THE CONSENT DECREE PROGRAM OF THE

DEPARTMENT OF JUSTICE

INTRODUCTION

Disposition of antitrust cases by consent of the parties is an outstanding feature of the administration of the antitrust laws by the Department of Justice. For decades, 3 out of every 4 of the antitrust cases in equity that the Attorney General has started have ended by consent, with no issue litigated and adjudicated.

An antitrust consent judgment, for purposes of this report, is an order of the court agreed upon by representatives of the Attorney General and of the defendant, without trial of the conduct challenged by the Attorney General, in proceedings instituted under the Sherman Act, the Clayton Act, or related statutes. Normally, the consent decree recites that it does not constitute evidence or admission by any of the parties with respect to any of the issues involved in the litigation.

The first consent decree in a Sherman Act case was entered in 1906.1 Enactment of the Clayton Act in 1914, however, stimulated the frequency of consent decrees in Government litigation. Section 5 provides that in no case shall a consent decree, entered before testimony is taken, in a case brought by the Government, be available as prima facie evidence to assist private parties to recover treble damages for injuries caused by the defendant's activities.

This provision made the consent decree a protection eagerly sought by defendants, and over the years its use has increased. In 1940 the Temporary National Economic Committee reported over half of the antitrust equity actions instituted by the Government had resulted in negotiated settlements.2 In 1955 the Attorney General's Committee was able to report “* * * from 1935 to date, 72 percent of the civil actions brought were terminated by consent decrees." Similarly, at the hearings Assistant Attorney General Hansen pointed out that "for fiscal years 1947 through 1957, 72 percent of all civil-case terminations were by means of consent decrees." In the 4-year period 1949-52, 48 cases, or 52 percent of the 92 civil cases terminated were disposed of by consent judgments. In the 4-year period, 1952-56, 97 cases, or 69 percent of the 140 civil cases terminated ended by consent. In fiscal year 1957 alone, 22, or 81.4 percent of 27 civil cases were terminated by means of consent decrees.5

4

1 United States v. Otis Elevator Co., June 1, 1906, 9th Cir., Hearings, p. 54.

2 Hamilton and Till, TNEC Monograph No. 16, p. 88 (1940).

Report of the Attorney General's National Committee To Study the Antitrust Laws, p. 360.

Hearings, p. 10. Consent Decree Program of the Department of Justice, Antitrust Subcommittee, Committee on the Judiciary, House of Representatives, 85th Cong., serial No. 9. The hearings are contained in 5 volumes in 2 parts. Pt. I: Oil Pipelines, contains vol. I, pp. 1-836 (a), and vol. II, pp. 837-1666. Pt. II, American Telephone & Telegraph Co., contains vol. I, pp. 1667-2401; vol. II, pp. 2403-3426; and vol. III, pp. 3427-4492. Hereinafter referred to as "Hearings."

"Hearings, pp. 38-39.

IX

The development and use of the consent-decree device as a major element in the program to enforce the antitrust laws has generated substantial amounts of criticism. Since 1955 the Antitrust Subcommittee has received complaints that consent decrees, for all practical purposes, eliminated the judiciary from enforcement of the antitrust laws. As a result, the staff of the Antitrust Division ceased to be a prosecuting arm and had become enmeshed in a form of industry regulation for which it is inadequately equipped.

Other complaints involved competitors of defendants in Government antitrust cases who had been injured by the defendant's activities but who were unable to undertake protracted antitrust litigation. They wanted the Government to proceed to trial in order that they could have the benefit of the Government's judgment in private trebledamage actions.

Others complained about the secrecy of the consent-decree procedures. Competitors of antitrust defendants alleged that, although they might be adversely affected by the terms of a consent decree, under current procedures they had no opportunity to present their views to the Department of Justice prior to its entry.

Other critics contended to the committee that consent-decree procedures essentially amounted to a compromise of the Government's interest. Entry of a consent decree often deprived the Government of relief it could have obtained if it had litigated its case. Finally, another area of complaint involved the allegation that the Department of Justice, once a consent decree had been entered, turned to other business and neglected the industry. As a consequence, failure of the Department to enforce the provisions of consent decrees rendered them virtually a license for further antitrust violation.

In view of these allegations, the committee concluded that a study of the entire consent-decree program of the Department of Justice would be appropriate, to determine, among other questions, whether remedial legislation was needed. To this end, on April 3, 1957, the chairman addressed a letter of inquiry to Victor R. Hansen, Assistant Attorney General in charge of the Antitrust Division of the Department of Justice, in part as follows:

During this Congress the House Antitrust Subcommittee will conduct a study of the procedures and competitive effects of the Antitrust Division's consent-decree program. In its study the committee will seek to ascertain how effective consent decrees have been to eliminate the conditions that caused the Government to institute its antitrust proceeding, and to restore a competitive climate in the industries concerned. In addition, the committee is interested in the effects of consent decrees upon competitors of the defendants."

In this letter, the chairman requested information about the procedures, available manpower, and policies applicable to the consentdecree program. In order to define enforcement problems, this letter also requested detailed chronological statements of the actions taken by the Antitrust Division with respect to the supervision and enforcement of five particular consent decrees.

• Hearings, p. 97.

In an effort to delineate Department policies and procedures with the type of specific information necessary to complete its appraisal of the Department's consent-decree program, the committee examined two individual consent decrees in detail. For these case studies, the Committee selected the decree in the oil pipeline industry, United States v. The Atlantic Refining Company Civil Action No. 14060, District of Columbia, Dec. 23, 1941, and the decree in the telephone industry, United States v. Western Electric Company and American Telephone and Telegraph Company, Civil Action 17-49, District Court, New Jersey, January 24, 1956. The A. T. & T. decree was selected because of the wide disparity between the relief asked for in the Government's complaint and the relief it received in the decree. The A. T. & T. decree afforded the committee an opportunity for a detailed examination of the procedures and policy considerations involved in negotiating a consent decree in a major antitrust case. The oil pipeline decree, which had been in effect 16 years, in addition to the problems that arise in industrywide negotiations, delineated the Antitrust Division's procedures and the enforcement problems that arise when a consent decree's provisions become the standard for an entire industry.

Early in the course of the committee's study it became apparent that wholehearted cooperation would not be forthcoming from the Department of Justice. The Department was reluctant to provide anything except generalized information on overall Antitrust Division policies and the broad theories that were the basis of the Department's program. When the committee desired information about specific cases or particular actions taken by representatives of the Antitrust Division, in most instances such information was refused.

The actions of the Department relative to the consent decree in the A. T. & T. case is an example in point. With respect to this decree, the Department apparently was so sensitive about the criticism that likely would result from full disclosure of the negotiations that preceded this decree, that it unconditionally refused to make information available from its files. On May 29, 1956, shortly after entry of the decree on January 24, 1956, in view of the Government's apparent consent to continued monopolization of the telephone equipment manufacturing industry, Chairman Celler requested Attorney General Herbert Brownell to make available "* * *all files in the Department of Justice relating to the negotiations for, and signing of, a consent decree in this case.""

William P. Rogers, then Deputy Attorney General, responded to this request on July 13, 1956. În his response Mr. Rogers declined to make any files available to the committee with respect to the A. T. & T. decree, on the ground that (1) the files contained information voluntarily submitted by the defendants, which could not be made available without violating the confidential nature of settlement negotiations; and (2) the files contained memorandums and recommendations prepared by the staff of the Antitrust Division which purportedly could not be disclosed in the interest of assuring full and open discussion, and even disagreement, in staff consideration of contemplated consentdecree provisions.

7 Hearings, p. 1674.

On December 12, 1957, in connection with the consent-decree investigation, the committee requested Attorney General Rogers for access to specific A. T. & T. material in the Department of Justice files. On December 27, 1957, Assistant Attorney General Hansen reiterated the Department's July 13, 1956, position in his refusal to make the A. T. & T. files available to the committee.8

The Department of Justice also refused to provide to the committee any documents from its files with respect to enforcement of the A. T. & T. consent decree. In connection with this investigation, the chairman on May 17, 1957, requested Assistant Attorney General Hansen to furnish to the committee copies of communications he had received from A. T. & T. in response to certain complaints that the Antitrust Division had made about compliance with the terms of the decree. On August 23, 1957, Mr. Hansen responded to the chairman's request as follows:

With reference to paragraphs 2 and 3 of your letter, I respectfully refer you to the letter from the Deputy Attorney General to you of July 13, 1956. Those considerations which require that the Department treat on a confidential basis communications with a defendant during consent decree negotiations also apply to the enforcement of a decree. Confidential information obtained from a defendant which may be required to ascertain whether there is compliance with the terms of a decree might nevertheless be harmful to the defendant if disclosed publicly. Where such information does not in fact indicate a violation of the terms of the decree, it would be unfair to disclose it to the public. To depart from this principle in a specific case could seriously hamper our judgments-enforcement program. Where the information obtained does disclose judgment violations, the Department will, of course, place it in evidence at the appropriate stage of litigation."

Subsequently, the documents examined in the public hearings shed light on the reason the Department of Justice was reluctant to have an examination of its files. The refusals of the Justice Department to provide the factual information readily available in its files relevant to the A. T. & T. consent decree, in part were based on the realization that the Department could be embarrassed by their disclosure.

The Department of Justice's reluctance to provide factual information to the committee was not limited to information about the A. T. & T. consent decree. With respect to the oil pipeline consent decree 10 the Antitrust Division refused to furnish to the committee documents which would define any of the enforcement problems that had arisen since entry of the decree in 1941. In pursuit of its policy to withhold any information which might prove to be embarrassing to the Department, the Antitrust Division even refused to supply copies of the Antitrust Division's interpretations of the provisions of the decree which over the years had been given to various defendant oil companies.

The Department of Justice also refused to make available to the committee copies of communications it had sent to Members of Con

p. 2219-2220.

3706.

28 v. The Atlantic Refining Co., et al., Civil Action No. 14060, D. C., Decem

gress with respect to oil-company violations of the terms of the pipeconsent decree. Some of these communications subsequently were found in the Congressional Record where they had been inserted by the recipients.

The Department of Justice's refusal to cooperate with the committee in its study was not limited to withholding documents in the Department's files. In their testimony during the hearings, representatives of the Department of Justice would not respond candidly to the committee's inquiries. With respect to many of the questions propounded, the Justice Department representatives testified reluctantly and evasively in what seemed to be an attempt to shield the Attorney General behind a multitude of excuses. With respect to questions about the negotiations which preceded entry of the pipeline consent decree, the Department of Justice representatives said they were unable to respond because they did not have firsthand personal knowledge and because they had **** not been able to locate any memorandums in the files ***" 11 The Department of Justice representatives also refused to testify about particular violations of the decree on the ground that to do so might disclose business information to competitors of the defendants,12 or, possibly might jeopardize unrelated litigation which was pending or even which might be instituted by the Department.13

The uncooperative attitude displayed by the Department of Justice throughout this investigation hampered the committee in its work. It made more difficult the committee's analysis of the benefits, as well as the dangers, that attend the administration by Department of Justice of its consent-decree program.

The extent to which the Department of Justice went to withhold information from the committee in this investigation is unparalleled in the committee's experience. The Department's attitude implied that the reluctance to provide information to the committee resulted from a desire to cover up those facts which the Department considered to be embarrassing.

The committee's suspicion proved to be well founded. Faced with the intransigent attitude of the Department, the committee turned to, and obtained from, affected private parties the type of specific information that the committee needed. Defendants subject to the provisions of certain consent decrees were requested to supply documents which had been withheld by the Department of Justice. The committee recognizes that these requests were burdensome, but, in view of the Department's position, it had no alternative. It is clear that most of the necessary information was readily available in the files in the Department of Justice, one centralized location. The committee, however, was required to search out corporations all over the country and, at great trouble and expense to these companies, obtain documents in a piecemeal fashion. The committee regrets that the circumstances required it to impose these hardships in order to complete its investigation.

With respect to the oil-pipeline consent decree, the committee requested statistical information and correspondence from the following defendant pipeline companies: Great Lakes Pipe Line Co.; Service

u Hearings, p. 85.

12 Hearings, p. 240.

13 Hearings, pp. 81, 211, 234, 246.