495 U.S. 271 (1990)
In March 1988, American Stores Co., which operated over 1,500 retail grocery stores including 252 in California, notified the Federal Trade Commission of its intent to acquire all of Lucky Stores, Inc.'s outstanding stock for $2.5 billion.1 Lucky was the largest supermarket chain in California with 340 stores.2 The FTC investigated and on May 31, 1988, filed a complaint alleging a violation of § 7 of the Clayton Act along with a proposed consent order that included a Hold Separate Agreement requiring American to keep the companies' assets and operations separate until after it had divested itself of several designated supermarkets.3
American accepted the consent order terms, acquired Lucky's stock, and on June 9, 1988, completed a Delaware short form merger, though the Hold Separate Agreement remained in effect.4 On August 31, 1988, the FTC gave final approval to the merger.5 The next day, California filed suit in the United States District Court for the Central District of California alleging that the merger violated § 1 of the Sherman Act and § 7 of the Clayton Act, and would harm competition and raise prices in 62 California cities.6
California's complaint sought a preliminary injunction requiring American to hold and operate Lucky's California assets separately, injunctive relief including rescission, and an order requiring divestiture of all Lucky assets in California.7 The District Court granted a temporary restraining order.8 It then entered a preliminary injunction after finding a prima facie § 7 violation.9 The court also found that Californians would suffer irreparable harm if the merger proceeded.10 The harm to the State far outweighed any harm to American.11 The court rejected American's argument that the relief was foreclosed by prior Ninth Circuit precedent.12
American appealed, and the Court of Appeals for the Ninth Circuit, relying on its earlier decision in International Telephone & Telegraph Corp. v. General Telephone & Electronics Corp., held that the preliminary injunction constituted impermissible indirect divestiture under § 16 of the Clayton Act and set it aside, even though it agreed California had shown likelihood of success on the merits and probability of irreparable harm.13 The Supreme Court granted certiorari to resolve a conflict with the First Circuit's decision in CIA. Petrolera Caribe, Inc. v. Arco Caribbean, Inc.14
Whether divestiture is a form of injunctive relief within the meaning of § 16 of the Clayton Act?15
Section 16 of the Clayton Act authorizes any person to sue for and obtain injunctive relief against threatened loss or damage by a violation of the antitrust laws.16 This authority exists under the same conditions and principles as injunctive relief is granted by courts of equity.17 The authority encompasses divestiture decrees as a remedy for unlawful mergers or acquisitions.18
Yes. The plain text of § 16 authorizes divestiture decrees to remedy § 7 violations.19 In this case American Stores acquired Lucky Stores stock for $2.5 billion and completed a short-form merger while the FTC Hold Separate Agreement remained in effect.20 California then filed suit alleging a § 7 violation that would harm competition and raise prices in 62 California cities.21 The District Court found a prima facie § 7 violation and irreparable harm to consumers that outweighed any harm to American.22 It entered a preliminary injunction preventing integration of the two companies' operations.23
The Court of Appeals erred when it set aside that injunction on the ground that it constituted impermissible indirect divestiture.24 The statutory reference to injunctive relief against threatened loss or damage plainly reaches orders that maintain separate operations or require asset sales when necessary to prevent anticompetitive harm.25 This reading is consistent with the Clayton Act's emphasis on private enforcement and with the recognition that divestiture is the preferred remedy for illegal mergers.26
Divestiture is a form of injunctive relief authorized by § 16 of the Clayton Act when equitable principles support its use to prevent threatened loss or damage from an unlawful acquisition.27
Related opinions on this issue
Justice Kennedy joined the opinion of the Court but wrote separately to note that the Hart-Scott-Rodino Antitrust Improvements Act of 1976 may be of vital relevance in determining whether to order divestiture in a particular case.28 He observed that the Act enables the FTC to review transactions before they occur and to negotiate settlements that provide predictability for businesses and unions.29 Although the statute does not prohibit private divestiture suits after an FTC-approved settlement, it may bear upon the issue of laches.30
California received formal notice of the merger filing months earlier yet chose not to sue until after FTC approval.31 Justice Kennedy stated that these considerations, including the possibility that the State must accept the consequences of its delay, should influence the ultimate disposition of the case on remand.32