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FEDERAL MARITIME COMMISSION v. SEATRAIN LINES, INC., ET AL.
CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE DISTRICT OF
Argued March 21, 1973
Decided May 14, 1973
In enacting 15 of the Shipping Act, 1916, Congress conferred on the Federal Maritime Commission (FMC) the power to exempt from the antitrust laws agreements, or those portions of agreements, between carriers that create an ongoing arrangement in which both parties undertake continuing responsibilities, and which therefore necessitate continuous FMC supervision, but not one-time acquisition-of-assets agreements that result in one of the contracting parties ceasing to exist. Pp. 731-746.
148 U.S. App. D.C. 424, 460 F.2d 932, affirmed.
MARSHALL, J., delivered the opinion for a unanimous Court.
Edward G. Gruis argued the cause for petitioner. With him on the briefs was David Fisher.
Irwin A. Seibel argued the cause for respondents. With him on the brief for the United States were Solicitor General Griswold, Assistant Attorney General Kauper, and William Bradford Reynolds. Marvin J. Coles, Neal M. Mayer, and G. Brockwel Heylin filed a brief for respondent Seatrain Lines, Inc. Odell Kominers and Richard S. Salzman filed a brief for respondents Pacific Far East Line, Inc., et al. *
[ Footnote * ] Lawrence E. Walsh, William F. Ragan, and Guy Miller Struve filed a brief for R. J. Reynolds Tobacco Co. as amicus curiae.
MR. JUSTICE MARSHALL delivered the opinion of the Court.
Section 15 of the Shipping Act, 1916, 39 Stat. 733, as amended, 46 U.S.C. 814, requires all persons subject to the Act to file with the Federal Maritime Commission 1 [411 U.S. 726, 727] every agreement within specified categories reached with any other person subject to the Act. The section further empowers the Commission to disapprove, cancel, or modify any such agreement which it finds to be unjustly discriminatory, to the detriment of the commerce of the United States, contrary to the public interest, or violative of the terms of the Act. 2 The Commission is [411 U.S. 726, 728] directed to approve all other agreements, and the statute expressly provides that agreements so approved are exempt from the antitrust laws. 3
The question presently before us is whether a contract which calls for the acquisition of all the assets of one carrier by another carrier and which creates no ongoing obligations is an "agreement" within the meaning of this section. The question is of some importance, since if such contracts are not approved by the Commission, the antitrust laws are fully applicable to them. See Carnation Co. v. Pacific Westbound Conference, 383 U.S. 213 (1966). Cf. United States v. Borden Co., 308 U.S. 188 (1939). But cf. United States Navigation Co. v. Cunard S. S. Co., 284 U.S. 474 (1932); Far East Conference v. United States, 342 U.S. 570 (1952). On the other hand, if they are within the Commission's jurisdiction, the Commission may approve them even though they are violative of the antitrust laws, although the Commission must take antitrust principles into account in reaching its decision. See Volkswagenwerk Aktiengesellschaft v. FMC, 390 U.S. 261, 273 -274 (1968); [411 U.S. 726, 729] FMC v. Aktiebolaget Svenska Amerika Linien, 390 U.S. 238, 244 -246 (1968).
In this case, the Court of Appeals for the District of Columbia Circuit concluded that 15 did not confer jurisdiction upon the Commission to approve discrete acquisition-of-assets agreements. In so holding, it followed a prior District Court decision in United States v. R. J. Reynolds Tobacco Co., 325 F. Supp. 656 (NJ 1971), but declined to follow a Ninth Circuit holding that the Commission had such jurisdiction. See Matson Navigation Co. v. FMC, 405 F.2d 796 (CA9 1968). We granted certiorari in order to resolve this conflict and because the case posed an important issue concerning the interface between the antitrust laws and the Commission's regulatory powers. We conclude that in enacting 15, Congress did not intend to invest the Commission with the power to shield from antitrust liability merger or acquisition-of-assets agreements which impose no ongoing responsibilities. Rather, Congress intended to invest the Commission with jurisdiction over only those agreements, or those portions of agreements, which created ongoing rights and responsibilities and which, therefore, necessitated continuous Commission supervision. We therefore affirm the judgment below.
This case was initiated when respondent Seatrain Lines, Inc. (Seatrain) filed a protest with the Commission against an agreement reached between Pacific Far East Lines, Inc. (PFEL) and Oceanic Steamship Co. (Oceanic), both of which are also respondents here, whereby Oceanic agreed to sell all its assets to PFEL. Under the terms of the agreement, Oceanic promised to transfer its entire fleet and all the related equipment together with Oceanic's interest in two container ships then being constructed and all of Oceanic's employees to [411 U.S. 726, 730] PFEL. Although Oceanic did not formally merge with PFEL and retained its corporate existence, it was left as a shell corporation wholly without assets. However, Oceanic undertook no continuing obligation not to re-enter the business and compete with PFEL. On October 6, 1970, Oceanic and PFEL notified the Commission of the agreement, but accompanied the notification with an express statement that, in their view, the agreement was not within the Commission's jurisdiction. The Commission published notice of the agreement, see 35 Fed. Reg. 16114, and allowed 10 days for interested parties to protest and request a hearing. Seatrain filed such a request on October 21, 1970, alleging that it was a potential competitor of PFEL and that the acquisition agreement would have anticompetitive consequences and, hence, was contrary to the public-interest standard of the statute.
Instead of holding a hearing to investigate these allegations, however, the Commission issued a summary order denying the request for an investigation and approving the agreement. The Commission held that "[w]hile section 15 of the Shipping Act, 1916, requires notice and opportunity for hearing, prior to agreement approval, there is no requirement of law that the mere filing of a protest is sufficient to require that a hearing be held before the Commission may grant approval of any protested agreement." Finding that "the likelihood of any impact at all upon [Seatrain's] operations which might result from approval of the agreement is a matter of mere speculation," the Commission concluded that "Seatrain has no standing in this matter, and that its protest is without substance." 4 [411 U.S. 726, 731]
After Seatrain's petition to reopen was denied, it appealed the Commission's ruling to the Court of Appeals. 5 Seatrain argued that the Commission was required to hold a hearing on its objection, while the United States, as statutory respondent, 6 and Oceanic and PFEL, as intervenors, argued that the Commission lacked jurisdiction over the agreement. In a comprehensive opinion, the Court of Appeals found it unnecessary to reach the hearing issue, since it found that the Commission "lacks jurisdiction under Section 15 of the Shipping Act, 1916, to approve arrangements of the type involved here, which do not require the continued existence or participation of the parties in such arrangements." 148 U.S. App. D.C. 424, 441, 460 F.2d 932, 949 (1972). The Court therefore vacated the Commission's decision and directed that the agreement be removed from its docket. The case then came here on the Commission's petition for certiorari. 409 U.S. 1058 (1972).
At the outset, it must be recognized that the statutory language neither clearly embraces nor clearly excludes discrete merger or acquisition-of-assets agreements. The situation is therefore fundamentally different from that posed in Volkswagenwerk Aktiengesellschaft v. FMC, relied upon heavily by petitioner, where we held in the context of an ongoing agreement that the Commission's ruling that the agreement was without its 15 jurisdiction "simply does not square with the structure of the statute." 390 U.S., at 275 . In this case, the statute is ambiguous in its scope and must therefore be read in [411 U.S. 726, 732] light of its history and the governing statutory presumptions.
By its terms, the statute requires those covered by it to "file immediately with the Commission a true copy, or, if oral, a true and complete memorandum, of every agreement . . . or modification or cancellation thereof" which falls into any one of seven categories. These are agreements
Our reluctance to construe the third category of agreements broadly so as to include discrete merger arrangements is bolstered by the structure of the Act. It should be noted that of the seven categories, six are expressly [411 U.S. 726, 734] limited to ongoing arrangements in which both parties undertake continuing responsibilities. Indeed, even the third category refers to agreements "controlling," "regulating" and "preventing" competition - all of which are continuing activities. Only the reference to the destruction of competition supports the Commission's argument that the provision was intended to cover one-time, discrete transactions. But even this reference must be read in light of the final, comprehensive category which refers to agreements "in any manner providing for an exclusive, preferential, or cooperative working arrangement." As the Court of Appeals noted, this last category was clearly meant as a catchall provision, "intended . . . to summarize the type of agreements covered." 148 U.S. App. D.C., at 427, 460 F.2d, at 935. Cf. FMB v. Isbrandtsen Co., 356 U.S. 481, 492 (1958). It is, of course, a familiar canon of statutory construction that such clauses are to be read as bringing within a statute categories similar in type to those specifically enumerated. See 2 J. Sutherland, Statutes and Statutory Construction 4908 et seq. (3d ed. 1943) and cases there cited. Since the summary provision is explicitly limited to "working arrangement[s]" (emphasis added), it is reasonable to conclude that Congress intended this limitation to apply to the specifically enumerated categories as well. 9
This reading of the statute is especially compelling in light of the rest of the statutory scheme, which simply does not make sense if the statute is read to encompass one-time agreements creating no continuing obligations. For example, the statute directs the Commission to "disapprove, [411 U.S. 726, 735] cancel or modify any agreement . . . whether or not previously approved by it, that it finds to be unjustly discriminatory or unfair as between carriers, shippers, exporters, importers, or ports, or between exporters from the United States and their foreign competitors, or to operate to the detriment of the commerce of the United States, or to be contrary to the public interest, or to be in violation of this chapter" (emphasis added). The statute thus envisions a continuing supervisory role for the Commission and invests it with power to disallow an agreement after a period of time even though it had initially been permitted. But it is hard to see how the Commission can exercise this supervisory function when there are no continuing obligations to supervise. And we think it unlikely that Congress intended to permit the Commission to approve acquisition-of-assets agreements, allow them to go into effect, and then, sometime in the indefinite future, resuscitate the expired company and unscramble the assets under its continuing power to disapprove agreements previously approved.
Similarly, the provision in the Act which provides that "[t]he Commission shall disapprove any . . . agreement . . . on a finding of inadequate policing of the obligations under it" makes no sense unless the agreements create continuing obligations to police. The statutory requirement that "continued approval" shall not be permitted for agreements "between carriers not members of the same conference or conferences of carriers serving different trades that would otherwise be naturally competitive, unless in the case of agreements between carriers, each carrier, or in the case of agreement between conferences, each conference, retains the right of independent action," suggests an ongoing relationship between the contracting parties. And the requirement that the contracting parties "adopt and maintain reasonable procedures for promptly and fairly [411 U.S. 726, 736] hearing and considering shippers' requests and complaints" can only be understood in the context of a continuing relationship between the contracting parties.
In short, while the statute neither expressly includes nor expressly excludes one-time acquisition-of-assets arrangements, the words must be read in context, and the context makes undeniably clear the ongoing, supervisory role which the Commission was intended to perform. As the Court of Appeals concluded, "[t]he whole structure of Section 15, not only the first paragraph listing the type agreement covered, shows an intent to grant the Commission authority to deal with agreements of a continuing nature." 148 U.S. App. D.C., at 427, 460 F.2d, at 935.
This construction of the Shipping Act is strongly supported by the legislative history of the Act and by Congress' treatment of other industries in contemporaneous and related statutes. As this Court recognized in FMB v. Isbrandtsen Co., 356 U.S., at 490 , most of the legislative history of the Act is contained in the so-called Alexander Report which culminated a comprehensive investigation into the shipping industry by the House Committee on the Merchant Marine and Fisheries chaired by Congressman Alexander. See House Committee on the Merchant Marine and Fisheries, Report on Steamship Agreements and Affiliations in the American Foreign and Domestic Trade, H. R. Doc. No. 805, 63d Cong., 2d Sess. (1914) (hereinafter Alexander Report). Although legislation designed to carry out the Report's recommendations initially failed to pass, see H. R. 17328, 63d Cong., 2d Sess., a substantially similar bill was enacted in the next Congress and was clearly intended to write the Alexander proposals into law. See H. R. Rep. No. 659, 64th Cong., 1st Sess., 27; S. Rep. No. 689, 64th Cong., 1st Sess., 7. [411 U.S. 726, 737]
After examining some 80 steamship agreements and conference arrangements, the Alexander Committee concluded that "practically all the established lines operating to and from American ports work in harmonious cooperation, either through written or oral agreements, conference arrangements, or gentlemen's understandings." Alexander Report 281. The Committee found that this network of agreements, many of them secret, provided a comprehensive system for fixing rates and suppressing competition. See id., at 282-295. As the Committee described the resulting competitive structure of the industry,
The illogical nature of the Commission's argument is especially apparent when one remembers that at the time the Act was passed, the Commission was arguably not permitted to take antitrust policies into account when ruling on proposed agreements. We have construed the "public interest" standard contained in the Act as requiring the Commission to consider the antitrust implications of an agreement before approving it. See Volkswagenwerk Aktiengesellschaft v. FMC, 390 U.S., at 274 n. 20; FMC v. Aktiebolaget Svenska Amerika Linien, 390 U.S., at 242 -244. Cf. Mediterranean Pools Investigation, 9 F. M. C. 264, 289 (1966). But the "public interest" criterion was not added to the Act until 1961. See 75 Stat. 763. Thus, under the petitioner's interpretation, at the time the Act was passed, the Commission was arguably required to approve merger agreements despite strong antitrust objections to them if the other criteria of the Act were met. We simply cannot believe that Congress intended to require approval of the very arrangements which, as the legislative history clearly shows, it wanted to prevent.
The legislative history also demonstrates that the Alexander Committee used the term "agreements" as [411 U.S. 726, 740] a word of art and that mergers and other arrangements creating no continuing rights and obligations were not included within its definition. As the District Court in United States v. R. J. Reynolds Tobacco Co. observed,
In light of these specific grants of merger approval authority, we are unwilling to construe the ambiguous provisions of 15 to serve this purpose - a purpose for which it obviously was not intended. As the Court of Appeals found, the House Committee which wrote 15 "neither sought information nor had discussion on ship sale agreements. They were neither part of the problem nor part of the solution." 148 U.S. App. D.C., at 432, 460 F.2d, at 940. If, as petitioner contends, there is now a compelling need to fill the gap in the Commission's regulatory [411 U.S. 726, 745] authority, the need should be met in Congress where the competing policy questions can be thrashed out and a resolution found. We are not ready to meet that need by rewriting the statute and legislative history ourselves.
But the Commission contends that since it is charged with administration of the statutory scheme, its construction of the statute over an extended period should be given great weight. See, e. g., NLRB v. Hearst Publications, Inc., 322 U.S. 111 (1944). This proposition may, as a general matter, be conceded, although it must be tempered with the caveat that an agency may not bootstrap itself into an area in which it has no jurisdiction by repeatedly violating its statutory mandate. In this case, however, there is a disjunction between the abstract principle and the empirical data. The court below made a detailed study of the prior Commission cases relied upon by petitioner to bolster its interpretation of the statute and concluded that none of them involved assertion of jurisdiction over a case such as this, where the agreement in question imposed no ongoing obligations. We find it unnecessary to decide whether every prior case decided by the Commission can be reconciled with our opinion today. It is sufficient to note that the cases do not demonstrate the sort of longstanding, clearly articulated interpretation of the statute which would be entitled to great judicial deference, particularly in light of the clear indications that Congress did not intend to vest the Commission with the authority it is now seeking to assert. As this Court held in a related context,
[ Footnote 2 ] Section 15 provides in pertinent part:
[ Footnote 3 ] Section 15 provides that "[e]very agreement, modification, or cancellation lawful under this section . . . shall be excepted from the provisions of sections 1 to 11 and 15 of Title 15, and amendments and Acts supplementary thereto." Since the Act makes lawful those agreements approved by the Commission, its effect is to vest the Commission with the power to shield those agreements approved by it from antitrust attack. See Carnation Co. v. Pacific Westbound Conference, 383 U.S. 213, 216 (1966). But cf. FMC v. Aktiebolaget Svenska Amerika Linien, 390 U.S. 238, 242 -246 (1968).
[ Footnote 4 ] In light of our holding that the Commission lacked jurisdiction over this agreement, we do not decide whether the Commission's decision that Seatrain was not entitled to a hearing would have been proper in a case in which the Commission properly asserted [411 U.S. 726, 731] jurisdiction. Cf. Marine Space Enclosures, Inc. v. FMC, 137 U.S. App. D.C. 9, 420 F.2d 577 (1969).
[ Footnote 5 ] Direct appeal to the Court of Appeals of final orders of the Commission is authorized by 28 U.S.C. 2342 (3).
[ Footnote 6 ] See 28 U.S.C. 2344.
[ Footnote 7 ] The Commission's position in this regard is not without irony. In denying Seatrain's application for a hearing and approving the agreement, the Commission held that Seatrain had failed to make sufficient allegations to show that the acquisition of assets would be destructive of competition. Yet the Commission now contends that it had jurisdiction over the agreement because it was one "preventing" competition.
[ Footnote 8 ] It is true that "antitrust exemption results, not when an agreement is submitted for filing, but only when the agreement is actually approved." Volkswagenwerk Aktiengesellschaft v. FMC, 390 U.S. 261, 273 (1968). But the fact remains that an expansive reading of the Commission's jurisdiction would increase the number of cases subject to potential antitrust immunity.
[ Footnote 9 ] The statute itself provides no definition of the term "agreement" beyond the statement that "[t]he term `agreement' in this section includes understandings, conferences, and other arrangements." Although certainly not dispositive, it is at least worthy of note that these synonyms given for "agreement" are all evocative of ongoing activity.
[ Footnote 10 ] The Reynolds court's observations were directed at the Committee's study of foreign trade. In this context, the Committee found that competition was largely frustrated by extensive use of conference arrangements. When the Committee turned to domestic trade, it found that "[u]nlike the practice of water carriers in the foreign trade of the United States, agreements to divide the territory or charge certain rates in the domestic trade are few." Alexander Report 421. Rather, in the domestic arena, the Committee found that competition was controlled largely through mergers, chiefly between railroads and water carriers. The Commission argues from this fact that Congress intended merger agreements to be filed, since the legislation which was ultimately enacted made no distinction between foreign and domestic trade. But throughout the Report whenever the Committee referred to mergers and acquisitions, it distinguished sharply between them and agreements, for which the filing [411 U.S. 726, 741] and approval mechanism was applicable. See the discussion in text. Cf. Note, The Shipping Industry Seeks a Safe Haven: Merger Jurisdiction for the FMC?, 5 Law & Pol. Int'l Bus. 274, 285-286 (1973). Moreover, a careful reading of the Report makes clear that the Committee envisioned other devices for controlling the mergers prevalent in the domestic field. Thus, the Committee noted that the Panama Canal Act of 1912, 49 U.S.C. 5 (14), already prohibited railroads from owning or controlling water carriers, see infra, at 742, and observed that this requirement went "far toward eliminating some of the undesirable practices which were found by the Committee to exist in the domestic commerce of the United States." Alexander Report 422. While the Committee made other recommendations with respect to domestic carriers, these merely paralleled its foreign recommendations and, hence, pertained to "agreements" and "arrangements" rather than "mergers" and "acquisitions" which it thought were sufficiently regulated by existing legislation. See id., at 422-424.
[ Footnote 11 ] The Commission would have us infer that the 1916 Act conferred jurisdiction upon it from an amendment added in 1950 to 7 of [411 U.S. 726, 744] the Clayton Act, 15 U.S.C. 18, as amended by 64 Stat. 1125, 1126. As amended, the provision specifies that: