California v. American Stores Company

PETITIONER: California
RESPONDENT: American Stores Company
LOCATION: Circuit Court for Howard County

DOCKET NO.: 89-258
DECIDED BY: Rehnquist Court (1988-1990)
LOWER COURT: United States Court of Appeals for the Ninth Circuit

CITATION: 495 US 271 (1990)
ARGUED: Jan 16, 1990
DECIDED: Apr 30, 1990

ADVOCATES:
H. Chester Horn, Jr. - on behalf of the Petitioner
Rex E. Lee - on behalf of the Respondents

Facts of the case

Question

Media for California v. American Stores Company

Audio Transcription for Oral Argument - January 16, 1990 in California v. American Stores Company

William H. Rehnquist:

We'll hear argument next in Number 88-258, California v. American Stores Company.

Mr. Horn.

H. Chester Horn, Jr.:

Thank you, Mr. Chief Justice, and may it please the Court:

This case presents the question whether Section 16 of the Clayton Act prohibits a district court from decreeing divestiture of a supermarket chain in California acquired in violation of the Clayton Act.

The issue arises from the attempt of the American Stores Company, the parent to Alpha Beta, the fourth largest supermarket chain in California, to acquire Lucky Stores, Inc., the largest supermarket chain in California, the acknowledged low-price leader, for the purpose of merging those two supermarket chains into one dominant firm controlling 25 percent of every consumer grocery dollar spent by California consumers.

The district court below found that that merger almost certainly violates Section 7 of the Clayton Act.

The district court found that that merger almost certainly threatens irreparable harm to California consumers in the form of several hundred million dollars per year in... higher grocery bills that the California customers will pay if this merger is allowed to be completed.

The district court therefore entered a preliminary injunction which it found necessary to preserve the remedy of divestiture and other possible relief to prevent that harm from occurring if it found, following a trial, that indeed this merger does violate Section 7 of the act.

The court of appeals in this case affirmed both sets of findings by the district court.

It affirmed the finding that this merger likely violates Section 7.

It affirmed the district court's finding that this merger threatens the precise harm that Section 7 of the Clayton Act was designed to prevent.

And it affirmed the district court's finding that California had made an adequate showing justifying preliminary injunctive relief on the record before it, which is the record before this Court.

But, the court of appeals held, based on its prior decision in ITT, that the preliminary injunction was overly broad, solely because the remedy of divestiture is not available, a conclusion it reached based not on the language of the statute, based not on the overriding purpose of Section 16 of the act and based on none of the policies underlying the substantive provisions under the act.

Rather, the Ninth Circuit concluded, based on a fragment of the legislative history which was... it was presented with, that Congress did not intend solely to provide the divestiture remedy to private litigants.

We think the Ninth Circuit's approach fundamentally misinterprets the approach prescribed by this Court in cases like Porter v. Warner Holding.

The inquiry ought not to be did Congress intend to prohibit a particular form of relief.

The question is, by granting the injunctive powers for the courts to remedy antitrust violations, is there a clear and valid command by the Congress to preclude that relief.

Sandra Day O'Connor:

Well, Mr. Horn, I guess the argument made by the other side in part is that at the time Congress considered this question and adopted the statute we are asked to examine, that there was generally regarded that there was a distinction between prohibitory injunctive relief and injunctive relief that required mandatory action, the so-called affirmative injunction.

And their argument is that Congress had in mind only providing prohibitory injunctive relief.

Now, how do you respond to that argument?

H. Chester Horn, Jr.:

We agree with American Stores that in 1914 the distinction between prohibitory and mandatory injunctive relief was well understood by the Congress.

And if Congress had intended to limit private litigants to prohibitory injunctive relief it would have said so clearly in the statute.

That is not what it did.

It provided the full scope of the injunctive relief to prevent... to prevent threatened loss or damage by a violation of the antitrust laws.

That is a long way from incorporating a distinction between prohibitory and mandatory injunctive relief.

And, by the way, the Ninth Circuit did not ground its decision on that distinction.

That is American Stores' argument to support the Ninth Circuit rule.

The... that distinction is not supportable by the language of Section 16.

I think--

Sandra Day O'Connor:

Now, Mr. Horn, the... the order here was one to hold and operate the stores separately, in effect.