Foremost Intern. Tours, Inc. v. Qantas Airways Ltd.

• Citation: 525 F.2d 281
• Decision Date: 22 October 1975
• Docket Number: No. 74-2463,74-2463
• Parties: 1975-2 Trade Cases 60,578 FOREMOST INTERNATIONAL TOURS, INC., Plaintiffs-Appellee, v. QANTAS AIRWAYS LIMITED, Doe One through Doe Ten, Inclusive, Defendants-Appellants.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 281

525 F.2d 281

1975-2 Trade Cases 60,578

FOREMOST INTERNATIONAL TOURS, INC., Plaintiffs-Appellee, v. QANTAS AIRWAYS LIMITED, Doe One through Doe Ten, Inclusive,

Defendants-Appellants.

No. 74-2463.

United States Court of Appeals, Ninth Circuit.

Oct. 22, 1975.

Rehearing and Rehearing En Banc Denied Jan. 16, 1976.

George N. Tompkins, Jr., New York City (argued), of Condon & Forsyth, New York City, for defendants-appellants.

Kevin B. Hughes (argued), Honolulu, Hawaii, for plaintiff-appellee.

OPINION

Before BARNES, KILKENNY and GOODWIN, Circuit Judges.

BARNES, Senior Circuit Judge.

Plaintiff-Appellant Foremost International Tours, Inc., is a wholesaler of tour programs. Its business consists of arranging for and putting together the necessary elements of land and air transportation, hotel accommodations, car rentals, sightseeing excursions, and so forth, to create a fully inclusive tour package, and then in operating, overseeing and selling these tours. Foremost markets its tour programs through retail outlets including travel agents and the ticket offices of those airlines which sponsor or participate in providing the air transportation phase of the tour in question.

Defendant-Appellant Qantas is a foreign air carrier, which up until March 31, 1974, was a participating airline in one of Foremost's tours. On November 7, 1973, Qantas informed Foremost that it would not renew its annual contract (expiring March 31, 1974) with Foremost to provide air transportation for Foremost's "Royal Road Tours"; and on April 1, 1974, Qantas extended its operations and itself entered the business of producing and selling an integrated tour package in competition with Foremost.

Foremost subsequently brought this antitrust action against Qantas alleging violations of section 1 and 2 of the Sherman Act, and complaining that the conduct of Qantas surrounding its entrance into the inclusive tour industry showed a clear intent to monopolize the inclusive tour industry, and was undertaken with predatory intent, and with the purpose of eliminating Foremost as a competitor in the market. (C.T. 11-12).

The District Court found that Foremost was faced with being irreparably injured (its very existence was endangered--see, finding 18, C.T. 492), and that the actions taken by Qantas in its vertical-conglomerate expansion into the tour business established a prima facie violation of the antitrust laws (379 F.Supp. 88, 97, D.Haw.1974). Consequently, the District Court issued a preliminary injunction against Qantas enjoining it from engaging in certain proscribed conduct in it operation of competing integrated tours. However, since many issues involved in the case ¹ are matters affecting the air transportation industry regulated by the Civil Aeronautics Board (hereinafter CAB) the district judge, while retaining jurisdiction, stayed further proceedings in the District Court until the CAB could consider those matters which were in its primary jurisdiction.

Qantas appeals from the issuance of the preliminary injunction. We summarize the issues appellant raises as follows: (1) whether it was appropriate for the District Court to issue a preliminary injunction when: (a) the subject matter was arguably within the primary jurisdiction of the CAB; (b) the CAB arguably could have provided under the suspension power of 49 U.S.C. Sec. 1482(j)(2) the prophylactic relief sought by Foremost, and (c) the provisions of Sec. 414 of the Federal Aviation Act, 49 U.S.C. Sec. 1384, grant a limited antitrust immunity to various acts approved by the CAB; and (2) regardless of the outcome of the first issue, whether the requirements for the issuance of the preliminary injunction were met in this case at all.

This court has appellate jurisdiction under 28 U.S.C. Sec. 1292(a)(1).

We affirm.

Were this an antitrust case where the anticompetitive effects of the complained of action were confined to, and primarily affected the regulated industry, and the regulatory agency had the power and authority to protect the status quo should it deem it necessary by issuing a cease and desist order, we would then agree with appellant that in issuing a preliminary injunction the District Court would be acting contrary to the intent of Congress when it established regulatory agencies to provide pervasive, coordinated, and uniform administration of an industry. These are the basic principles enunciated by the Supreme Court in Pan American World Airways v. United States, 371 U.S. 296, 83 S.Ct. 476, 9 L.Ed.2d 325 (1962). But this is not such a case.

The instant case is not the normal type of case where the District Court's jurisdiction and the regulatory jurisdiction of an administrative agency conflict. In the usual case, we face one of two situations: (1) where one firm in a regulated industry is suing another firm in the same regulated industry over some intra-industry squabble relating to unfair competition, violation of some regulatory rule, territory allocation, horizontal agreements, or some other wholly intra-industry problem within the jurisdiction of the regulatory agency, ² or (2) when the consumers of the regulated industry's product or service are objecting to the effects upon the quality, availability, or cost of the goods or service due to intra-industry combinations (i.e., price fixing, territory allocations, etc.), the regulation of which is also wholly within the province of the administrative agency. ³

In those cases where the complained of action has an anticompetitive effect primarily confined to the regulatory industry in question (including necessarily the effect on its consumers who are those primarily affected by any anticompetitive influences in the industry) and where the anticompetitive effects arise from regulation, conduct, accords, agreements, etc. which are wholly of an intra-industry nature, the only appropriate course of action for a district court to take when faced with a conflict between regulatory agency jurisdiction over these matters, and the court's own antitrust jurisdiction is: (1) to dismiss the antitrust action and refrain from itself acting until a review of the agency's determination of the matter comes before it, or (2) in the event that the agency does not have sufficient means to provide the full panoply of antitrust remedies sought, stay the proceedings in the District Court until after the regulatory agency has acted. See Pan American v. United States, supra, at 313 n. 19, 83 S.Ct. 476; Report of the Attorney General's National Committee to Study the Antitrust Laws, 282 (1955).

The purpose of the Pan Am Rule is that when a regulatory agency has pervasive authority and the ability and expertise to exercise coordinated control over an entire industry and over all facets of that industry's industrial behavior, the agency having this overview of the entire industry is in the better position to resolve wholly intra-industry problems, and, being more attuned to the problems of the whole industry, better able to formulate and implement remedies which are flexible and deal with all of the intra-industry problem. Whether this purpose is always achieved is sometimes in doubt. In essence, it reflects a congressional determination that continuing regulation is a better calibrated tool for dealing with and controlling anti-competitive behavior within an industry than the more blunt and generalized instrument of the antitrust laws. Agencies, because their interests are narrowed and fixed on one industry, may be better able to balance the competing interests within the industry and the welfare of the consumers of the industry's service or product. In light of these factors, the District Court is to refrain from immediate or hasty interference in intra-industry problems of industries subject to the control of a regulatory agency, until the regulatory agency has had an opportunity to carry out the functions for which it was initially created by Congress. The policy more simply stated is that when a matter is wholly an intra-industry problem the agency created to regulate that industry should initially determined that problem.

Where, however, the antitrust problem facing the court is not wholly confined to the regulated industry, other factors and policy considerations may substantially alter the desirability of according such substantial deference to an agency which does not have a perspective broader than its own industry, or the interest, expertise, power, or willingness to deal with an inter-industry problem.

Even were this a case where a firm in a regulated industry entered into a business not regulated by the regulatory agency in question or vice versa (where a firm in an industry not regulated by the agency in question enters the regulated industry), and by either entry creates anticompetitive effects confined to the regulated industry in such an instance the regulatory agency might still deserve to be accorded this same degree of deference since the agency still has an incentive to act because of the adverse economic effect on its own industry, and it would still have authority to act and the means to enforce its decisions due to its control over firms operating within the regulated industry. (Cf. Hughes Tool Co. v. Trans World Airlines, Inc., 409 U.S. 363, 93 S.Ct. 647, 34 L.Ed.2d 577 (1973).)

But in the instant case, the situation is different. Here we have Qantas, a firm engaged in a regulated industry, entering the tour industry, which is not per se regulated by the CAB, and its entry into this industry is alleged to have had an anticompetitive effect on the non-CAB-regulated tour industry. In this case, while the CAB has authority over Qantas, and arguably has the means to enforce an order against Qantas should it choose, in lacking authority over all the parties, it cannot make the accommodations and effect the compromises which are the hallmark of agency regulation. It may well lack the means to deal with the...