UNITED STATES V. AMERICAN BLDG. MAINT. INDUS.

• Decision Date: 24 June 1975
• Citation: 422 U. S. 271
• Court: U.S. Supreme Court

United States v. American Building Maintenance Industries

No. 73-1689

Argued April 22, 1975

Decided June 24, 1975

422 U.S. 271

APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE CENTRAL DISTRICT OF CALIFORNIA

Syllabus

The Government brought this civil antitrust action against appellee, one of the largest suppliers of janitorial services in the country, with 56 branches serving more than 500 communities in the United States and Canada, and providing about 10% of such service sales in Southern California, contending that appellee's acquisition of two Southern California janitorial service firms (the Benton companies), which supplied about 7% of such services in Southern California, violated § 7 of the Clayton Act. That section provides that

"[n]o corporation engaged in commerce shall acquire . . . the stock or other share capital and no corporation subject to the jurisdiction of the Federal Trade Commission shall acquire . . . the assets of another corporation engaged also in commerce, where in any line of commerce in any section of the country, the effect of such acquisition may be substantially to lessen competition, or to tend to create a monopoly."

The Benton companies, some of whose customers engaged in interstate operations, performed all their services within California, locally recruited labor (which accounted for their major expenses) and locally purchased incidental equipment and supplies. The District Court granted appellee's motion for summary judgment, holding that there had been no § 7 violation. The Government contends that "engaged in commerce." as used in § 7. encompasses corporations like the Benton companies engaged in intrastate activities that substantially affect interstate commerce, and that, in any event, the Benton companies' activities were sufficiently interstate to come within § 7.

Held:

1. The phrase "engaged in commerce," as used in § 7 of the Clayton Act, means engaged in the flow of interstate commerce, and was not intended to reach all corporations engaged in activities subject to the federal commerce power; hence, the phrase does not encompass corporations engaged in intrastate activities substantially affecting interstate commerce, and § 7 can be applicable only when both the acquiring corporation and the acquired

Page 422 U. S. 272

corporation are engaged in interstate commerce. P P. 275-283.

(a) The jurisdictional requirements of § 7 cannot be satisfied merely by showing that allegedly anticompetitive acquisitions and activities affect commerce. Gulf Oil Corp. v. Copp Paving CO., 419 U. S. 186; FTC v. Bunte Bros., 312 U. S. 349. P P. 276-277.

(b) The precise "in commerce" language of § 7 is not coextensive with the reach of power under the Commerce Clause, and is thus not to be equated with § 1 of the Sherman Act, which reaches the impact of intrastate conduct on interstate commerce. P P. 277-279.

(c) When Congress reenacted § 7 in 1950 with the same "engaged in commerce" limitation, the phrase had long since become a term of art, indicating a limited assertion of federal jurisdiction, and, prior to that time, Congress had frequently distinguished between activities "in commerce" and broader activities "affecting commerce." P P. 279-281.

(d) Limiting § 7 to its plain meaning comports with the enforcement policies that the FTC and the Justice Department have consistently pursued. P P. 281-282.

2. Since the Benton companies did not participate directly in the sale, purchase, or distribution of goods or services in interstate commerce, they were not "engaged in commerce" within the meaning of § 7. And neither supplying local services to corporations engaged in interstate commerce nor using locally bought supplies manufactured outside California sufficed to satisfy § 7's "in commerce" requirement. P P. 283-286.

401 F.Supp. 1005, affirmed.

STEWART, J., delivered the opinion of the Court, in which BURGER, C.J., and MARSHALL, POWELL, and REHNQUIST, JJ., joined, and in all but Part III of which WHITE, J., joined. WHITE, J., filed a concurring opinion, post, P. 286. DOUGLAS, J., filed a dissenting opinion, in which BRENNAN, J., joined, post, P. 286. BLACKMUN, J., filed a dissenting opinion, post, P. 287.

Page 422 U. S. 273

MR. JUSTICE STEWART delivered the opinion of the Court.

The Government commenced this civil antitrust action in the United States District Court for the Central District of California, contending that the appellee, American Building Maintenance Industries, had violated § 7 of the Clayton Act, 38 Stat. 731, as amended, 15 U.S.C. § 18, by acquiring the stock of J. E. Benton Management Corp., and by merging Benton Maintenance Co. into one of the appellee's wholly owned subsidiaries. Following discovery proceedings and the submission of memoranda and affidavits by both parties, the District Court granted the appellee's motion for summary judgment, holding that there had been no violation of § 7 of the Clayton Act. The Government brought an appeal to this Court, and we noted probable jurisdiction. 419 U.S. 1104. [^{Footnote 1}]

I

The appellee, American Building Maintenance Industries, is one of the largest suppliers of janitorial services in the country, with 56 branches serving more than 500 communities in the United States and Canada. It is also the single largest supplier of janitorial services in southern California (the area comprising Los Angeles, Orange, San Bernardino, Riverside, Santa Barbara, and Ventura Counties), providing approximately 10% of the sales of such services in that area.

Page 422 U. S. 274

Both of. the acquired companies, J. E. Benton Management Corp. and Benton Maintenance Co., also supplied janitorial services in Southern California. [^{Footnote 2}] Together, their sales constituted approximately 70% of the total janitorial sales in that area. Although both Benton companies serviced customers engaged in interstate operations, all of their janitorial and maintenance contracts with those customers were performed entirely within California. Neither of the Benton companies advertised nationally, and their use of interstate communications facilities to conduct business was negligible. [^{Footnote 3}]

The major expense of providing janitorial services is the cost of the labor necessary to perform the work. The Benton companies recruited the unskilled workers needed to supply janitorial services entirely from the local labor market in Southern California. The incidental equipment and supplies utilized in providing those janitorial services, except in concededly insignificant amounts, were purchased from local distributors. [^{Footnote 4}]

Page 422 U. S. 275

It is unquestioned that the appellee, American Building Maintenance Industries, was and is actively engaged in interstate commerce. But on the basis of the above facts, the District Court concluded that, at the time of the challenged acquisition and merger, neither Benton Management Corp. nor Benton Maintenance Co. was "engaged in commerce" within the meaning of § 7 of the Clayton Act. Accordingly, the District Court held that there had been no violation of that law.

The Government's appeal raises two questions: first, does the phrase "engaged in commerce," as used in § 7 of the Clayton Act, encompass corporations engaged in intrastate activities that substantially affect interstate commerce? Second, if the language of § 7 requires proof of actual engagement in the flow of interstate commerce, were the Benton companies' activities sufficient to satisfy that standard?

II

Section 7 of the Clayton Act, 15 U.S.C. § 18, provides in pertinent part:

"No corporation engaged in commerce shall acquire, directly or indirectly, the whole or any part of the stock or other share capital and no corporation subject to the jurisdiction of the Federal Trade Commission shall acquire the whole or any part of the assets of another corporation engaged also in commerce, where in any line of commerce in any section of the country, the effect of such acquisition may be substantially to lessen competition, or to tend to create a monopoly."

Under the explicit reach of § 7, therefore, not only must the acquiring corporation be "engaged in commerce," but

Page 422 U. S. 276

the corporation or corporations whose stock or assets are acquired must be "engaged also in commerce." [^{Footnote 5}]

The distinct "in commerce" language of § 7, the Court observed earlier this Term,

"appears to denote only persons or activities within the flow of interstate commerce -- the practical, economic continuity in the generation of goods and services for interstate markets and their transport and distribution to the consumer. If this is so, the jurisdictional requirements of [§ 7] cannot be satisfied merely by showing that allegedly anticompetitive acquisitions and activities affect commerce."

Gulf Oil Corp. v. Copp Paving Co., 419 U. S. 186, 195. But even more unambiguous support for this construction of the narrow "in commerce" language enacted by Congress in § 7 of the Clayton Act is to be found in an earlier decision of this Court, FTC v. Bunte Bros., 312 U. S. 349.

In Bunte Bros., the Court was required to determine the scope of § 5 of the Federal Trade Commission Act, 38 Stat. 719, as amended, 15 U.S.C. § 45, which authorized the Commission to proceed only against "unfair methods of competition in commerce." The Court squarely held that the Commission's § 5 jurisdiction was limited to unfair methods of competition occurring in the flow of interstate commerce. The contention that "in commerce" should be read as if it meant "affecting interstate commerce" was emphatically rejected:

"The construction of § 5 urged by the Commission would thus give a federal agency pervasive control over myriads of local businesses in matters heretofore traditionally left to local custom or local law. . . . An inroad upon local

Page 422 U. S. 277

conditions and local standards of such far-reaching import as is involved here, ought to await a clearer mandate from Congress....