Standards for Evaluating Requests for Preliminary Injunctive Relief in Merger Cases

Loyola University Chicago Law Journal Volume 12 Issue 3 Spring 1981 Antitrust Symposium: Mergers Article 10 1981 Standards for Evaluating Requests for Preliminary Injunctive Relief in Merger Cases Patricia Neeham Marucci Follow this and additional works at: http://lawecommons.luc.edu/luclj Part of the Antitrust and Trade Regulation Commons Recommended Citation Patricia N. Marucci, Standards for Evaluating Requests for Preliminary Injunctive Relief in Merger Cases, 12 Loy. U. Chi. L. J. 503 (1981). Available at: http://lawecommons.luc.edu/luclj/vol12/iss3/10 This Note is brought to you for free and open access by LAW eCommons. It has been accepted for inclusion in Loyola University Chicago Law Journal by an authorized administrator of LAW eCommons. For more information, please contact . Standards for Evaluating Requests for Preliminary Injunctive Relief in Merger Cases INTRODUCTION Section 7 of the Clayton Act' prohibits acquisitions of stock or mergers which may substantially lessen competition or tend to create a monopoly in any line of commerce in any section of the country. Effective enforcement of section 7 may be impossible where consummation of the merger has occurred and restoration of the merged organizations' separate identities is impractical. A preliminary injunction to prevent the consummation of a merger can serve to maintain the status quo pending determination of the antitrust charges at a plenary hearing." Traditional equitable analysis to determine whether a preliminary injunction is appropriate focuses on the plaintiff's likelihood of success on the merits, the possibility of irreparable harm, the equities, and the public interest.' A more liberal test, originating in the Second Circuit, permits an injunction to issue when the balance of the equities weighs in favor- of the plaintiff and there has been a "serious and substantial" showing on the merits.4 Which 1. 15 U.S.C. § 18 (1976). Section 7 provides in pertinent part: No corporation engaged in commerce shall acquire, directly or indirectly, the whole or any part of the stock or other share capital and no corporation subject to the jurisdiction of the Federal Trade Commission shall acquire the whole or any part of the assets of another corporation engaged also in commerce where in any line of commerce in any section of the country, the effect of such acquisition may be substantially to lessen competition, or to tend to create a monopoly. 2. The court in Hamilton Watch Co. v. Benrus Watch Co., 206 F.2d 738 (2d Cir. 1953) characterized the nature of a preliminary injunction as follows: For a preliminary injunction-as indicated by the numerous more or less synonomous adjectives used to label it-is, by its very nature, interlocutory, tentative, provisional, ad interim, impermanent, mutable, not fixed or final or conclusive, characterized by its for-the-time-beingness. It serves as an equitable policing measure to prevent the parties from harming one another during the litigation; to keep the parties, while the suit is on, as far as possible in their respective positions they occupied when the suit began. Id. at 742. The procedure governing temporary restraining orders and preliminary injunctions is found in Fed. R. Civ. P. 65. 3. For a general discussion of the preliminary injunction, see D. DOERS, HANDBOOK ON THE LAW OF REMEDIES: DAMAGES, EQUITY, OR RESTITUTION § 2.10 (1973). 4. This Second Circuit test originated in Sonesta Int'l Hotels Corp. v. Wellington Assoc., 483 F.2d 247 (2d Cir. 1973). See notes 20-32 infra and accompanying text for further 503 Loyola University Law Journal [Vol. 12 test should be applied to an application for preliminary relief in an antitrust case touches on basic policy issues at the heart of antitrust law. Preservation of a free and competitive marketplace supports arguments favoring the broad use of preliminary injunctions to diminish any threat of antitrust violations. Protection of private interests supports a more conservative approach to insure shareholders their right of access to the marketplace. The type of merger involved-vertical, horizontal, or conglomerate-is an additional factor to be considered in whether to apply a particular analysis. Finally, the nature of the plaintiff's interests also may be critical. The Federal Trade Commission (FTC), Department of Justice, and private plaintiffs each are empowered to seek preliminary injunctive relief where an antitrust violation is alleged.5 This note will discuss the tests used by the courts in determining whether to grant preliminary injunctive relief in antitrust cases. First, the traditional analysis and the alternative approach of the Second Circuit will be presented, with particular attention to the implications of these tests for merger cases. Second, courts have differentiated their analysis of injunctive relief based on whether the plaintiff is the FTC, the Justice Department, or a private party. The underlying rationale for this approach and its disparate results will be delineated. Finally, a uniform standard of analysis will be proposed which could be applied to all requests for preliminary injunctive relief where an antitrust violation is alleged. EVALUATION OF THE NEED FOR PRELIMINARY INJUNCTIVE RELIEF: Two MODELS Traditional Equitable Analysis Traditionally, courts have refrained from issuing the drastic remedy of a preliminary injunction,6 and have limited their use to cases where the issuance of an injunction is necessary to preserve the status quo pending resolution of the underlying conflict.7 Pres- discussion. 5. The Department of Justice may seek preliminary injunctive relief against proposed antitrust violations through § 15 of the Clayton Act, 15 U.S.C. § 25 (1976). Private parties may seek this relief through § 16 of the Clayton Act, 15 U.S.C. § 26 (1976). The FTC is empowered to seek preliminary relief through § 13(b) of the Federal Trade Commission Act, 15 U.S.C. § 53(b) (1976). 6. 11 C. WiuoHT & A. MILLER, FED=AL PRACTiCE & PRocEDUR § 2948 at 430-31 (1973). 7. II H. TouLmm's ANTRusT LAws § 28.7 (1949). See also FTC v. Food Town Stores, Inc., 539 F.2d 1339 (4th Cir. 1976); United States v. Ingersoll-Rand Co., 320 F.2d 509 (3d Cir. 1963); Harriman v. Northern Securities Co., 134 F. 331 (3d Cir. 1905); United States v. 1981] Injunctive Relief in Merger Cases ervation of the status quo in merger cases is especially important, since maintaining the organizations as separate entities prevents commingling of assets, employees, and trade secrets. Such commingling can make final relief difficult and ineffective. Yet, the granting of a preliminary injunction often effectively means a final resolution, where the parties abandon the merger rather than face complex, costly, and time-consuming litigation.' The final effect of the grant or denial of a preliminary injunction on the merger is an unarticulated factor often considered by the courts in their decisions. Under the tradition (...truncated)