U.S. v. AMERICAN BLDG. MAINT. INDUSTRIES

Print this transcript Transcript: 

Argument of Bruce B. Wilson

Chief Justice Warren E. Burger: We'll hear arguments next in 73-1689, United States against American Building Maintenance.

Mr. Wilson, I think you can proceed now.

Mr. Bruce B. Wilson: Mr. Chief Justice and may it please the Court.

I was interested in listening to the prior argument because we were dealing with matters of economic reality, serious matters and matters which concerned individuals.

I think this case is a little different and it involves matters of economic reality which concern the national economy.

This case is here today because in 1950, the Congress was concerned with increasing concentration in that national economy and it was concerned with increasing concentration which was resulting from mergers and acquisitions.

And it was concerned with acquisitions by national companies of local firms and that kind of acquisition which was attributing -- contributing to that increasing concentration.

Now, this case squarely presents the question of whether Congress effectively executed its expressed intention to prevent that kind of mergers and acquisitions.

There's really only one issue or decision in this case, whether Congress in Section 7 of the Clayton Act intended to exercise the full scope of its power to reach mergers and acquisitions not only in commerce, in the flow of commerce but also those which affected commerce.

Now, if Congress didn't so intend and if Congress did not so effectively legislate then a series of acquisitions could occur, acquisitions of intrastate firms which could result in a situation which Congress clearly sought to avoid.

It sought to avoid that situation in a statute which it denominated as a supplement to the Sherman Act.

And as we shall see, Congress in the Sherman Act intended to exercise the full range of its power.

And the facts of this case are as follows.

In 1971, the United States filed this civil action under Section 7 challenging a transaction in which the American Building Maintenance Industries --

Chief Justice Warren E. Burger: We'll resume there --

Mr. Bruce B. Wilson: Right.

Chief Justice Warren E. Burger: -- at 1 o'clock Mr. Wilson.

Mr. Bruce B. Wilson: Fine, thank you Mr. Chief Justice.

Chief Justice Warren E. Burger: Mr. Wilson you may continue.

Mr. Bruce B. Wilson: Thank you Mr. Chief Justice and may it please the Court.

Just before the luncheon recess, we had outlined the central issue in this civil antitrust case which was filed by the Government in 1971.

In this case, the Government challenged under Section 7 of the Clayton Act, a transaction in which affirmed American Building Maintenance Industries acquired control of two janitorial service firms doing business in Southern California.

One was the Benton Maintenance Company, the other was the J.E. Benton Management Corporation.

In terms of market shares at the time of the Acquisition, American controlled about 10% of the janitorial service market in Southern California and the Benton Companies combined had about 7%.

Now, of course, the statute with which we deal here today, Section 7 of the Clayton Act, prohibits the acquisition by any corporation engaged in commerce of the stock or assets of another corporation, engaged also in commerce where the effect of that acquisition maybe to substantially lessen competition or tend to create a monopoly.

And this case involves the meaning of four words in that statute.

Those four words being a corporation, also engaged in commerce.

There's no question as to whether the acquiring firm, American was engaged in commerce.

No such question has been raised.

But the decision on the District Court was on a motion for summary judgment on the grounds that the acquired firms were not corporations engaged also in commerce.

The Government introduced various affidavits, none of which I think are disputed showing that Benton had provided janitorial services necessary to support the interstate operation of its customers.

The Benton had purchased substantial quantities of janitorial supplies manufactured outside of California.

That it negotiated at least to major contracts without a state customer and that it did although to -- admittedly minor extent utilized interstate communications facilities in its business.

The court below entered summary judgment in 1973 and in doing so, it adopted almost rebut him the findings of fact and conclusions of law submitted by America but proposed prior to the time that the United States had filed its affidavits.

Of course, once the Court had concluded that, it resulted in a holding that Section 7 had no application to this case.

But there was however in the court below, no opinion explaining the Court's reasoning as to how it reached its conclusion.

The first issue which this appeal raises and when which is easily disposed off, is whether the power of Congress could reach this kind of a transaction.

This Court disposed of that question in Mandeville Island Farms against American Crystal Sugar in 1947.

There, the question was whether an agreement by Sugar Refiners which sold sugar in interstate commerce could agree on the price.

Whether they could agree on the price which they were going to pay to sugar beet growers located in Northern California.

This Court in that case clearly held that such an agreement on price was an agreement which affected commerce and one that was in -- within the reach of the Sherman Act, the first antitrust statute.

Now, of course, when we're dealing with the Sherman Act and with the Clayton Act, we are not dealing with the same statutes.

But we are dealing with statutes in which Congress sought to address substantially the same problem, the problem of monopoly, the problem of trust, the problem of anticompetitive effects on the American economy.

When Congress passed the Clayton Act in 1914, it made clear that that Act was intended to supplement the Sherman Act which Congress had enacted in 1890.

In the light therefore of Mandeville farms, the holding of this Court in that case, there doesn't seem to be much question but that Congress if it so desired and intended could have made the scope of the Clayton Act equally as broad.

It could have reached a merger or acquisition of the type with which we deal here.

And this brings us I think down to the central issue, did Congress intend in Section 7 of the Clayton Act to exercise as it did in the Sherman Act the full extend of its power under the commerce clause?

I think if one looks at the history of the antitrust laws, one can conclude only that Congress in enacting Section 7 did intend to exercise the full extent of those powers.

In the Sherman Act, we have not only Mandeville farms, we have South-Eastern Underwriters in 1944 again holding that in that Act, Congress wanted to go to the full extent of its constitutional power in restraining trust agreements and in restraining monopoly agreements.

And thus, given the history of that act, Senator George in 1890 stating that Sherman was ingeniously drawn to cover every case that is within the commercial power of Congress and Senator Sherman after whom the Act was of course named noting that the bill was just as broad and as sweeping and as explicit as the English language couldn't make it become then to 1914 and we see that Congress in 1914 dissatisfied and disappointed with the application of the 1890 law.

We find that Congress disappointed and dissatisfied with its efforts to control trust and monopolies.

And so in 1914, we find the Congress enacting a law, which according to its title was to supplement the existing laws against restraints and monopolies.

The Congress in that act wanted to arrest such restraints in their incipiency and they intended to do that insofar as it was possible to do so and they did it in Section 7 of the Clayton Act.

Justice Byron R. White: Had the department taken out after any merger such as this before?

Mr. Bruce B. Wilson: I think so Mr. Justice White, I think we have --

Justice Byron R. White: Can you give me a couple of examples?

Mr. Bruce B. Wilson: Bennington Bank where the question was as to the jurisdictional -- not the jurisdictional reach of the act but rather --

Justice Byron R. White: So it wasn't a question, that wasn't the question then.

Mr. Bruce B. Wilson: No but it's a merger of the same type --

Justice Byron R. White: Well, that I know but --

Mr. Bruce B. Wilson: -- and that I think is very important because a question here is, does the jurisdiction of the act extend to this kind of a merger?

The act -- the question in Bennington was whether Bennington Vermont was indeed a section of the country.

Justice Byron R. White: Well, you wouldn't do and suggest the department regularly since 1914 as to take in this position and has attempted to apply the act to corporations that were engaged solely in intrastate commerce.

Let's just assume that they were here.

Mr. Bruce B. Wilson: Well, I think the problems with which we are dealing --

Justice Byron R. White: Well, has it or has it not?

Mr. Bruce B. Wilson: I think in recent years, yes sir it has.

But not consistently since 1914, I think the appellee is correct on that.

Then until we get to such cases as Bennington, until we get to problems within let us say the last 10 years, the department indeed has not challenged that kind of a merger.

Justice Lewis F. Powell: Mr. Wilson, on page 36 of your brief at the top of the page of the first sentence states that previous Section 7 cases have involved both acquiring and acquired firms that have been engaged in the floor of commerce.

I take that to mean that this is the first case the justice department had brought in which the acquired firm was not engaged in commerce, is that correct?

Mr. Bruce B. Wilson: Mr. Justice Powell, I agree that this is the first case in this Court which clearly presents the question of whether the acquisition by an interstate firm.

By the -- no question on the acquiring corporation of an acquired firm dealing primarily in intrastate commerce but with the interstate contacts that we have here serving interstate firms, buying supplies from out of state.

I think this is the first case which presents this kind of a set of facts.

Justice Lewis F. Powell: You referred to the dissatisfaction of Congress in 1914 with the limitation of the Sherman Act.

Has Congress indicated any dissatisfaction with the failure of a justice department to bring this type of suit before in the last 60 years?

Mr. Bruce B. Wilson: I think the Congress Mr. Justice Powell has indicated that it wants us to bring this kind of a suit where the result of the acquisition is going to be in the words of the statute substantially to lessen competition.

And it is indicated that time and time again, it did again in 1950 when it amended the statute.

Justice Byron R. White: Yes, but it refused to put the words affecting commerce in the Act.

Mr. Bruce B. Wilson: Oh, I don't Mr. Justice White, I don't think it has.

Justice Byron R. White: Though there have been -- I'll put it this way, there have been proposals.

Mr. Bruce B. Wilson: There have been proposals but one cannot rely as this Court has recognized on the failure of Congress to act on a specific proposal as an indication of Congress' intent in enacting a statute which has already enacted one way or the other.

Justice Byron R. White: But you certainly wouldn't rely on a failure to amend the statute to show that Congress expresses some dissatisfaction or is the way the department of justice for enforcing the act?

Mr. Bruce B. Wilson: Oh, heavens, no, One has to --

Justice Byron R. White: Well, what other evidence is there?

Mr. Bruce B. Wilson: Well, there is the evidence of Congress and it's -- the statements of its intention in 1950, again, it came back to the Clayton Act in 1950.

And in a --

Justice Byron R. White: Well, I take it then that the -- under your -- under the department's position now that the act don't mean exactly the same if the words engaged in commerce or any act at all?

Mr. Bruce B. Wilson: Read, engaged and/or affect in commerce.

Justice Byron R. White: Well, I know but lets just take them out.

Mr. Bruce B. Wilson: Or indeed --

Justice Byron R. White: Let's just take them out.

No corporation shall acquire directly or indirectly the whole or any part of the stock of any other corporation if the effect would be to substantiate us in competition with any line of commerce.

The Act would be precisely what you say it is now.

Mr. Bruce B. Wilson: Yes sir.

Justice Byron R. White: The way you want to construe it.

Mr. Bruce B. Wilson: Yes sir.

Justice Byron R. White: So those are just surpassing.

Mr. Bruce B. Wilson: I think that is correct.

Justice Byron R. White: And you must take that position?

Mr. Bruce B. Wilson: Yes sir.

Coming back to 1950, Congress then made the Act applicable to asset -- acquisitions of assets as well as the stock of competing corporations.

And the House Report indicated that the 1950 amendments made the Act less restrictive prohibiting mergers and acquisitions where in any line of commerce in any section of the country, the effect of that acquisition might maybe to substantially lessen competition.

And the report made it clear that what Congress was trying to do was go even further if they could than they went in the Sherman Act.

One can't conclude looking at that legislative history that Congress intended that the reach of the Clayton Act should be less than the reach of the Sherman Act but there was a concern raised in Congress at that time.

That the Act might be construed to prohibit the acquisition of a local business by another local business in the same town.

These concerns are addressed in the legislative history and rather than narrowing the reach of the jurisdiction under the commerce requirement that Congress limited the terms of the substantive offense.

The original draft provided that the Act would be violated, if competition was substantially lessened in any community and that language concerned the Senate and the Senate noted that that language was dropped and the phrase "in any section of the country" was substituted in order to get rid of that concern.

But even so, the Senate also concurred in the view that it was the purpose of this legislation to assure a broader construction of the more fundamental provisions that are retained than has been given in the past.

Then we come and now retrogressing a little bit to the questions of the 1936 amendments which inserted in the Clayton Act provisions governing price discrimination.

But those provisions and the merger provisions of Section 7 have very different jurisdictional test.

And the jurisdictional tests under the price discrimination provisions were those construed by this Court in Gulf Oil Corporation against Copp Paving Company decided earlier this term.

The Court there expressly declined to decide the decision and to decide the question which we are dealing here with today.

If one examines those jurisdictional provisions, the differences are immediately apparent.

To violate the price discrimination provisions, one must be engaged in commerce.

Yes, the same language which we have under the merger provisions.

One must also make a sale in the course of such commerce and finally, either or any of the purchasers involved in the price discrimination must be in commerce.

So, we have there a three part test for jurisdictional purposes, not the single test which is involved in Section 7.

Second, I think we have to note that this Court has recognized that the Congressional enactments dealing with commerce reveal a process of legislation which is words of I believe Mr. Justice Frankfurter strikingly empiric.

The Court has uniformly looked to what Congress was trying to do in enacting particular statutes.

Again, Mr. Justice Frankfurter said, if we do -- if we do not do that to search for a dependable touch zone is as rewarding as an attempt to square the circle.

So, we have to look to the intent of Congress in passing this statute in 1914, in amending it again in 1950 and the construction which this Court has since placed on Section 7 of the Clayton Act.

The Court in Von's Grocery noted that the 1950 amendments were designed to broaden the scope of the antitrust laws.

Justice Potter Stewart: But the amendment simply added the acquisition of assets to stock acquisition, that was basically what it did, isn't it?

Mr. Bruce B. Wilson: That's right, it did not Mr. Justice Stewart in any way change what the jurisdictional requirements had been in 1914.

Justice Potter Stewart: Right, that's what I thought and it -- does it carry a very far to -- now you undoubtedly must think it does because you spend a good deal of time in your brief on oral argument but I wonder how far does it carry you just to say that Congress intended to implement, add to, effectuate, amplify the Sherman Act both in 1914 and again in 1950 when it enacted and then amended the Clayton Act because we -- it's clear from the language of the Clayton Act that in many ways it did add to the Sherman Act but in certain other ways, it very clearly have -- was more limited than the Sherman Act quite apart from the question now before us.

For example, the Sections -- what is now Section 7 of the Clayton Act applies only to corporations, whereas, the Sherman Act applies to individual people as well as corporations.

Now, that certainly is a more limiting jurisdictional coverage, isn't it?

Mr. Bruce B. Wilson: Well, I think it is more limiting in the sense that it limits the substantive offense under the Clayton Act that there is no indication in any of the legislative history that Congress intended the jurisdictional reach of the Clayton Act to be less than the jurisdiction which Congress had exercised under the Sherman Act.

Justice Potter Stewart: You can argue about what jurisdictional means but certainly no matter how strangling of competition potentially at least, the acquisition of an individual person's assets might be even though that person was engaged in commerce by somebody else engaged in commerce, Section 7 simply doesn't reach it as a matter --

Mr. Bruce B. Wilson: Simply by it terms.

Justice Potter Stewart: Statutory scope or jurisdiction if you want to call it that, isn't that correct?

Mr. Bruce B. Wilson: Well, I don't think the substantive offense --

Justice Potter Stewart: Precisely.

Mr. Bruce B. Wilson: -- is so defined.

Justice Potter Stewart: Precisely.

Mr. Bruce B. Wilson: Now, if Congress jurisdiction --

Justice Potter Stewart: Even though the -- well, go ahead.

Mr. Bruce B. Wilson: If Congress jurisdictionally wanted to reach that, there's no doubt that they could and the question is did they intend to reach this kind of a merger.

Justice Potter Stewart: And there's no doubt that if Congress wanted to exercise their full power, the same Sherman Act power and with respect to Section 7 of the Clayton Act, they could, everybody agrees on that.

The only question is here, did they?

Mr. Bruce B. Wilson: And our answer to that is yes.

Justice Potter Stewart: Yes.

Mr. Bruce B. Wilson: They did.

Justice Potter Stewart: And your brother's answer is no, they didn't?

Mr. Bruce B. Wilson: That is correct.

Justice Potter Stewart: That's the case.

Mr. Bruce B. Wilson: Now, coming back just for a moment to Mr. Justice White's question as to what kind of acquisitions was Section 7 designed to reach.

Well, we have in Von's Grocery, a curious parallel.

And I think to this case, we've already discussed the Bennington Bank case, the whole issue in that case, everything else was conceded was whether the Bennington area of Vermont was a section of the country for the purposes of Section 7, that's how the Congress limited the reach of the statute in addition to limiting its reach to corporations rather than natural persons.

Then I think Von's Grocery is a good example of something which is a purely local merger.

There were two grocery companies.

They had seven-and-a-half percent of the Los Angeles market.

And by coincidence in this case, we are dealing with precisely the same market with which the Court dealt in that case.

And this Court noted that in that case Congress had passed the 1950 amendments to prevent a destruction of competition.

It noted that the cases since the passage of that act have faithfully endeavored to enforce that congressional command and the United States believes that the Court should today continue to enforce that congressional command.

Let me sum up, in our view the scope of the Clayton Act is coterminous with that of the Sherman Act, the act which it was designed to supplement.

Mr. Chief Justice, if I could remain -- reserve the remainder of my time for rebuttal, I would appreciate it.

Chief Justice Warren E. Burger: Very well.

Mr. Mattson.

Argument of Marcus Mattson

Mr. Marcus Mattson: Mr. Chief Justice and may the Court please.

I'm not here to deny the Clayton Act was intended to reach areas not reached by the Sherman Act.

I'm not here to deny that as to specifically limited transactions and specifically limited entities, Congress exercised far reaching commerce powers or that they exercised all of their commerce power, I don't -- only history can tell because only ingenuity can define how far those powers go.

Obviously, Congress exercised its power only with regard to acquisitions.

Contrary to the Sherman Act, it was every contract.

It exercised in Clayton 7 only with regarded corporations engaged in commerce.

Now, this Court has already said in Gulf Oil versus Copp that that language appears to denote only persons or activities within the flow of interstate commerce, the practical, economic continuity in generation of goods and services for interstate markets and their transport and distribution to the consumer.

With that legal principle, the past enforcement pattern of the Department of Justice has until now agreed as Mr. Justice Powell has indicated from page 36 of the Government's brief, this case marks the advent of a new policy in the Department of Justice in the enforcement of the Clayton Act 7.

And the fact that this policy as stated on page 36 of the Government's brief precisely conforms with the explicit terms of Section 7 is according to the Government's intimation only coincidental.

This conformity says the Government, simply reflects the fact that the Government has devoted its limited enforcement resources to areas where the need is most pressing.

The Government's new so-called application of the statute and I was surprised to hear that counsel now says that the words that we rely on are surpluses.

But they now -- they say in their briefs that their application is that the words engaged in commerce includes not only activities in the flow of commerce but also local activities that substantially affect interstate commerce and those are their words.

The statute of course is doubly explicit to the contrary not only must they acquire incorporation be engaged in commerce but also the acquired corporation must be engaged also in commerce.

The repetition of those terms demonstrates that they were obviously important to Congress.

This importance has until now and for more than 60 years than recognized by the department of justice as it's passed enforcement pattern and that's what it caused it.

There are additionally important features in the record which indicate that the new policy of the department of justice was not in mind when it initiated this case.

And as not even yet given it adequate consideration, thus file the Government positively states on page 36 again that it is true and this is the Government's words.

It is true that previous Section 7 cases have involved both acquiring and acquired firms engaged in the flow of commerce.

Justice Byron R. White: Do you think this was inadvertence?

Mr. Marcus Mattson: I think that this was -- that this -- their argument that they're making in their brief and their argument they make today is an effort to reach a problem which arose in this case and this is the first time that they've used it as a means of taking care of this case.

Justice Byron R. White: But you don't -- you think -- you don't think this case was brought, was the idea of reaching farther with Section 7 that hadn't been reached before?

Mr. Marcus Mattson: I do not.

Justice Byron R. White: You take the idea in the first place was that these corporations were engaged to commerce?

Mr. Marcus Mattson: I thought perhaps they felt that they're -- they hardly conceive that there was anyone who had such local operation as the Benton Corporation.

They assumed that everybody could be included within commerce.

They didn't understand what the janitorial business was about when they brought the case.

And that's my judgment as to why this case was bought -- brought.

Now, they say in their -- to continue and may perhaps this is along the line of your idea Mr. Justice White.

They say in their reply brief that the Department of Justice has never taken that position that is that the -- that they had a past enforcement pattern along the lines.

They say that they had in -- on page 36 of their brief in chief.

So they go out of their 860 year history under Section 7.

They were able to select only two cases to support the denial of what they said in page -- on page 36.

One was the Bennington National Bank case.

Now, every one knows that banks are engaged in commerce.

That's a long since been decided, there are no question about it.

So, that case doesn't indicate one way or another.

The other is the Von's Shopping bag case.

There, the Government proved its allegation that both the acquired and the acquiring corporations were supermarket chains and its allegation and I read from the complaint, such chains operate purchasing offices which are in contact with suppliers located throughout the United States to purchase and affect the shipment of substantial quantities of groceries and related products from producing facilities located in the various states to the change distribution centers and supermarkets in the Los Angeles area.

The facts here would not support any such allegation and none was made.

And as Mr. Justice White asked, we looked -- we -- it is reasonable to assume that if the Government had in mind a new application of the statute, a new extension of the statute and was prepared to prove it, its complaint would have reflected these facts and yet you look in vein for any allegation in this complaint that Benton, the acquired corporation was engaged in local activities that substantially affected interstate commerce, there's nothing of that in the complaint.

If you look in vein for any allegation which would describe the commerce so affected or which was state -- what the effect had been?

The most that is found are the allegations in paragraph 8 of the complaint that the acquiring corporation maintains offices and serves customers in various states of the United States.

But as to Benton, the acquired corporation, there is no comparable allegation.

As to Benton, it is alleged only that some of its customers and some of its vendors were engaged in interstate commerce.

This state of the pleadings, evidences and inconsistency with the Government's new application of the statute and shows a total disregard of the explicit jurisdictional requirements of the statute.

I mentioned that I didn't think they understood the janitorial service business and I think that perhaps that's one of their basic failures in bringing this case to start with.

Justice William H. Rehnquist: But you're not suggesting are you that the case went back to the District Court Mr. Mattson.

The Government were to amend its complaint to supply this deficiencies and you had the same affidavits that then the District Court ought not -- ought to deny the motion for summary judgment?

Mr. Marcus Mattson: No, I don't think they could support the situation at all.

I'm only indicating that because there seem to be a question that why did they bring this case at all.

And that my only indication is from the complaint itself, they didn't have a basis.

They made a mistake.

Now, janitors don't manufacture a product.

They don't sell a product.

Their raw material is unskilled labor which necessarily must be obtained locally for the rendering of a local service.

Janitors can't go in to other than their local areas to compete for unskilled labor their raw material or to get it at lower price.

A janitorial firm can of course expand and go national as the acquiring corporations in here or it can elect to remain local as Benton, the acquired corporations here.

Of course, janitors need mops, pails, soap and that sort of thing but these supplies are incidental and are extensively available from local vendors just as they are to the local housewife.

Benton to an extraordinary degree limited these activities to the Southern California area.

When the Government's discovery efforts developed at Benton's interstate purchases aggregative $140.00 and then its interstate telephone calls cost only $19.78, the Government was driven to a conceding in its footnote number 5 that Benton's interstate purchases were admittedly small.

Further confirmation of that fact is -- and the fact that Benton's operation were intensely local, it's shown by the fact that no officer, no employee of Benton traveled outside of California on business.

There is every evidence that Mr. Benton who founded the business was convinced that if he satisfied the local people.

That if he cleaned their buildings properly and they were the one with whom he had to a deal.

He need not waste the firm's money on any non-essentials connected with interstate commerce.

There's -- I think the Government also started from a false premise as to the legislative history.

We were willing -- we would have found no necessity of going to legislative history because the statute is explicit.

It was the Government that went to the legislative history here.

And the unrestricted freedom with which the Government exercised their reference to the explicit language of Section 7 is based upon a misunderstanding of the legislative record.

The Government persist in urging that Congress had not considered the meaning of the words engaged also in commerce in connection with Section 7.

That of course is an unflattering conclusion because the legislators must have known that they were putting that language in at least.

Justice Byron R. White: I suppose -- suppose one of these building companies are both -- say both the janitor companies, maintenance companies were -- bought a couple of $100,000.00 a year of piece of goods from outer state, would that --

Mr. Marcus Mattson: You mean directly from out of state?

Justice Byron R. White: Yes.

Mr. Marcus Mattson: You would have a more difficult question.

Justice Byron R. White: But at least they would have -- to some extent they would be then engaged in commerce?

Mr. Marcus Mattson: They might have come within -- then come within part of the Government's contention if you could prove that those purchases affected interstate commerce.

Justice Byron R. White: Well, let's assume they -- well yes, for jurisdictional purposes.

Mr. Marcus Mattson: Yes.

Justice Byron R. White: They'd still have -- they'd have a problem of proof about the line of commerce of whether there would be affect on commerce.

But for jurisdictional purposes, they would have been in commerce.

Mr. Marcus Mattson: I'm not prepared to concede that.

I think the words engaged in commerce means that you have a business which does -- which is day to day engaged in commerce.

Justice Byron R. White: Well, they've -- all their supplies or most of their supplies, they buy it from out of state directly, let's assume that.

Mr. Marcus Mattson: If that's an assumption, it is possible to so state.

I think however, their basis --

Justice Byron R. White: But instead of buying from 10 suppliers from out of state, they buy it from wholesaler in California who buys in turn all those supplies from out of state, you see that breaks the flow.

Mr. Marcus Mattson: Yes I do.

And moreover, I would say if they bought directly, it maybe that that is an incidental part of their business.

And then I go back to the fact that the janitorial business is local.

Justice Byron R. White: Well, I will change my -- let's assume that you would concede that if they bought directly from out of state, they would be engaged in commerce first.

Mr. Marcus Mattson: I'm willing to start in that assumption.

Justice Byron R. White: But I know you don't want to agree with that.

Mr. Marcus Mattson: Right.

Justice Byron R. White: But you say it makes all the difference if they -- instead of doing it directly, they buy from a wholesaler, from the California wholesaler?

Mr. Marcus Mattson: Right.

Justice Byron R. White: That changes the case completely, no jurisdiction.

Mr. Marcus Mattson: That's the assumption.

Yes.

Justice Byron R. White: You say that would be the legal result?

Mr. Marcus Mattson: Right.

Justice Byron R. White: That the flow of commerce has broken with the wholesaler?

Mr. Marcus Mattson: Yes, very much so.

Justice Byron R. White: And that's some -- some Clayton Act cases, jurisdictional cases on that point?

Mr. Marcus Mattson: I don't think this is the first case.

Justice Byron R. White: There aren't any, are they?

Mr. Marcus Mattson: There aren't any and I think the reason for that is that the statute is so explicit.

Justice William J. Brennan: But what is the factor or does this record show what the factors -- where the mops and the pails and things?

Mr. Marcus Mattson: Yes.

Justice William J. Brennan: Are they purchased from a wholesaler?

Mr. Marcus Mattson: They're purchased all in California.

Justice William J. Brennan: Yes I know, but from a wholesaler?

Mr. Marcus Mattson: Well, or a distributor or whatever you might call him.

Justice Byron R. White: But those distributors also shows, those distributors buy from out of state.

Mr. Marcus Mattson: Yes, they buy it part from out of state.

The affidavits talk about a portion going from out of state, the closes they got was an estimate of one man who said that 40% came from out of state.

Justice Byron R. White: Of the distributor?

Mr. Marcus Mattson: Yes.

The distributor's purchases were 40% of out of state.

Justice Byron R. White: You don't have any figures on what these two maintenance companies bought, what supplies they bought that had the origin on the state.

Mr. Marcus Mattson: The record doesn't show any figures that you can point to with that regard.

Portions where the -- for instance the -- what anybody who isn't -- the janitorial business purchase a lot of paper goods.

Paper -- we don't have paper for us in California so you got the raw -- the paper comes from out of state.

It came to -- in some cases it was reprocessed in California but it came to a wholesaler and we bought the -- or the Benton bought the paper from the wholesaler.

Justice William J. Brennan: How about -- any of these employees, maintenance employees, window washers will have to heights?

Mr. Marcus Mattson: Oh yes.

Justice William J. Brennan: The wear of harness?

Mr. Marcus Mattson: Yes.

Justice William J. Brennan: I take it those come from out of state?

Mr. Marcus Mattson: I really don't know.

The founder of my client was a window washer.

The father of the two men who operate the American building maintenance was a window washer in San Francisco in the bank of America building and he started this business from there and it has expanded.

The legislative history is particularly significant when you come to the 1950 amendments.

And mind you, in 1950, the Clayton Act 7 was extensively reviewed and you can find that in Brown Shoe.

They spell out to the extent to which that length, the Federal trade commission from starting in 1928 proposed changes in Section 7.

So I say that Section 7 as reenacted in 1950 was just like a reenactment of that statute.

And they -- and our brief will show you there were -- in the 7 years prior to 1956, bills were introduced in which mentioned affecting interstate -- affecting commerce.

In other words, would have change the words engaged in commerce to affecting commerce.

Now, those were -- as a part of Section 7 in a pre-merger notification proposal that was made.

And the significant, highly significant is that in 1958, there was a bill entered or two bills introduced which would have said -- which was provided that if either corporation, either acquired or the acquiring corporation was engaged in commerce, the action could proceed.

And Senator Sparkman was in the hearings.

He was the proposer of one of those two bills and he explained that his bill made section applicable if either company was engaged in interstate commerce.

And he explained that the existing situation was that in cases where the acquired corporation is engaged exclusively in intrastate commerce, the enforcement agencies lack jurisdiction.

And Paul Rand Dixon spoke up at that hearing and he said, the in commerce test is quite different from the affecting commerce as you recognized.

And as late as January of this year, Congress changed the Federal Trade Commission Act Section 5.

So that it now reads in or affecting commerce.

But Congress didn't at that time embraced the opportunity to change Section 7.

The -- and the 1950 amendments of course came subsequent to this Court's decision in Federal Trade Commission versus Bunte in which the Court said this case presents the narrow question of what Congress did, not quite it could do.

In other words, that's the question here.

And we merely hold that to read unfair methods of competition in interstate commerce as though it meant unfair methods of competition in any way affecting interstate commerce requires in view of the relevant considerations much clear manifestations of the intention of Congress than it furnished.

Chief Justice Warren E. Burger: I recall some discussion of the proportion of the total cost of the acquiring company and of the acquired company particularly and it's overwhelmingly the cost of labor, is it not?

Mr. Marcus Mattson: Oh yes.

This is the labor oriented business.

Chief Justice Warren E. Burger: Only a small percentage in the material?

Mr. Marcus Mattson: Right, very small, it's 3% as I recall.

I believe --

Chief Justice Warren E. Burger: The cost --

Mr. Marcus Mattson: -- its total gross income is in the -- the Government's position with reference to the legislative history is ambivalent.

It relies upon post 1914 history itself on page -- on the number of pages but would apparently foreclose us from doing that.

Justice Byron R. White: Well, as in -- are you suggesting in your argument that in order to -- of course that the issue is not here I take it but are you suggesting that the -- that to satisfy the latter part of Section 7, the impact on any line of commerce, that the impact, the substantially lessening of competition would have to result only from activities in commerce?

Mr. Marcus Mattson: No, I do not.

Justice Byron R. White: Yeah, alright.

Mr. Marcus Mattson: The commerce part of Section 7 is the first part, they engaged in commerce.

Justice Byron R. White: I understand.

Mr. Marcus Mattson: The operative part.

Justice Byron R. White: But the effect on the line of commerce could be delivered by wholly intrastate?

Mr. Marcus Mattson: Exactly.

Justice Byron R. White: Okay, thank you.

Mr. Marcus Mattson: And this case is brought upon that theory.

They allege only that the effect is in Southern California.

Justice Byron R. White: Thank you.

Mr. Marcus Mattson: But you have to get in to -- the only way to get in to Court perhaps is by means of the jurisdictional point.

Justice Potter Stewart: In any section of the country can be purely intrastate?

Mr. Marcus Mattson: Yes.

Justice Potter Stewart: As it was in Von's for example --

Mr. Marcus Mattson: Right.

Justice Potter Stewart: As alleged to be here.

Mr. Marcus Mattson: Right correct, and as it could be here.

Justice Potter Stewart: Or as alleged to be here?

Mr. Marcus Mattson: Yes.

Justice Potter Stewart: Southern California again?

Mr. Marcus Mattson: It is alleged only in Southern California.

The -- for the purpose of trying to foreclose us from using 1950 legislative history, which they apparently would like to avoid besides Philadelphia National Bank, the Court -- there the Court was dealing with the assertion that after the 1950 amendment to Section 7, some members of Congress and for a time the Justice Department, this is quoting from the opinion.

Some members of Congress and for a time the Justice Department forced the view that bank mergers were still beyond the reach of the section as to which this Court said, the views of a subsequent Congress form a hazardous basis for the intent of the early one.

Now, that may have been perfectly valid there but here, we're not presenting post 1914 legislative history for the purpose of inferring anything into the statute.

We are using the legislative history to confirm the explicit terms of the 1914 statute and for the purpose of showing that Congress when it reenacted Clayton Act in 1950 had an intent consistent with the explicit terms of the statute and inconsistent with the new application of the statute which the Government is now asserting.

In Philadelphia Bank, the defendant was attempting to avoid the language of Section 7 and to use for that purpose matters outside of Section 7 like the Bank Merger Act of 1960.

The Government here is trying to do the same thing, they're trying to avoid the explicit language of the statute.

We on the other hand are supporting it.

Now, I perhaps should refer to the Standard Oil case because that's been referred to by counsel and I think it confirmed some of the things that I -- we've said in our briefs and perhaps I didn't treat it fully there.

The Standard Oil company of California case confirms our position.

The Court there was dealing not with the narrowly directed jurisdictional question of Section 3 as we are here with Section 7.

Standard Oil company was obviously engaged in commerce with any question about it.

And under Section 3, it was necessary that only one of the corporation making the contract be engaged in commerce.

Standard Oil Company was the question which this Court faced and determined in the Standard Oil case was whether the requirements contracts lessened competition under the broadly phrase portion of the statute.

The -- since the contracts prevented service station operators from dealing with suppliers from outside of California as well as within the state and because the large number of such contracts, competition was lessened in both intrastate and interstate.

But again, that was the operative portion, not the jurisdictional portion of the statute.

There was no issue as to whether standard was engaged in commerce and the operative portion of Section 3 was satisfied by extensive evidence on the structure of the industry.

And the substantiality of the number of requirements contracts, and I think that case will demonstrate to the Court that there has been no satisfying the requirements of the Government's own proposal with regard to Section 7 and they say it should read that local activities which have a substantial effect on interstate commerce but they have proved no such effect.

All they have shown is that we receive money.

They said 80% to 90% of our revenues form interstate operators.

That shows only in effect on Benton not in interstate commerce.

And they have shown nothing with regard to the structure of any product which we bought.

They merely show that we bought -- I think it's a $150,000.00 worth according to the briefs, I can't find where they got that figure in the record but be that as it may, they've shown no market structure of any kind with regard to any market of goods that passed in to interstate commerce before we bought them.

Thank you.

Chief Justice Warren E. Burger: Mr. Mattson.

Do you have anything further Mr. Wilson?

Rebuttal of Bruce B. Wilson

Mr. Bruce B. Wilson: Mr. Chief Justice, I arise to make but one short point.

It seems that page 36 of our brief is becoming fairly notorious and I would only wish to point out that our enforcement policy can in no way stop what the Congress tried to do in a statute.

Even if it's a new policy, even if this is the first case brought and we do not believe it is.

Maybe the first case we have brought but certainly the --

Justice Byron R. White: Has the Government abandoned the notion that these companies were engaged in commerce?

Mr. Bruce B. Wilson: They were engaged in commerce within the meaning of that -- of those words for the jurisdictional purposes of the Clayton Act.

Justice Byron R. White: Are you saying they were engaged in commerce without having to rely on the effect notion?

I mean you certainly argue in your brief.

Mr. Bruce B. Wilson: No, I think we have to say that the affecting commerce in any section of the -- in any line of commerce in any section of the country, that's what gets this merger within the scope of the Section 7 of the Clayton Act.

Justice Byron R. White: But you argue that -- you argue that these people were sufficiently dealing directly in interstate commerce.

Mr. Bruce B. Wilson: Well, they were, there were certainly dealings in interstate that gives directly in interstate commerce.

Justice Byron R. White: Well, on that basis you don't need any change, any redefinition of engaged in commerce at all.

Mr. Bruce B. Wilson: Well, the District Court of course found that those dealings were de minimis.

Justice Byron R. White: But you don't agree with that.

Mr. Bruce B. Wilson: If -- we don't agree with that but if one accepts the District Court's findings, we say that nevertheless --

Justice Byron R. White: Well, you're not abandoning your --

Mr. Bruce B. Wilson: Oh no sir.

Justice Byron R. White: -- charge to the District Court's findings.

Mr. Bruce B. Wilson: No sir.

And there is one case --

Justice Harry A. Blackmun: Go ahead.

Mr. Bruce B. Wilson: There is one case which is directly on point.

The Third Circuit decision in Transamerica by -- decided by a panel of judges, Maris, Goodrich and Kalodner which deals directly with the point at issue here, did Congress intend in this statute to exercise the same full range of its jurisdictional power which it exercised in the Sherman Act.

The Court there so held that is coming back to that last point.

Justice Harry A. Blackmun: Mr. Wilson could I interrupt you here.

Mr. Bruce B. Wilson: Yes sir.

Justice Harry A. Blackmun: Before you sit down, would you expand a little bit on what your response is to your oppositions rely on some of the comments to Senator Sparkman and member Dickson in the 1958 debate?

Mr. Bruce B. Wilson: Well, I think one has to come back to the -- a position taken by an administrative agency cannot be used subsequently to stop the intent of Congress in passing a statute.

If the statute means what we contended means, the fact that we have been mistaken, the fact that a -- another committee have been mistaken and the fact that the federal trade commission may have been mistaken in some of the positions, it is taken in the past should not prohibit a new construction, not really a new construction, a real construction, a true construction of the statute and its meaning.

Chief Justice Warren E. Burger: At what point could you fix the time when this sort of maintenance became a nationwide business on a large scale?

Mr. Bruce B. Wilson: Well, I think one has to look at the growth of the service industries generally.

I don't think as in the antitrust business as we deal with it everyday.

One can precisely put a time.

Chief Justice Warren E. Burger: Not precisely but at something in the last decade, 15 years?

Mr. Bruce B. Wilson: Yes sir, 10 to 15 years.

Thank you sir.

Chief Justice Warren E. Burger: Pretty much the same history as the -- or at least comparable history to the private security business protecting industries and office buildings, things of that kind.

Mr. Bruce B. Wilson: I think that's correct, Mr. Chief Justice.

Thank you.

Chief Justice Warren E. Burger: Thank you gentlemen.

The case is submitted.