violated § 7 of the Clayton Act and § 5 of the Federal Trade Commission Act. Thereafter, the FTC, under the All Writs Act, 28 U.S.C. § 1651(a), petitioned the Court of Appeals for a temporary restraining order and a preliminary injunction to maintain the status quo until the FTC determined the merger's legality. The FTC alleged the probability of its finding an antitrust violation, and that the need for injunctive relief was "compelling," since, under the merger, one of the respondents would no longer exist, its milk routes and certain of its plants and equipment would be sold and its remaining assets would be consolidated, precluding its restoration as a viable independent company if the merger were subsequently ruled illegal. The petition alleged that the Court of Appeals would consequently be deprived of its appellate jurisdiction over final FTC orders and the opportunity to enter a meaningful order of its own. The Court of Appeals, on the hearing for a preliminary injunction, dismissed the petition on the ground that the FTC had not entered a cease and desist order, and had no authority to institute the proceeding, Congress having failed to enact bills introduced for such a purpose. The contract was then closed. MR. JUSTICE CLARK, on application, issued a preliminary injunction against material corporate changes in the acquired company and subsequently this Court granted certiorari.

Held:

1. The Court of Appeals has jurisdiction to issue a preliminary injunction to prevent consummation of the merger agreement upon

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a showing that all effective remedial order would otherwise be virtually impossible once the merger had been implemented, thus rendering a final divestiture decree futile. Pp. 603-605.

(a) The All Writs Act extends to the potential jurisdiction of an appellate court where an appeal is not then pending, but may later be perfected. Pp. 603-604.

(b) The grant in § 11(c) of the Clayton Act to courts of appeals of jurisdiction to review final orders of the FTC against illegal mergers on application of any person required thereby to cease and desist such violations includes the traditional power to preserve the status quo while administrative proceedings are in progress to prevent impairment of the effective exercise of appellate jurisdiction. Cf. Whitney Nat. Bank v. New Orleans Bank, 379 U.S. 411. Pp. 604-605.

2. The FTC, under the circumstances alleged in this case, has standing to seek preliminary relief under the All Writs Act. Pp. 605-612.

(a) It would stultify Congress' purpose in entrusting the FTC with enforcement of the Clayton Act and granting it the power to order divestiture if the FTC did not have the incidental power to ask the courts of appeals to exercise their authority under the All Writs Act. Pp. 606-612.

(b) The power of the courts of appeals to grant preliminary relief here derives from the All Writs Act, not the Clayton Act. P. 608.

(c) Congress' failure to enact proposals that the FTC be empowered itself to issue preliminary relief or to proceed in district courts for that purpose reflects no intent to circumscribe traditional judicial remedies. Pp. 608-611.

356 F.2d 481, reversed and remanded.

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CLARK, J., lead opinion

MR. JUSTICE CLARK delivered the opinion of the Court.

At issue here is the power of the Court of Appeals under the All Writs Act, 28 U.S.C. § 1651(a) (1964 ed.), to temporarily enjoin the consummation of a merger that is under attack before the Federal Trade Commission as violative of § 7 of the Clayton Act, as amended, 64 Stat. 1125, 15 U.S.C. § 18 (1964 ed.). This case arose on the application of the Commission for a temporary restraining order and a preliminary injunction against respondents Dean Foods Company and Bowman Dairy Company to maintain the status quo until the Commission determined the legality of their merger. The Commission alleged that it had issued a complaint against respondents under § 7 of the Clayton Act and § 5 of the Federal Trade Commission Act, 38 Stat. 719, as amended, 52 Stat. 111, 15 U.S.C. § 45 (1964 ed.), and that, from the facts underlying the complaint, "it is probable that the Federal Trade Commission will enter an order finding a violation of these laws." The petition stated that there was a "compelling" need for preliminary relief, since the

acquisition itself will split Bowman in two -- Dean will acquire fixed assets, receivables and good will; Bowman will retain all cash, government and other marketable securities, and some real estate investments

for distribution to its stockholders.1 In addition, it was alleged that Dean planned to dispose of most of Bowman's retail milk routes, certain of its plants and equipment, and to consolidate the remaining assets. The Commission thus argued that, if the merger were allowed to be completed, "Bowman as an entity will no longer exist," and that it "will be `extremely difficult and very probably impossible'"

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to restore Bowman as "a viable independent" company if the merger were subsequently ruled illegal. In other words, consummation of the agreement would

prevent the Commission from devising, or render it extremely difficult for the Commission to devise, any effective remedy after its decision on the merits.

As grounds for issuance of an extraordinary writ, the Commission asserted that the Court of Appeals

will, in effect, be deprived of its appellate jurisdiction [over final Commission orders] and of the opportunity to enter a meaningful final order of its own in respect to this acquisition, since the res in custodia legis -- Bowman -- will have vanished.

The Court of Appeals entered a temporary restraining order against respondents, as prayed. On the hearing for a preliminary injunction, however, it dissolved the temporary restraining order and dismissed the petition for the reasons that

no cease and desist order has been entered by the Commission relative to the subject matter in the case at bar and . . . we now hold that the Commission did not have authority to institute this proceeding in this court. . . .

In its final judgment, the Court of Appeals supported [86 S.Ct. 1741] its refusal to grant relief at the request of the Commission by reference to the fact that:

in the 84th Congress and in the 89th Congress, bills sponsored by the said Commission were introduced, which bills, if enacted into law, would have conferred upon the Commission such authority as it is attempting to exercise in the case now before this court, but that said measures were not enacted into law, and Congress has not provided otherwise for bestowing this authority upon said Commission.

356 F.2d 481, 482.

A few hours after the Court of Appeals entered its order on January 19, 1966, the contract was closed and Dean acquired legal title to Bowman's operating assets.

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Upon application by the Solicitor General on behalf of the Commission, Mr. Justice Clark, after consulting the other members of this Court, entered a preliminary injunction on January 24, 1966, restraining respondents from making any material changes with respect to Bowman's corporate structure or the assets purchased. This order provided that Dean might sell Bowman's retail home delivery routes upon terms and conditions acceptable to the Commission, but that any milk supplied by Dean to the purchasers of the routes must continue to be delivered under the Bowman label and from former Bowman plants. We granted certiorari on February 18, 1966, 383 U.S. 901, and expedited consideration of this case. We conclude that the Court of Appeals erred, and reverse its judgment.

I

Since the case comes to us from a dismissal on jurisdictional grounds, we must take the allegations of the Commission's application for a preliminary injunction as true. We need not detail the facts further than to say that Dean and Bowman were substantial competitors in the sale of packaged milk in the Chicago area, one of the largest markets in the United States for packaged milk. On November 2, 1965, attorneys for Dean and Bowman met with representatives of the Commission to discuss a proposal by Dean to purchase all of Bowman's plants and equipment, the Bowman name, all customer and supplier lists, together with the benefit of their relationships and various other assets, all of which were situated in the Chicago area. Bowman would consequently cease doing a dairy business there. It was emphasized that the inquiry was merely to ascertain the views of the staff of the Commission, and not to secure a formal advisory opinion. After investigation, on December 3, 1965, the Commission's staff advised Dean's counsel that it believed the acquisition would raise serious questions under the

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antitrust laws, and that, on the basis of existing information, the staff would recommend that the Commission issue a complaint against the acquisition if consummated. After further meetings...

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