F.T.C. v. Food Town Stores, Inc.

• Decision Date: 13 August 1976
• Docket Number: No. 76-8264,76-8264
• Citation: 539 F.2d 1339
• Parties: 1976-2 Trade Cases 61,031 FEDERAL TRADE COMMISSION, Petitioner, v. FOOD TOWN STORES, INC., and Lowe's Food Stores, Inc., Respondents. Misc.
• Court: U.S. Court of Appeals — Fourth Circuit

Page 1339

539 F.2d 1339

1976-2 Trade Cases 61,031

FEDERAL TRADE COMMISSION, Petitioner, v. FOOD TOWN STORES, INC., and Lowe's Food Stores, Inc., Respondents.

Misc. No. 76-8264.

United States Court of Appeals Fourth Circuit.

Aug. 13, 1976.

Robert J. Lewis, Gen. Counsel, Gerald P. Norton, Deputy Gen. Counsel, Gerald Harwood, Asst. Gen. Counsel, David M. FitzGerald, F. T. C., Washington, D. C., for petitioner.

H. Grady Barnhill, Jr., Winston-Salem, N. C., Thomas M. Caddell, Salisbury, N. C., Rayner M. Hamilton, New York City, for respondents.

MEMORANDUM AND ORDER

WINTER, Circuit Judge.

Application has been made to me for an injunction pending appeal, pursuant to Rule 8, F.R.A.P., prohibiting the consummation of a merger between Food Town Stores, Inc. (Food Town) and Lowe's Food Stores, Inc. (Lowe's), which is scheduled to become effective by the filing of articles of merger at 5:00 p. m. on August 11, 1976. The district court denied relief, except to grant a temporary stay to provide the Court of Appeals sufficient time to consider and act upon the motion. It is impossible to convene a panel of the court in time to hear and decide the motion, and I will decide it as a single circuit judge. The motion and the supporting documents, including a brief, and a memorandum in opposition thereto, including supporting papers, have been read and considered, and counsel heard in chambers.

I conclude that an injunction pending appeal should be granted.

FACTS

On August 6, 1976, the Federal Trade Commission (FTC) filed an application in the United States District Court for the Middle District of North Carolina for a temporary restraining order (TRO), and a preliminary injunction pursuant to § 13(b) of the Federal Trade Commission Act, 15 U.S.C. § 53(b) (1976 Cum.Supp.), to enjoin the consummation of a merger between Food Town and Lowe's. The injunction was sought in aid of an FTC administrative proceeding which was instituted on August 4, 1976, challenging the merger as violating The matter was submitted to the district judge on August 9, 1976, on the papers and affidavits, some of which were not filed until August 8, 1976, and on oral argument. On August 10, 1976, the district court denied the TRO, but enjoined the filing of articles of merger until 5:00 p. m. on August 11, so as to permit the instant application to be made.

§ 7 of the Clayton Act, 15 U.S.C. § 18, and § 5 of the Federal Trade Commission Act, 15 U.S.C. § 45. The administrative complaint alleged that if permitted to become effective, the merger would eliminate competition between Food Town and Lowe's in six cities or towns of North Carolina and their trading areas, would increase concentration in those markets, would eliminate potential competition in other markets, would eliminate potential competition in other markets in West-Central North Carolina, and would increase barriers to entry into the retail food store business in some or all of the markets involved. The stockholders of both Food Town and Lowe's approved the merger on August 10, 1976, and the merger will become effective upon the filing of the articles of merger with the Secretary of State of North Carolina, or within six days thereafter.

FTC's motion presents two questions: the first is whether the order of the district judge is appealable so as to vest jurisdiction in the Court of Appeals to consider granting an injunction pending appeal on its merits, and, second, has FTC shown its entitlement to an injunction pending appeal?

JURISDICTION

Food Town and Lowe's vigorously assert that the order of the district judge denying the TRO is not an appealable order and therefore the Court of Appeals lacks jurisdiction to grant an injunction pending appeal. Analysis of the merits of this argument must begin with consideration of the statute under which the Commission instituted the proceeding in the district court. The pertinent provisions of § 13 of the Act, 15 U.S.C. § 53, follow:

Temporary restraining orders; preliminary injunctions

(b) Whenever the Commission has reason to believe

(1) that any person, partnership, or corporation is violating, or is about to violate, any provision of law enforced by the Federal Trade Commission, and

(2) that the enjoining thereof . . . until such complaint is dismissed by the Commission or set aside by the court on review, or until the order of the Commission made thereon becomes final, would be in the interest of the public

the Commission . . . may bring suit in a district court of the United States to enjoin any such act or practice. Upon a proper showing that, weighing the equities and considering the Commission's likelihood of ultimate success, such action would be in the public interest, and after notice to the defendant, a temporary restraining order or a preliminary injunction may be granted without bond . . . .

It is at once obvious that in a proceeding under § 13, the granting or denial of a temporary restraining order or a preliminary injunction is an end unto itself. The district court is not authorized to determine whether the antitrust laws have been or are about to be violated. That adjudicatory function is vested in FTC in the first instance. The only purpose of a proceeding under § 13 is to preserve the status quo until FTC can perform its function.

Viewed in this light, the conclusion follows that the district court's denial of a TRO effectively terminated the litigation and constituted a final order which is appealable under 28 U.S.C. § 1291. The case is quite like our recent decision in Commonwealth of Virginia v. Tenneco, Inc., 4 Cir.,538 F.2d 1026 (February 20, 1976), in which we concluded that since a temporary restraining order effectively granted the plaintiff all of the relief which it sought, the order was sufficiently final to be appealable. Of course, in the instant case the temporary restraining order was denied Additionally, the denial of the temporary restraining order is appealable under 28 U.S.C. § 1292. The TRO order was denied after full hearing in which the parties fully participated, and the practical effect of the denial, under the facts of the case, will be effectively to prevent FTC from carrying out its statutory duty of prohibiting a merger which violates § 7 of the Clayton Act and § 5 of the Federal Trade Commission Act. If articles of merger are filed on August 11, 1976, and permitted to become effective, any proceeding in the district court for a preliminary or permanent injunction will be rendered moot. Commonwealth of Virginia v. Tenneco, Inc., supra. I deem the fact that FTC might subsequently order a divestiture, if the merger is consummated and if it violates federal antitrust laws, irrelevant. Divestiture may not be as effective a remedy as prevention of a merger, but in any event, FTC has a statutory duty to prevent illegal mergers as well as to disassemble them.

but the effect of the denial was to deny FTC the only relief which it sought.

ENTITLEMENT TO INJUNCTION

In passing upon the merits of FTC's motion for an injunction pending appeal, I consider first the factors which may properly be given weight under § 13(b). Counsel for defendants press on me the statements contained in my opinion in Long v. Robinson, 432 F.2d 977 (4 Cir. 1970). Although Long was not cited by the district court in its 18-page order (which counsel for defendants admit was prepared by them at the district court's request and adopted by the court), the format of Long was followed in arriving at the decision to deny the TRO. From my examination of the law, I think Long largely inapposite.

Section 13(b) prescribes as the test for granting injunctive relief " the interest of the public," and it authorizes a district court to grant injunctive relief when "weighing the equities and considering the Commission's likelihood of ultimate success, such action would be in the public interest . . . ." The equities to be weighed are not, however, the usual equities in private litigation, to which so much attention was given in Long. This is made clear by Conference Committee Report No. 93-924 concerning P.L. 93-153, the legislation which enacted § 13(b) as it presently exists. See 2 U.S.Code Cong. and Admin.News, 93 Cong., 1st Sess., pp. 2523, et seq. (1973). In speaking of the language which was codified as § 13(b), the Report states:

16. Section 408(f) relates to the standard of proof to be met by the Federal Trade Commission for the issuance of a temporary restraining order or a preliminary injunction. It is not intended in any way to impose a totally new standard of proof different from that which is now required of the Commission. The intent is to maintain the statutory or "public interest" standard which is now applicable, and not to impose the traditional "equity" standard of irreparable damage, probability of success on the merits, and that the balance of equities favors the petitioner. This latter standard derives from common law and is appropriate for litigation between private parties. It is not, however, appropriate for the implementation of a Federal statute by an independent regulatory agency where the standards of the public interest measure the propriety and the need for injunctive relief.

The inclusion of this new language is to define the duty of the courts to exercise independent judgment on the propriety of issuance of a temporary restraining order or a preliminary injunction. This new language is intended to codify the decisional law of Federal Trade Commission v. National Health Aids, D.C., 108 F.Supp. 340 and Federal Trade Commission v. Sterling Drug, Inc., 317 F.2d 669, and similar cases which have defined the judicial role to include the exercise of such independent judgment. The Conferees did not intend, nor do they consider it appropriate, to burden the Commission with the requirements imposed by the traditional equity standard which the common law applies to private litigants. (Emphasis in original.) Id.,...