Pan American World Airways, Inc v. United States United States v. Pan American World Airways, Inc, s. 23 and 47

• Citation: 83 S.Ct. 476,9 L.Ed.2d 325,371 U.S. 296
• Decision Date: 14 January 1963
• Docket Number: Nos. 23 and 47,s. 23 and 47
• Parties: PAN AMERICAN WORLD AIRWAYS, INC., Appellant, v. UNITED STATES. UNITED STATES, Appellant, v. PAN AMERICAN WORLD AIRWAYS, INC., et al
• Court: United States Supreme Court

371 U.S. 296

83 S.Ct. 476

9 L.Ed.2d 325

PAN AMERICAN WORLD AIRWAYS, INC., Appellant,

v UNITED STATES.

UNITED STATES, Appellant,

v. PAN AMERICAN WORLD AIRWAYS, INC., et al.

Nos. 23 and 47.

Argued Nov. 8, 1962.

Decided Jan. 14, 1963.

[Syllabus from pages 296-297 intentionally omitted]

Archibald Cox, Sol. Gen., for appellee and appellant United states.

David W. Peck, New York City, for appellant and appellee Pan American World Airways, Inc. Lawrence J. McKay, New York City, for appellee W. R. Grace & Co.

Mr. Justice DOUGLAS delivered the opinion of the Court.

This is a civil suit brought by the United States charging violations by Pan American, W. R. Grace & Co., and Panagra of §§ 1, 2, and 3 of the Sherman Act, 15 U.S.C. §§ 1, 2, and 3. This suit, which the Civil Aeronautics Board requested the Attorney General to institute, charged two major restraints of trade. First, it is charged that Pan American and Grace, each of whom owns 50% of the stock of Panagra, formed the latter under an agreement that Panagra would have the exclusive right to traffic along the west coast of South America free from Pan American competition and that Pan American was to be free from competition of Panagra in other areas in South America and between the Canal Zone and the United States. Second, it is charged that Pan American and Grace conspired to monopolize and did monopolize air commerce between the eastern coastal areas of the United States and western coastal areas of South America and Buenos Aires. Pan American was also charged with using its 50% control over Panagra to prevent it from securing authority from the C.A.B. to extend its route from the Canal Zone to the United States.¹ In 1928, when Pan American and Grace entered into an agreement to form Panagra,² air transportation was in its infancy; and this was the first entry of an American air carrier on South America's west coast. Pan American in 1930 acquired the assets of an airline competing with it for air traffic from this country to the north and east coasts of South America and received a Post Office air mail subsidy contract.³

The District Court found that there was no violation by Pan American and Grace of § 1 of the Sherman Act through the division of South American territory between Pan American and Panagra.⁴ It held, however, that Pan American violated § 2 of the Sherman Act by suppressing Panagra's efforts to extend its route from the Canal Zone to this country—in particular, by blocking Panagra's application to the Civil Aeronautics Board for a certificate for operation north of the Canal Zone.⁵ It indicated that Pan American should divest itself of Panagra stock. But it directed dismissal of the complaint against Grace and against Panagra, holding that none of their respective practices violated the Sherman Act. 193 F.Supp. 18. Both Pan American and the United States come here on direct appeals (15 U.S.C. § 29); and we postponed the question of jurisdiction to the merits. 368 U.S. 964, 966, 82 S.Ct. 438, 440, 7 L.Ed.2d 395.

When the transactions, now challenged as restraints of trade and monopoly, were first consummated, air carriers were not subject to pervasive regulation. In 1938 the Civil Aeronautics Act (52 Stat. 973 (49 U.S.C. § 401 et seq., 1952 Ed.)) was passed which was superseded in 1958 by the Federal Aviation Act, 72 Stat. 731, 49 U.S.C. § 1301 et seq., the latter making no changes relevant to our present problem. Since 1938, the industry has been regulated under a regime designed to change the prior competitive system. As stated in S.Rep. No. 1661, 75th Cong., 3d Sess., p. 2, 'Competition among air carriers is being carried to an extreme, which tends to jeopardize the financial status of the air carriers and to jeopardize and render unsafe a transportation service appropriate to the needs of commerce and required in the public interest, in the interests of the Postal Service, and of the national defense.'

Some provisions of the 1938 Act deal only with the future, not the past. Such, for example, are the provisions dealing with abandonment of routes (§ 401(k)), with loans or financial aid from the United States (§ 410), and with criminal penalties. § 902. The Act, however, did not freeze the status quo nor attempt to legalize all existing practices. Thus § 401 requires every 'air carrier' to acquire a certificate from the Board, a procedure being provided whereby some could obtain 'grandfather' rights. By § 401(h) the Board has authority to alter, amend, modify, or suspend certificates whenever it finds such action to be in the public interest.

Section 409, in regulating interlocking relations between air carriers and other common carriers or between air carriers and those 'engaged in any phase of aeronautics,' looks not only to the future but to the past as well. For the prohibition is that no air carrier may 'have and retain' officers or directors of the described classes. Section 408, which is directed at consolidations, mergers, and acquisition of control over an 'air carrier,' makes it unlawful, unless approved by the Board, for any 'common carrier' to 'purchase, lease, or contract to operate the properties' of an 'air carrier' or to 'acquire control of any air carrier in any manner whatsoever' or to 'continue to maintain any relationship established in violation of any of the foregoing' provisions of § 408(a). By § 408(b) a common carrier is taken to be an 'air carrier' for the purposes of § 408; and transactions that link 'common carriers' to 'air carriers' shall not be approved unless the Board finds that 'the transaction proposed will promote the public interest by enabling such carrier other than an air carrier to use aircraft to public advantage in its operation and will not restrain competition.'

We do not suggest that Grace, a common carrier, need get the Board's approval to continue the relationship it had with Panagra when the 1938 Act became effective.⁶ It is clear, however, that the Board under § 411 of the 1958 Act has jurisdiction over 'unfair practices' and 'unfair methods of competition' even though they originated prior to 1938.

That section provides.

'The Board may, upon its own initiative or upon complaint by any air carrier, foreign air carrier, or ticket agent, if it considers that such action by it would be in the interest of the public, investigate and determine whether any air carrier, foreign air carrier, or ticket agent has been or is engaged in unfair or deceptive practices or unfair methods of competition in air transportation or the sale thereof. If the Board shall find, after notice and hearing, that such air carrier, foreign air carrier, or ticket agent is engaged in such unfair or deceptive practices or unfair methods of competition, it shall order such air carrier, foreign air carrier, or ticket agent to cease and desist from such practices or methods of competition.' (Italics added.) 49 U.S.C. § 1381.

The words 'has been or is engaged in unfair * * * practices or unfair methods of competition' plainly include practices started before the 1938 Act and continued thereafter⁷ as well as practices instituted after the effective date of the Act.

The parentage of § 411 is established. As the Court stated in American Airlines v. North American Airlines, 351 U.S. 79, 82, 76 S.Ct. 600, 604, 100 L.Ed. 953 this section was patterned after § 5 of the Federal Trade Commission Act,⁸ and '(w)e may profitably look to judicial interpretation of § 5 as an aid in the resolution of * * * questions raised * * * under § 411.' As respects the 'public interest' under § 411, the Court said:

'* * * the air carriers here conduct their business under a regulated system of limited competition. The business so conducted is of especial and essential concern to the public, as is true of all common carriers and public utilities. Finally, Congress has committed the regulation of this industry to an administrative agency of special competence that deals only with the problems of the industry.' Id., 84, 76 S.Ct. 604.

The Board in regulating air carriers is to deal with at least some antitrust problems. Apart from its power under § 411, it is given authority by §§ 408 and 409, as already noted, over consolidations, mergers, purchases, leases, operating contracts, acquisition of control of an air carrier, and interlocking relations. Pooling and other like arrangements are under the Board's jurisdiction by reason of § 412. Any person affected by an order under §§ 408, 409 and 412 is 'relieved from the operations of the 'antitrust laws," including the Sherman Act. § 414. The Clayton Act, insofar as it is applicable to air carriers, is enforceable by the Board. 52 Stat. 973, 1028, § 1107(g); 15 U.S.C. § 21.

There are various indications in the legislative history that the Civil Aeronautics Board was to have broad jurisdiction over air carriers, insofar as most facets of federal control are concerned.

The House Report stated:

'It is the purpose of this legislation to coordinate in a single independent agency all of the existing functions of the Federal Government with respect to civil aeronautics, and, in addition, to authorize the new agency to perform certain new regulatory functions which are designed to stabilize the airtransportation industry in the United States.' H.R.Rep.No.2254, 75th Cong., 3d Sess., p. 1.

No mention is made of the Department of Justice and its role in the enforcement of the antitrust laws, yet we hesitate here, as in comparable situations,⁹ to hold that the new regulatory scheme adopted in 1938 was designed completely to displace the antitrust laws—absent an unequivocally declared congressional purpose so to do. While the Board is empowered to deal with numerous aspects of what are normally thought of as antitrust problems, those expressly entrusted to it encompass only a fraction of the total. Apart from orders which give immunity from the antitrust laws by reason of § 414, the whole criminal...