California v. Federal Power Commission

Background

El Paso Natural Gas bought most of the stock of Pacific Northwest Pipeline and then asked the Federal Power Commission to approve a merger of Pacific’s assets. The Justice Department had already sued under the antitrust law, alleging the stock purchases illegally lessened competition. The Commission held hearings, approved the merger in December 1959, and the companies completed the transaction. The State of California intervened in the Commission proceedings and challenged the approval in court; the Court of Appeals upheld the Commission, and the Supreme Court agreed to review the case.

Reasoning

The central question was whether the Commission should decide a merger application while a court antitrust lawsuit about the same transaction was still pending. The Court said no. It explained that the Commission has to apply the Natural Gas Act’s public-interest standard but does not have power to decide antitrust violations. The Court relied on the Clayton Act’s structure and practical concerns: if a court later finds the stock purchases unlawful, undoing a completed merger causes costly "unscrambling," tax and other complications, and gives the agency decision undue influence over the antitrust case. For these reasons, the Court reversed the court of appeals and ordered the case sent back so the Commission must await the courts’ resolution before acting.

Real world impact

The decision means federal regulators should not approve mergers when related antitrust suits are unresolved. It does not decide whether El Paso actually violated antitrust law; it only says the agency must wait for the courts on that issue.

Dissents or concurrances

Justice Harlan (joined by Justice Stewart) dissented, warning the Court adopted a broad new rule and criticizing the Government for not seeking temporary relief earlier; he would have left the Commission’s approval in place.