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UNITED STATES v. AMERICAN NATURAL GAS COMPANY

July 24, 1962

UNITED STATES OF AMERICA, PLAINTIFF,
v.
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 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 proceedings.

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 certificates.

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
  ...

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