420 U.S. 223 (1975), 73-1290, United States v. ITT Continental Baking Co.

Docket Nº:No. 73-1290
Citation:420 U.S. 223, 95 S.Ct. 926, 43 L.Ed.2d 148
Party Name:United States v. ITT Continental Baking Co.
Case Date:February 19, 1975
Court:United States Supreme Court
 
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Page 223

420 U.S. 223 (1975)

95 S.Ct. 926, 43 L.Ed.2d 148

United States

v.

ITT Continental Baking Co.

No. 73-1290

United States Supreme Court

Feb. 19, 1975

Argued November 13, 1974

CERTIORARI TO THE UNITED STATES COURT OF APPEALS

FOR THE TENTH CIRCUIT

Syllabus

The civil penalty provisions of the Clayton Act, 15 U.S.C. § 21(l), and the Federal Trade Commission Act, 15 U.S.C. § 45(l), similarly provide in part that each separate violation of a Federal Trade Commission (FTC) cease and desist order issued under the respective Acts shall be a separate offense, except [95 S.Ct. 928] that, in the case of a violation through "continuing failure or neglect to obey" a final order of the FTC each day of continuance of such failure shall be deemed a separate offense. After the FTC had charged the Continental Baking Co. (Continental), a bakery which later merged with respondent, with violations of § 7 of the Clayton Act and § 5 of the Federal Trade Commission Act by various acquisitions of other bakeries, the parties agreed to a consent order prohibiting Continental from "acquiring" other bakeries. Thereafter, alleging that Continental had acquired assets in other companies in violation of this order, the Government brought suit for civil penalties to be imposed daily from the date of the contract of acquisition to the date of filing of the complaint. The District Court, while holding that the order had been violated, declined to order daily penalties, finding that the order proscribed only the initial act of acquisition, that the violations did not constitute "a continuing failure or neglect to obey" within the meaning of §§ 21(l) and 45(l), and that, therefore, only a single penalty might be imposed. The Court of Appeals affirmed that holding.

Held: "Acquiring" as used in the consent order means both the initial transaction and the maintaining of the rights obtained without resale, and therefore violation of the order is a "continuing failure or neglect to obey" an FTC order within the meaning of §§ 21(l) and 45(l) and thus subject to daily penalties thereunder. Pp. 230-243.

(a) The purpose of the "continuing failure or neglect to obey" provisions of §§ 21(l) and 45(l), as shown by their legislative

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histories, to assure that the penalty provisions would meaningfully deter violations whose effect is continuing and whose detrimental effect could be terminated or minimized by the violator at some time after initiating the violation, would be undermined and the penalty would be converted into a minor tax if violation of an order prohibiting "acquiring" assets were treated as a single violation. Pp. 230-233.

(b) Since the consent order "as it is written" supports an interpretation that the act of acquisition continues until the assets are disgorged (see (c), infra), there is no need to determine whether §§ 21(l) and 45(l) would permit the imposition of daily penalties even if the consent order must be read, as respondent claims, to proscribe only the initial act of acquisition. Pp. 233-238.

(c) Under the consent order "as it is written," "acquiring" must mean both the act of first obtaining assets and the retention and use of those assets, since to conclude otherwise would be to ignore the flexibility of the English language, as well as the circumstances surrounding the order and the context in which the parties were operating. That conclusion is supported by both the "appendix" to the parties' agreement of which the order is a part and the complaint, as proper aids for construing the order which is to be construed basically as a contract. But even without the aid of these documents, "acquiring," as used in an antitrust decree or order, continues until the assets are disgorged, since "acquiring" and related words, as used in the antitrust context, encompass the continuing act of obtaining certain rights and treating them as one's own. Pp. 238-243.

485 F.2d 16, reversed and remanded.

BRENNAN, J., delivered the opinion of the Court, in which DOUGLAS, MARSHALL, WHITE, and BLACKMUN, JJ., joined. STEWART, J., filed a dissenting opinion, in which BURGER, C.J., and POWELL and REHNQUIST, JJ., joined, post, p. 243.

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BRENNAN, J., lead opinion

MR. JUSTICE BRENNAN delivered the opinion of the Court.

The question presented by this case is whether violations of the prohibition of a Federal Trade Commission (FTC) consent order against "acquiring" other companies constituted single violations within the meaning of the applicable civil penalty statutes, 38 Stat. 734, as [95 S.Ct. 929] amended, 15 U.S.C. § 21(l); 38 Stat. 719, as amended, 15 U.S.C. § 45(l), or whether such violations constituted a "continuing failure or neglect to obey" within the meaning of those statutes, authorizing imposition of daily penalties. The United States District Court for the District of Colorado interpreted the consent order to proscribe only the initial act of acquisition, and held that, therefore, only a single penalty might be imposed. 1972 CCH Trade Cases ¶ 73,993, p. 92, 127 (Aug. 2, 1971). The Court of Appeals for the Tenth Circuit affirmed the District Court to that extent, 485 F.2d 16 (1973). A subsequent decision of the Court of Appeals for the Eighth Circuit is in conflict, United States v. Beatrice Foods Co., 493 F.2d 1259 (1974), cert. pending No. 73-1798. In interpreting a consent order worded in its pertinent terms similarly to that in this case, the Court of Appeals for the Eighth Circuit held that acquisition is a continuing offense until it is undone, noting that the construction of "acquiring" as a single, rather than continuing, violation "ignores the crucial effects of an acquisition and would render nonacquisition orders virtually meaningless." Id. at 1270.

We granted certiorari in order to resolve this conflict between Courts of Appeals concerning the proper application of the "continuing" violation clauses of 15 U.S.C. §§ 21(l) and 45(l) to wording employed in a large number of FTC consent orders.1 Since we interpret

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"acquiring" as used in the consent order in this case to mean both the initial transaction and the maintaining of the rights obtained without resale, we hold that violation of the consent order is a continuing violation subject to daily penalties, and reverse.2

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I

The FTC alleged in 1960 that Continental Baking Co. (Continental),3 a major producer of bread and other bakery products, had violated § 7 of the Clayton Act, 38 Stat. 731, 64 Stat. 1125, 15 U.S.C. § 18, and § 5 of the Federal Trade Commission Act, 15 U.S.C. § 45, by various acquisitions which "may have the effect of substantially lessening competition or tending to create a monopoly. . . ." Before any decision in the case, the parties agreed to a proposed consent order which was approved by the FTC in May, 1962. The order, among

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other things, prohibited Continental for 10 years4 from

acquiring, directly or indirectly, through subsidiaries or otherwise, the whole or any part of the stock, share capital, or assets of any concern, corporate or non-corporate, engaged in any state of the United States in the production and sale of bread and bread-type rolls unless the Commission, on petition for modification of this Section III of this order, permits such an acquisition. . . .

Alleging that Continental had acquired assets in three companies in violation of this order, the Government brought suit in the District of Colorado under § 11(l) of the Clayton Act, 15 U.S.C. § 21(l)5 and § 5(l) of the Federal

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Trade Commission Act, 15 U.S.C. § 45(l),6 for civil penalties and other relief. The complaint prayed for penalties of [95 S.Ct. 931] $1,000 per day from the date of the contract of acquisition to the date of filing of the complaint on each of the three counts.

The District Court held that two of the three transactions were, in fact, in violation of the consent order. It declined, however, to order daily penalties, finding that

the terms of the consent order proscribe only the act of acquisition, and that the violations of the consent order . . . did not constitute a "continuing failure or neglect to obey" [15 U.S.C. §§ 21(l), 45(l)] said

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order. . . . Once these two acquisitions were accomplished, the violations were complete.

1972 CCH Trade Cases, at 92, 129. The District Court therefore entered a judgment against ITT Continental for $5,000 for each of the two violations found.7

The Court of Appeals reversed the District Court only insofar as it had held one of the three transactions not in violation of the consent order. It affirmed on the matter of daily penalties, holding that

whether the order was directed to the acquisition or to the acquisition and retention of assets or interests . . . [is] an interpretation of the consent order, and the result is in accordance with the prevailing standards.

485 F.2d at 21. Remand to the District Court was ordered only for imposition of a penalty for the third violation.

II

The basic question before us is whether there has been a "continuing failure or neglect to obey" an FTC order within the meaning of 15 U.S.C. §§ 21(l) and 45(l).

The "continuing failure or neglect to obey" provision

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of § 45(l) was added to the Federal Trade Commission Act in 1950, and the like provision of § 21(l) to the Clayton Act in 1959. Although the legislative history of these provisions is sparse, some examples of behavior intended to be covered by the "continuing" violation provisions do appear in the legislative history. These include continuing conspiracies to fix prices or control production, maintenance of a billboard [95 S.Ct. 932] in defiance of an order prohibiting false advertising, failure to dissolve an unlawful merger, and failure to eliminate an interlocking directorate. See letter from FTC General Counsel to Senator Fulbright, 96 Cong.Rec. 3026-3027 (1950); Hearings on H.R....

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