International Tel. & Tel. Corp. v. General Telephone & Electronics Corp.

• Decision Date: 25 April 1975
• Docket Number: No. 73-1513,73-1513
• Citation: 518 F.2d 913
• Parties: 1975-1 Trade Cases 60,291 INTERNATIONAL TELEPHONE AND TELEGRAPH CORPORATION, Appellee, v. GENERAL TELEPHONE & ELECTRONICS CORPORATION and Hawaiian Telephone Company, Appellants.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 913

518 F.2d 913

1975-1 Trade Cases 60,291

INTERNATIONAL TELEPHONE AND TELEGRAPH CORPORATION, Appellee, v. GENERAL TELEPHONE & ELECTRONICS CORPORATION and Hawaiian Telephone Company, Appellants.

No. 73-1513.

United States Court of Appeals Ninth Circuit.

April 25, 1975.

Milton Handler (argued), New York City, for appellants.

Maxwell M. Blecher (argued), Los Angeles, Cal., for appellee.

Before ELY and GOODWIN, Circuit Judges, and WILLIAMS, ^* District Judge.

ALFRED T. GOODWIN, Circuit Judge:

General Telephone & Electronics Corporation and Hawaiian Telephone Company, defendants, appeal a district court judgment ordering massive divestiture of subsidiary companies in a private antitrust action brought in 1967 by International Telephone and Telegraph Corporation. ¹ The judgment is affirmed in part and reversed in part.

ITT alleged that numerous acquisitions by GTE, beginning in 1950, together with trade practices which followed those acquisitions, violated §§ 1 and 2 of the Sherman Act and § 7 of the Clayton Act. ²

As of 1969, GTE owned and controlled 33 telephone operating companies serving customers in several states. GTE also owned Automatic Electric Company, which in turn owned Lenkurt Co., Inc. Automatic Electric and Lenkurt manufacture telecommunications equipment.

The theory of ITT's case was that GTE's acquisitions had enabled GTE to effect a growing foreclosure of competition within the telecommunications equipment-manufacturing industry. By satisfying the equipment demand of its operating subsidiaries from sales by its manufacturing subsidiaries, GTE allegedly reduced to an impermissible degree the potential sales opportunities of "independent" manufacturers, such as ITT.

The district court held that GTE had violated both the Sherman Act and the Clayton Act. The court ordered GTE to divest itself of Automatic and a number of operating subsidiaries.

I. The Clayton Act § 16 Proviso.

GTE's first point on appeal is that the Clayton Act's § 16 proviso ³ precluding private injunction suits against common carriers regulated by the Interstate Commerce Commission bars ITT's suit. By its terms, the proviso does not apply to carriers regulated by the Federal Communications Commission. ⁴ However, GTE would have us look through the language of the statute to achieve conformance with the purported intentions of Congress.

We assume for the purpose of this appeal that the § 16 proviso, if it had been worded so as to apply to FCC-regulated carriers, would preclude a suit for the type of injunctive relief sought here against a noncarrier holding company ⁵ owning such a carrier. ⁶

In 1914, when the Clayton Act was promulgated, telephone operating companies were common carriers subject to the Interstate Commerce Act ⁷ and thus were exempted from private injunction suits by virtue of the Clayton Act § 16 proviso. In 1934, Congress passed the Federal Communications Act, ⁸ which transferred jurisdiction over communications common carriers from the ICC to the FCC. Included in the Communications Act was a housekeeping amendment to § 11 of the Clayton Act reflecting the transfer of jurisdiction. ⁹ But Congress did not amend the § 16 proviso to extend the private injunction exemption to carriers newly made subject to the jurisdiction of the FCC. The district court held that the failure was intentional. ¹⁰ GTE urges that it was the result of oversight. The failure probably was inadvertent ¹¹ but we need not resolve that debate to decide this case. Assuming a legislative oversight, we decline to engage in a judicial revision of the statute.

There are two circumstances in which this court may look beyond the express language of a statute in order to give force to Congressional intent: where the statutory language is ambiguous; ¹² and where a literal interpretation would thwart the purpose of the over-all statutory scheme or lead to an absurd result. ¹³ GTE has not contended that the language of the proviso is ambiguous. But it has argued that a literal interpretation would thwart the purposes of the Federal Communications Act.

The § 16 proviso was enacted to prevent private "interference by injunction with any business or transactions in interstate carriers of sufficient public significance and importance to be within the jurisdiction of the Commission * * *." ¹⁴ The protection afforded by the proviso to common carriers regulated by the ICC is, at least to some extent, redundant. Its preclusion of private injunction suits directed against railroad mergers is clearly superfluous. Railroad mergers require prior ICC approval, which confers full antitrust immunity. ¹⁵ With respect to transactions and practices not expressly immunized, there is redundancy of exemption to the extent the ICC's regulatory scheme would, in the absence of the proviso, constitute an implied abrogation of the antitrust laws. ¹⁶

Similarly, there would be at least some overlap between the protections afforded communications common carriers by the § 16 proviso, if applicable, and those available without the proviso. For example, the interstate rates charged by communications common carriers, if set in accordance with the provisions of the Communications Act, ¹⁷ would be immune from antitrust attack to the extent that the charging practice was subject to the regulation of the FCC. ¹⁸ Telephone operating-company mergers would be at least partially immune without the proviso if submitted to the FCC and approved. ¹⁹

The narrow question we confront is whether any diminution in immunity resulting from the inapplicability of the § 16 proviso would thwart the regulatory scheme of the Communications Act. We do not decide whether the scheme would be equally well protected in the absence of the proviso. Such a standard would open the door to judicial revision of legislation whenever a requested revision would have any effect whatsoever in aid of discerned legislative intent. We think that a higher threshold of threat to the over-all statutory scheme must exist before judicial revision becomes appropriate. Indeed, we prefer the test employed by the Supreme Court in determining whether a regulatory scheme impliedly repeals the antitrust laws. We ask, then, whether, if the proviso remains inapplicable, there would exist a "plain repugnancy between the antitrust and regulatory provisions * * *." United States v. Philadelphia National Bank, 374 U.S. 321, 351, 83 S.Ct. 1715, 1735, 10 L.Ed.2d 915 (1963).

The question suggests its answer. The availability of a statutory exemption upon application to the FCC ²⁰ greatly reduces the danger of collision between the "two regimes * * *." ²¹ and even if a statutory exemption is not obtained or is not available ²² a defendant can make a claim of implied immunity which will be tested under the "repugnancy" standards of Philadelphia National Bank and its successors, ²³ thus insuring that the policies of the regulatory statute will not be thwarted. If it be argued that implied immunity may not be available because, as the district court held, § 221(a) is intended to be "the only means given to telephone companies to evade possible attack for violation of the antitrust laws," ²⁴ then the short answer is that any resulting "conflict" would stem from the effect of the regulatory statute itself. Obviously there would be no "repugnancy" if the initial premise were that the regulatory scheme contemplates the applicability of the antitrust laws in the absence of a statutory exemption.

In sum, the protection afforded by the implied-immunity doctrine and the statutory exempting power of the FCC ensures that the absence of a blanket ban or injunctive remedies in private antitrust suits against communications common carriers would not thwart the purposes of the Communications Act. Accordingly, we hold that we are not at liberty to vary the express language of the § 16 proviso.

We note that GTE makes no claim of exemption or immunity in this appeal.

Tidewater Oil Co. v. United States, 409 U.S. 151, 93 S.Ct. 408, 34 L.Ed.2d 375 (1972), and Monarch Life Ins. Co. v. Loyal Protective Life Ins. Co., 326 F.2d 841 (2d Cir. 1963), cert. denied, 376 U.S. 952, 84 S.Ct. 968, 11 L.Ed.2d 971 (1964), relied on by GTE, are not controlling. The crucial difference between Tidewater Oil and this case is that in Tidewater Oil the Supreme Court determined that a literal interpretation of 28 U.S.C. § 1292(b) would thwart the policy embodied in the Expediting Act. ²⁵ Resort to the legislative history was thus justified to discern whether the enactment of § 1292(b) had been intended as a departure from that policy. Here we have determined that the policy of the Communications Act would not be thwarted by a literal reading of the § 16 proviso. The threshold justification for varying the literal language of the statute to accord with legislative intent is thus lacking.

Monarch Life Insurance is similarly distinguishable. ²⁶

When Congress enacted the § 16 proviso it obviously intended to prevent disruption of the ICC's regulatory scheme by private parties seeking to enjoin activities of regulated carriers. The protection afforded the regulatory scheme was incomplete, however, because actions for damages, which have a serious potential for disruption, ²⁷ were not forbidden by the proviso. ²⁸ Subsequent Congressional efforts to preserve the integrity of regulatory schemes have taken the form, not of extension of the partial protection afforded by the § 16 proviso, but rather of full antitrust immunity for transactions approved by specified agencies. ²⁹ In certain instances, such immunity results inevitably because prior approval is required by the regulatory statute. ³⁰ In other cases, approval and antitrust immunity may be sought at the option of the regulated party. ³¹

This change in approach represents a rational policy choice to grant full immunity under specified conditions rather than partial immunity under all conditions. It is...