California v. American Stores Co.

Background

California sued after American Stores bought Lucky, more than doubling American’s supermarkets in California and alleging the merger would harm competition and raise prices in 62 cities. The FTC negotiated a consent order and a "Hold Separate Agreement" keeping operations apart while some stores awaited divestiture. The District Court issued a preliminary injunction to keep the companies separate and contemplated divestiture; the Ninth Circuit agreed on likely harm but held §16 did not allow divestiture in private suits.

Reasoning

The Court asked whether the phrase "injunctive relief" in §16 includes divestiture. Looking at the statute, its history, and traditional equitable powers, the Court concluded §16 permits divestiture as an equitable remedy to prevent threatened harm. The Court reversed the Ninth Circuit, but stressed that private plaintiffs must still show threatened loss or damage and that ordinary equitable limits and defenses apply before a court orders divestiture.

Real world impact

States and private parties can now ask federal courts to force sales or separation of assets in antitrust suits to stop harmful mergers, subject to normal equity rules. The ruling does not make divestiture automatic; courts will weigh evidence, timing, and defenses such as delay or "unclean hands." The case is returned to lower courts for further fact-specific proceedings on relief.

Dissents or concurrances

Justice Kennedy concurred in the judgment and noted that the Hart-Scott-Rodino premerger review process may affect whether divestiture should be ordered and that delay or laches could bar relief in particular cases.