UNITED STATES COURT OF APPEALS FOR THE DISTRICT OF COLUMBIA CIRCUIT
Appeal from the United States District Court for the District of Columbia.
Robinson and Wilkey, Circuit Judges, and Jameson,* Senior United States District Judge for the District of Montana.
DECISION OF THE COURT DELIVERED BY THE HONORABLE JUDGE ROBINSON
Section 10 of the Clayton Act *fn1 prohibits interstate common carriers and corporations with which they have interlocking directors from dealing in securities and articles of commerce aggregating in value more than $50,000 annually except on the basis of competitively-derived bids most favorable to the carrier. *fn2 Section 4 of the Act enables a person injured in his business or property by activity violative of the federal antitrust laws to sue for triple damages. *fn3 On appellees' motion, appellant's complaint invoking Section 4 for alleged infractions of Section 10 was dismissed by the District Court on the ground that it failed to state a claim upon which relief could be awarded. *fn4 We affirm. I
From 1956 to 1973, D.C. Transit System, Inc. (Transit),5 engaged as a common carrier of passengers in and between the District of Columbia and its Maryland and Virginia suburbs.6 Between 1964 and 1970, Transit made six conveyances of improved parcels of real estate7 which had been withdrawn from transportation operations after they had lost their usefulness therein.8 Each conveyance was of a single parcel to a corporation in exchange for all of its capital stock.9 Each was made at the property's book value -- which exceeded Section 10's $50,000 ceiling -- without competitive bidding. At the time of each transaction, Transit and at least five of the conveyees were interlocked in a fashion addressed by Section 10.10 And at the inauguration of this litigation, all of the conveyees remained wholly-owned subsidiaries of Transit. These were the salient facts established on the record when the District Court acted.11
Appellant was a regular farepaying rider of Transit's vehicles.12 In that role he sued for himself and the entire class of riders.13 The theory of the complaint, predicated squarely on Section 10, was that Transit had conveyed properties worth substantially more than the securities -- the corporate stocks -- received in return, and had divested itself of the earning power and loan value which those properties possessed, all to the detriment of Transit's customers in the form of higher fares.14 For this the complaint sought treble damages,15 and jurisdiction and standing to sue were rested exclusively on Section 4.
In the view that the allegations of appellant's complaint did not provide a foundation for relief, the District Court granted appellees' motion to dismiss.16 On this appeal the parties have debated a number of points, but we find it necessary to address only the question whether the transactions described fell within the condemnation of Section 10. We answer that question in the negative.17 II
The goal of the Federal antitrust laws is to safeguard the interplay of competitive forces in the far-flung commerce of the Nation.18 The Sherman Act,19 passed in 1890, "was designed to be a comprehensive charter of economic liberty aimed at preserving free and unfettered competition as the rule of trade."20 Its "fundamental purpose . . . was to secure equality of opportunity and to protect the public against evils commonly incident to destruction of competition through monopolies and combinations in restraint of trade."21 The Clayton Act, adopted in 1914,22 had these wholesome aims no less in view,23 but sought its contribution to them through a regulatory technique of its own.
Unlike the Sherman Act, which broadly approached antitrust problems by outlawing consummated contracts and conspiracies, the Clayton Act specifically prohibits particular practices which are outside the ambit of the Sherman Act but nonetheless are steps toward the monopolistic ends which the latter had undertaken to forbid.24 "In passing the Clayton Act," Congress "sought to bring within the scope of its proscriptive provisions, conduct and practices which, though dangerous to the competitive structure, were not covered at all or only inadequately covered by provisions of the Sherman Act."25 It was intended "to supplement the purpose and effect of other anti-trust legislation, principally the Sherman Act of 1890;"26 it "sought to reach the agreements embraced within its sphere in their incipiency, and . . . to determine their legality by specific tests of its own."27 In sum, by banishing designated practices, Congress endeavored to nip embryonic conspiracies and monopolies in the bud.28
That, which is so true of the Clayton Act, generally, is no less so of Section 10, which imposes the prohibition upon which appellant relies. In its features relevant to this case, Section 10 provides that:
No common carrier engaged in commerce shall have any dealings in securities . . . or other articles of commerce, . . . to the amount of more than $50,000, in the aggregate, in any one year, with another corporation, . . . when the said common carrier shall have upon its board of directors or as its president, manager, or as its purchasing or selling officer, or agent in the particular transaction, any person who is at the same time a director, manager, or purchasing or selling officer of, or who has any substantial interest in, such other corporation, . . . unless and except such purchases shall be made from, or such dealings shall be with, the bidder whose bid is the most favorable to such common carrier, to be ascertained by competitive bidding under regulations to be prescribed by rule or otherwise by the Interstate Commerce Commission.29
As we shall see, both the legislative history and a consistent course of judicial construction unveils Section 10 as "a narrowly drawn statute designed to meet a particular set of experienced evils."30
Section 10 followed in the wake of public concern over abuses flowing from interlocking directorates among railroads and their suppliers and bankers shortly after the turn of the century.31 Interlocked office-holding in these industries created the potential for such activities as purchases by railroads at exhorbitantly high prices, issuance of railroad securities at exhorbitantly low prices, and loans to railroads at excessively high rates of interest.32 President Wilson, in his message to Congress of January 20, 1914, proposed "laws which will effectively prohibit and prevent such interlockings of the personnel of the directorates of great corporations."33 The House promptly responded with a bill which would have outlawed certain kinds of interlocks between carriers and bankers.34 The Senate expanded the House version to cover dealings in supplies and other articles of commerce, ...