Petition of Gold Bond Stamp Company

• Decision Date: 09 August 1963
• Docket Number: No. 4-62 Civil 369.,4-62 Civil 369.
• Citation: 221 F. Supp. 391
• Parties: Petition of GOLD BOND STAMP COMPANY for an Order Modifying or Setting Aside Civil Investigative Demand No. 0016.
• Court: U.S. District Court — District of Minnesota

221 F. Supp. 391

Petition of GOLD BOND STAMP COMPANY for an Order Modifying or Setting Aside Civil Investigative Demand No. 0016.

No. 4-62 Civil 369.

United States District Court D. Minnesota, Fourth Division.

August 9, 1963.

Matthew J. Levitt, John M. Palmer and Jerry F. Rotman, of Levitt & Palmer, Minneapolis, Minn. (John R. Heim, Minneapolis, Minn., of counsel), for petitioner.

Morton M. Maneker and Margaret H. Brass, Attys., Dept. of Justice, Washington, D. C., for United States.

NORDBYE, District Judge.

This cause came before the Court on a petition by the Gold Bond Stamp Company under Section 5(b) of the Antitrust Civil Process Act, 15 U.S.C.A. §§ 1311-1314, hereafter referred to as the Act, for an order modifying or setting aside a Civil Investigative Demand served upon it by the Assistant Attorney General in charge of the Antitrust Division of the Department of Justice.

The petitioner contends that the demand should be modified or set aside upon the grounds that (1) it fails to define the "nature of the conduct" under investigation and the "provision of law applicable thereto" as required by Section 3(b) (1) of the Act; (2) it fails to request documents which are relevant to the subject matter of the investigation as required by Section 3(a) of the Act; and (3) it fails to describe the documents sought with sufficient certainty so as to allow them to be identified as required by Section 3(b) (2) of the Act. The petitioner further contends that because of these above-mentioned failures, this particular demand constitutes a fishing expedition or industry-wide survey, a result not intended by Congress, and that it also is violative of the petitioner's constitutional right to be free from unlawful searches and seizures provided by the Fourth Amendment. In the alternative, the petitioner requests that the Court stay compliance with this demand until the Federal Trade Commission has completed its investigation of two of its leading competitors, Sperry and Hutchinson Company and Top Value Enterprises, Inc.

So far as this Court has been able to determine, this is the first time that any person has resorted to the procedure found in Section 5(b) of the Act in order to secure a determination of its rights and duties thereunder. Thus it may be helpful to examine briefly the purpose of the bill, its history, and its provisions in order to provide a framework in which to consider the petitioner's contentions.

Basically this Act provides a compulsory pre-complaint procedure through which the Antitrust Division can obtain documentary information upon which it can make a determination of whether or not a person has committed a civil violation of the antitrust laws. Prior to the enactment of this legislation, there were four methods which the Division could employ to obtain such information; first, by asking the person involved to furnish it voluntarily; second, by impaneling a grand jury and obtaining it under subpoena; third, by requesting it from the Federal Trade Commission;¹ and fourth, by commencing a civil suit with a skeleton complaint and then using the rules of discovery.

All of these methods were alleged to be unsatisfactory. The first method was unsatisfactory because the person from whom the information was sought could frustrate the investigation by refusing to cooperate. Case histories compiled by the Justice Department showed that this happened with some frequency.² The second method was unsatisfactory for several reasons, primarily, however, because it had been held in United States v. Procter & Gamble, 1958, 356 U.S. 677, 7 S.Ct. 983, 2 L.Ed.2d 1077, that it was an abuse of process to make use of the grand jury where there was no intention to bring a criminal action. The third method was unsatisfactory because it placed the investigation of the facts under the control of one group of men different from those who might eventually institute an action based upon them. Furthermore, it was unsatisfactory because it would take men whom the Federal Trade Commission needed and for whom appropriations had been made, away from the work of the Commission to do the work of the Justice Department. The fourth method was also unsatisfactory because it was felt that it was unfair to resort to such a practice without any certainty that sufficient evidence existed to warrant a civil suit. Thus it seems reasonably clear that some other method not then available to the Justice Department had to be created.

The first impetus for such a method came from the Attorney General's National Committee to study the Antitrust Laws. In its report, the Committee recognized that the aforementioned methods of obtaining documentary information in order to determine whether or not a civil suit should be brought was inadequate and recommended that the Attorney General be allowed to serve Civil Investigative Demands.³ The requirements of the Civil Investigative Demand as recommended by the Committee bears a striking resemblance to the requirements found in this Act now under construction. The President also recommended in his Economic Reports legislation similar to that found in the Act.⁴ The Cabinet Committee on Small Business, in its first progress report issued on August 7, 1956, and in its second progress report issued on December 31, 1958, also recommended legislation empowering the Attorney General to obtain such information. Bills were presented to the 84th and 85th Congresses which looked to the carrying out of these recommendations.⁵ In neither Congress were these bills acted upon. In the 86th Congress, Senator Estes Kefauver introduced S. 716, which provided the Attorney General with the authority to obtain documentary information for civil antitrust investigations by the use of the Civil Investigative Demands. This bill as amended was passed by the Senate, but never was acted upon by the House. In the 87th Congress, S. 167, which was identical with S. 716, was introduced. After numerous amendments, it was enacted on September 19, 1962.

The concept embodied in the Antitrust Civil Process Act is not particularly unique. At the time of its enactment, at least seventeen States allowed their Attorneys General somewhat similar visitorial powers in the antitrust enforcement area.⁶ Furthermore, numerous federal officials also had visitorial powers of a like nature to aid them in the performance of their duties.⁷

Turning now to the Antitrust Civil Process Act itself, it authorizes the Attorney General or his Assistant in charge of the Antitrust Division to issue a Civil Investigative Demand whenever he has reason to believe that any person under investigation has in his possession any documents relevant to an antitrust investigation. The term "person" means any corporation, association, partnership, or other legal entity, not a natural person. The Civil Investigative Demand must be in writing and is required to state the nature of the conduct constituting the alleged violation and the provision of law applicable thereto. It also must define the documents sought with sufficient particularity so that they may be fairly identified and provide a reasonable time to allow the person on whom the demand is served to collect them for inspection. Furthermore, the demand also must identify the Custodian who will receive the antitrust documents secured by the demand. The Civil Investigative Demand cannot contain any requirement which would be considered unreasonable if contained in a grand jury subpoena duces tecum, nor can it require the production of documents which would be considered privileged if requested by a grand jury subpoena duces tecum. Service of the demand upon a person under investigation is provided for in the same manner as under the Federal Rules of Civil Procedure.

In order to insure that the documents received pursuant to such a demand are properly preserved and the rights of the person under investigation are protected, the Act requires the Assistant Attorney General in charge of the Antitrust Division to designate an Antitrust Documents Custodian who is charged with these responsibilities. The documents so obtained may be used by the United States in any court or grand jury proceeding involving antitrust violations. However, they may not be examined by anyone other than an employee of the Department of Justice or the person under investigation.

Upon the conclusion of any antitrust case or proceeding or after a reasonable time for analysis and inspection and failure to institute an antitrust case or proceeding, and upon written demand upon the Attorney General or his Assistant in charge of the Antitrust Division, the documents produced, not including the copies made by the Antitrust Division, which have not passed into the hands of a court or grand jury, shall be returned by the Custodian to the person who has produced them pursuant to the demand.

Under the provisions of the Act, the sufficiency of such a demand may be tested by the person upon whom it is served in any district in which that person resides, is found, or transacts business. That person also may petition the Court in the district in which the Custodian has his office for an order requiring the performance of any duty required of him by the Act. The Attorney General also may file a petition in any district where the person under investigation resides, is found, or transacts business, for an order requiring compliance with a demand. Such orders are appealable and the disobedience of such an order is made punishable as contempt. Also any willful obstruction of the antitrust civil process done with "intent to avoid, evade, prevent, or obstruct compliance" with a demand is punishable by a fine of $5,000 or 5 years in jail or both.

With this framework in mind, the Court will consider first the petitioner's contention that the power granted to the Attorney General violates the search and seizure clause of the Fourth Amendment to the Constitution....