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Lieberman v. Federal Trade Commission

August 20, 1985


Appeal from an order of the United States District Court for the District of Connecticut, M. Joseph Blumenfeld, Judge, holding that section 7A(h) of the Clayton Act, 15 U.S.C. § 18a(h), enacted as part of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, does not prohibit the disclosure of premerger information by federal authorities to state law enforcement officials on a confidential basis.

Author: Oakes

Before: MANSFIELD, OAKES, and MESKILL, Circuit Judges.

OAKES, Circuit Judge:

On a difficult question of statutory interpretation, seldom does a court of appeals have the benefit, as we do in this case, of guidance from two cogent, well-reasoned opinions going in opposite directions. The difficulty of the question is revealed not only in the direct conflict between these two decisions, but also in the three-to-two decision of the Federal Trade Commission ("FTC" or "Commission"), the administrative agency that deals with the statute we must interpret. The question is whether section 7A(h) of the Clayton Act, 15 U.S.C. § 18a(h) (1982), enacted as part of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, Pub. L. No. 94-435, 90 Stat. 1383 ("H-S-R"), prohibits the Commission from furnishing premerger information to state attorneys general acting in their parens patriae capacities. The United States District Court for the District of Connecticut, M. Joseph Blumenfeld, Judge, disagreed in the decision now on appeal. Lieberman v. FTC, 598 F. Supp. 669 (D. Conn. 1984). The Fifth Circuit, however, agreed with the Commission in Mattox v. FTC, 752 F.2d 116 (5th Cir. 1985). We find the language of section 7A(h) not unambiguous, the legislative history sparse, and the administrative interpretation of debatable if not doubtful usefulness. But in light of the congressional purpose we divine to be at work, we come down with the Fifth Circuit and the majority of the Commission, and therefore are required to reverse.


The Attorneys General of Connecticut, Minnesota, Pennsylvania, and Rhode Island brought this action against the Commission alleging that the Commission improperly denied their requests for access to documents generated by the Commission in connection with a merger proposed between Texaco, Inc., and Getty Oil Company.*fn1 The attorneys general sought the information as part of an effort to enforce both federal and state antitrust laws. States have long had the right under section 16 of the Clayton Act, 15 U.S.C. § 26, to seek to enjoin antitrust violations, such as violations of section 7 of the Clayton Act, 15 U.S.C. § 18, which prohibits mergers that my tend substantially to lessen competition or to create a monopoly. See Hawaii v. Standard Oil Co., 405 U.S. 251, 259-60, 31 L. Ed. 2d 184, 92 S. Ct. 885 (1972); Georgia v. Pennsylvania Railroad Co., 324 U.S. 439, 450-52, 89 L. Ed. 1051, 65 S. Ct. 716 (1945). The state attorneys general, of course, may also seek to enjoin unlawful mergers under their respective state antitrust laws. See Connecticut Anti-trust Act, 17 Conn. Gen. Stats. Ann. ch. 624, §§ 35-26,-32 (West 1981); Minnesota Antitrust law, 20B Minn. Stat. Ann. §§ 325D.51, .59 (West 1981); Commonwealth Attorneys Act, 71 Pa. Cons. Stat. Ann. § 732-204(c) (Purdon Supp. 1985); Rhode Island Antitrust Act, 2 R.I. Gen. Laws §§ 6-36-4, -11, -12 (Supp. 1984). As part of the FTC's policy "to cooperate with other governmental agencies to avoid unnecessary overlapping or duplication of regulatory functions," 16 C.F.R. § 4.6 (1985), federal regulations allow state law enforcement agents to request access to Commission records if the state officials certify that the information will be maintained in confidence and used only for official law enforcement purposes. Id. § 4.11(c). Between January and April 1984, appellees made several such requests for premerger information about the Texaco/Getty merger.*fn2

In letters issued May 2, 1984, the four state attorneys general were notified that the Commission had held that it was not authorized to share information and documentary material filed with it before merger by the merging companies pursuant to Title II of H-S-R, now codified as section 7A of the Clayton Act. The Commission's decision turned on its interpretation of section 7A(h), which states that "no [section 7A] information or documentary material may be made public" except in administrative or judicial proceedings but provides for disclosure to Congress or any duly authorized congressional committee or subcommittee. The decision marked the first time that the Commission addressed whether section 7A(h) barred the confidential disclosure of premerger information to state law enforcement officials, but on prior occasions Commission General Counsels had granted state officials access to premerger materials. The Justice Department, however, has always denied such access, according to an affidavit submitted to the district court in this case by the Assistant Attorney General for Antitrust, J. Paul McGrath. See also Antitrust Div., U.S. Dep't of Justice Antitrust Division Manual V11-15 (1979) (stating that H-S-R material "will not be disclosed to state attorneys general").

It will be recalled that the FTC, an independent federal agency, has a multifaceted role in federal antitrust law enforcement. For example, the agency is authorized to enforce section 5 of the Federal Trade Commission Act, 15 U.S.C. § 45 ("FTC Act"), with [which] prohibits "unfair or deceptive acts or practices in or affecting commerce." More to the point in this case, together with the Department of Justice the Commission also enforces section 7 of the Clayton Act, 15 U.S.C. § 18, which, as noted above, prohibits acquisitions that may tend to have anticompetitive effects. Section 11 of the Clayton Act, 15 U.S.C. § 21, vests the Commission with authority to enforce compliance with the substantive provisions of the Clayton Act, such as section 7, by means of administrative proceedings reviewable in the court of appeals.*fn3 In connection with such administrative proceedings, the agency may issue orders to cease and desist or orders of divestiture under 15 U.S.C. §§ 21, 45, as well as bring suit in federal district court for a preliminary injunction under section 13(b) of the FTC Act, 15 U.S.C. § 53(b), to preserve the status quo pending completion of its administrative challenge. At the same time, the FTC has played the role of publicist since its inception. Congress enacted section 6(f) of the FTC Act, 15 U.S.C. § 46(f), to authorize the FTC "to convey the informational fruits of its labors [of investigation and adjudication] to the American Public." FTC v. Cinderella Career & Finishing Schools, Inc., 131 U.S. App. D.C. 331, 404 F.2d 1308, 1319 (D.C. Cir. 1968) (Robinson, J., concurring).

A crucial element of the Commission's and Justice Department's enforcement strength is the power to investigate possible antitrust violations. The Commission has long had authority to use the compulsory process conferred by sections 6 and 9 of the FTC Act, 15 U.S.C. § 46(a), (b), 49, to investigate corporate acquisitions that might violate section 7 of the Clayton Act. See, e.g., Menzies v. FTC, 242 F.2d 81, 83-84 (4th Cir.), cert. denied, 353 U.S. 957, 77 S. Ct. 863, 1 L. Ed. 2d 908 (1957). The Antitrust Civil Process Act, 15 U.S.C. § 1311-1314, gives the Antitrust Division of the Justice Department similar investigative powers by authorizing it to use Civil Investigative Demands ("CIDs"). Prior to 1976, however, enforcement of section 7 was hampered because both agencies were often unable to obtain important information about a merger before it was consummated.*fn4

Congress designed H-S-R in part to solve this problem. The statute has three titles. Title I expanded the general civil investigatory power of the Antitrust Division and established "controls over the Division's use of CID information, in order to protect the confidentiality of these investigative files." H.R. Rep. No. 1343, 94th Cong., 2d Sess. 4 (1976), reprinted in 1976 U.S. Code Cong. & Ad. News 2596, 2598. This case requires us to note in particular amended section 4(c)(3) of the Antitrust Civil Process Act, which limits disclosure of CID information to Justice Department or other authorized officials as well as to members of Congress.*fn5 Title III added section 4C to the Clayton Act, 15 U.S.C. § 15c, which authorizes state attorneys general to bring parens patriae actions for monetary damages sustained by state residents "by reason of any violation of [the Sherman Act]," id. § 15c(a)(1). As noted above, Congress addressed the problem of premerger information in Title II, which amended the Clayton Act by adding section 7A. Section 7A outlines an elaborate process requiring those who attempt acquisitions above a specified size to notify the Commission and the Antitrust Division of their intentions, to furnish information requested by the agencies, and to wait a period of time before consummating the transactions, allowing the agencies to analyze the data.*fn6 Because much of the information involves sensitive and confidential commercial or financial matters that would ordinarily not be made available without compulsory process, Congress adopted section 7A(h), which reads in full:

Any information or documentary material filed with the Assistant Attorney General or the Federal Trade Commission pursuant to this section shall be exempt from disclosure under . . . [the Freedom of Information Act] and no such information or documentary material may be made public, except as may be relevant to any administrative or judicial action or proceeding. Nothing in this section is intended to prevent disclosure to either body of Congress or to any duly authorized committee or subcommittee of the Congress.

On cross-motions for summary judgment the court below held that section 7A(h) does not prohibit confidential disclosure to state law enforcement officials. The court's conclusion turned in large part on its agreement with the state attorneys general that section 7A(h) should be interpreted in the same way the courts had interpreted the pre-1980 version of section 6(f) of the FTC Act.*fn7 The Court relied on the decision in Interco, Inc. v. FTC, 490 F. Supp. 39, 44-46 (D.D.C. 1979). The Interco court had held that section 6(f)'s provision keeping trade secrets from being made public did not prohibit confidential disclosure to state law enforcement officials. The district court interpreted section 7A(h)'s "public" as in pari materia with the term "public" in the pre-1980 version of section 6(f). 598 F. Supp. at 674-75. Moreover, it read Congress's 1980 amendment to section 6(f), which effectively codified the Interco holding,*fn8 as support for its conclusion; the amendment demonstrated a legislative intention "to create a Federal-State sharing of information." Id. at 676.

The district court further declined to defer to the FTC decision, finding that the agency's past practice had been inconsistent with its present stand. Id. at 672. It also rejected any suggestion that section 7A(h)'s legislative history offered an indication of what Congress had intended. Id. at 673-74. The FTC's construction of legislative intent was said to go to the issue of confidentiality, not to the issue of disclosure on a confidential basis. See, e.g., id. at 674. In sum, the district court considered that it was construing a statutory provision "in the face of a question which the Congress did not squarely consider in the enactment of the statute." Id. at 677.

It should come as no surprise that the district court also held that section 6(f) in fact authorized the FTC's disclosure of premerger information to the state officials. The Commission's contention that section 6(f) only authorizes disclosure of information obtained under the FTC Act, not premerger information obtained under the Clayton Act, failed to persuade. Id. at 677-78. Finally, the court easily avoided the anomaly of finding that the FTC could disclose the information while the Justice ...

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