United States District Court, Northern District of Illinois, E.D
July 24, 1962
UNITED STATES OF AMERICA, PLAINTIFF,
AMERICAN NATURAL GAS COMPANY, NORTHERN NATURAL GAS COMPANY, PEOPLES GAS LIGHT AND COKE COMPANY, RALPH T. MCELVENNY, JOHN F. MERRIAM AND JAMES F. OATES, JR., DEFENDANTS.
The opinion of the court was delivered by: Will, District Judge.
There are two motions presently before the Court in this cause.
One is the motion of the individual defendants to dismiss the
indictment as to them on the ground that it fails to allege an
offense cognizable under sections 1 and 2 of the Sherman Act,
15 U.S.C.A. §§ 1 and 2. This motion has been definitively determined
by the decision of the Supreme Court in United States v. Wise,
370 U.S. 405, 82 S.Ct. 1354, 8 L.Ed.2d 590 (June 25, 1962).
Accordingly, it is herewith denied.
The second motion is that of both the corporate and individual
defendants to dismiss the indictment on grounds variously
stated in written briefs and on oral argument. Those contentions
advanced in defendants' written briefs — which relate to the
question of primary jurisdiction — have also recently been the
subject of Supreme Court consideration in its decision in
California v. Federal Power Commission, et al., 369 U.S. 482, 82
S.Ct. 901, 8 L.Ed.2d 54 (April 30, 1962).
The effect of this decision, however, is not so clearly
dispositive of the instant motion as is the decision in Wise
conclusive of the first motion. For this reason and because on
oral argument defendants addressed themselves to an issue
different from that set forth in their briefs, the Court deems it
appropriate to explain the reasons for its ruling.
The defendants contend in their briefs that the present
indictment is an inherent interference with subject matter which
Congress has placed within the comprehensive control of the
Federal Power Commission, and, as such, it should be dismissed on
the ground of primary jurisdiction. The indictment itself, as
amplified by the government's bill of particulars, charges
agreement and concert of action by the defendants and their
co-conspirators to exclude Midwestern Gas Transmission Company as
a competitor in the interstate transportation and sale of natural
gas by such activities, among others, as (1) boycotting and
refusing to purchase gas from Midwestern, (2) agreeing among
themselves not to compete with each other, (3) absorbing markets
otherwise available to Midwestern, and (4) soliciting other
competitors of Midwestern to join the alleged conspiracy.
The general position of the government is that in no event do
the charges against the defendants call for an application of the
doctrine of primary jurisdiction.
While the defendants argue as the basis of their position that
the natural gas industry is pervasively regulated from "well to
burner tip", the brunt of their analysis is directed toward that
portion of industry activity which is covered by the indictment
and bill of particulars. Indeed, if defendants were to stand or
fall solely on the determination of the question of pervasive
regulation, they would be foreclosed on this aspect of their
motion without more, since the Supreme Court in the California
case, supra, after asserting that "(i)mmunity from antitrust laws
is not lightly implied" and discussing certain instances in which
immunity has been granted, stated:
"Here, as in United States v. R.C.A., 358 U.S. 334,
82 S.Ct. 901, 8 L.Ed.2d 54, while `antitrust
considerations' are relevant to the issue of `public
convenience and necessity' * * * there is no
`pervasive regulatory scheme' * * * including the
antitrust laws that has been entrusted to the
(Federal Power) Commission."
This court recognizes, however, that the foregoing language can
be said to be limited to the facts of the California case.
Therefore, the extent to which that language and the decision
itself are applicable here must be analyzed.
In that case, the Federal Power Commission and the Department
of Justice were both considering a proposed acquisition by the El
Paso Natural Gas Company of the stock of the Pacific Northwest
Pipeline Corporation. The Federal Power Commission's
consideration took the form of hearings on El Paso's application
for approval of the acquisition pursuant to section 7 of the
Natural Gas Act, 15 U.S.C.A. § 717f(c); the Department of
Justice's consideration took the form of an action in the Federal
District Court alleging that the acquisition violated section 7
of the Clayton Act, 15 U.S.C.A. § 18.
On several occasions, the Justice Department requested the
Federal Power Commission to stay its proceedings pending the
outcome of the antitrust litigation, but the Commission refused.
For its part, the Commission invited the
Justice Department to participate in its hearings, but the
Department (Antitrust Division) failed to do so. Thereafter, the
District Court granted a motion of the defendants for continuance
of the antitrust trial until final decision in the administrative
Those proceedings were subsequently concluded and the
acquisition authorized by the Commission. During the course of
the Federal Power Commission hearings, however, the State of
California intervened in those proceedings and obtained review by
the Court of Appeals, which affirmed the Commission's approval of
the merger, People of State of Calif. v. Federal Power Com.,
D.C.Cir. 1961, 296 F.2d 348. The Supreme Court reversed the
judgment of the Court of Appeals and vacated the order of the
Commission approving the merger on the grounds that (1) the
antitrust aspects of the proposed acquisition were primarily the
concern of the Department of Justice, and (2) the antitrust
litigation in the federal court took precedence over the
Commission's proceedings. It was the Commission, therefore, which
should have stayed its hand, not the Justice Department.
The relevance of the California decision to the present motion
is apparent. There is no doubt that in considering El Paso's
application to acquire the assets of Pacific Northwest, the
Federal Power Commission was acting within the purview of its
authority under the Natural Gas Act. Section 7 of that Act
empowers the Commission to issue certificates of public
convenience and necessity in just such cases, and imposes on it a
duty to determine the propriety of granting any such
There could be no clearer Congressional mandate prescribing the
Commission's right of action and right of way. Yet the Supreme
Court, in construing other facets of the Natural Gas Act and the
interplay of section 7 of that Act and section 7 of the Clayton
Act, found that the Commission must give way to the Justice
Department, even within an area of its unquestioned authority. On
this the Court stated:
"* * * The Commission's standard, set forth in § 7
of the Natural Gas Act, is that the acquisition,
merger, etc., will serve the `public convenience and
necessity.' If existing natural gas companies violate
the antitrust laws, the Commission is advised by §
20(a) to `transmit such evidence' to the Attorney
General `who, in his discretion, may institute the
necessary criminal proceedings.' Other administrative
agencies are authorized to enforce § 7 of the Clayton
Act when it comes to certain classes of companies or
persons; but the Federal Power Commission is not
included in the list."
One certain effect of the foregoing is that for purposes of the
doctrine of primary jurisdiction, the natural gas industry is not
pervasively regulated from "well to burner tip". But, more
importantly, if the Commission must accommodate itself to
antitrust policy by postponing action on certification
proceedings which involve the very same transaction to be tried
in the antitrust merger litigation, it would seem even more clear
that the Commission does not have either responsibility or
authority to decide alleged antitrust violations which occur
prior to the time it embarks on its hearings, and which will not
necessarily determine the outcome of the certification
Such is the situation disclosed by the pleadings and other
documents in the present case. The indictment herein is directed
against activities which allegedly precluded Midwestern from
effectively entering the competition before the Commission. As
the government points out, there are numerous preliminary steps
which a potential entrant into the market must take before
applying for certification. "These steps include such matters as
procuring a gas supply, contracting with prospective customers,
arranging financing, obtaining commitments for pipe and other
necessary for the proposed facilities, and qualifying to do
business in the various states in which sales are to be made"
(page 14, Brief of the United States in Opposition to Defendants'
Motion to Dismiss on Grounds of Primary Jurisdiction).
Anti-competitive conduct at this stage of entry into the market
is not a primary concern of the Commission. In certification
proceedings of this nature, the Commission is required to award
the franchise involved to the company or companies which
demonstrate greatest ability to render the best service to the
public at the lowest cost. While alleged antitrust violations are
a factor which may be considered, the Commission could not
properly award a certificate to a company whose ability to
qualify, let alone perform, had been largely destroyed even
though it found that this was caused by the illegal concerted
action of its competitors. In such circumstances, presumably the
Commission would seek recourse to that portion of section 20(a)
of the Natural Gas Act, 15 U.S.C.A. § 717s(a), which provides
that "(t)he Commission may transmit such evidence as may be
available * * concerning apparent violations of the Federal
antitrust laws to the Attorney General, who, in his discretion,
may institute the necessary criminal proceedings".
Whatever the manner in which the Antitrust Division procured
the information relating to the present indictment however, there
is no indication from the record herein of any jurisdictional
conflict or dispute between the Department of Justice and the
Federal Power Commission, as there was in the California case.
Accordingly, there is even less reason here to invoke the
doctrine of primary jurisdiction. In the light of the foregoing,
it appears that the Attorney General and the Justice Department
are the proper custodians of the antitrust violations alleged in
the present indictment.
On oral argument defendants urged that the indictment, even
when viewed in the light most favorable to the government, fails
to charge an offense cognizable under sections 1 and 2 of the
Sherman Act. In support of this position, they relied in great
part on the decision of the Supreme Court in Eastern Railroad
Presidents Conference v. Noerr Motor Freight, Inc., 365 U.S. 127,
81 S.Ct. 523, 5 L.Ed.2d 464 (1961). But that case, which held
that sections 1 and 2 of the Sherman Act do not apply to attempts
to influence the passage or enforcement of laws, at least on the
basis of the facts therein, was largely predicated on the premise
that such an action invades the area of legitimate political
activity and encroaches on the right of petition which "* * * is
one of the freedoms protected by the Bill of Rights." The lesson
which defendants herein seek to extract from the Noerr case for
purposes of the present motion is that innocent and legitimate
activities of the market place may have the effect of harming a
competitor but the fact of harm, if legitimately inflicted,
cannot make the perpetrator subject to sanctions under the
The Court agrees with the import of the statement. However, it
cannot be said at this juncture of the case that the government
will be unable to adduce proof to substantiate the charges of the
indictment or that the defendants will be able to establish that
all of the acts proved by the government were innocent and
legitimate business activities.
Furthermore, the concerted activity charged in the instant
case, while it may ultimately turn out to be innocent and
legitimate, appears preliminarily to be much closer to the
practices customarily condemned in Sherman Act indictments and
treble damage suits than the practices attacked in the Noerr
case. For these reasons and for the reasons set out in that
portion of the opinion dealing with the question of primary
the motion of the corporate and individual defendants to dismiss
the indictment will be denied.
An order consistent with the foregoing will be entered.
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