Finnegan v. Campeau Corp.
915 F.2d 824, 1990 WL 145635 (1990)
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Rule of Law:
Where a specific federal regulatory scheme, such as the Williams Act governing corporate takeovers, contemplates and requires disclosure of certain conduct (like agreements between rival bidders), it implicitly repeals the general prohibitions of the Sherman Antitrust Act to the extent that applying the antitrust laws would create a direct and irreconcilable conflict with the securities regulation.
Facts:
- In March 1988, Federated Department Stores, Inc. (Federated) was put up for sale, initiating a battle for its control.
- R.H. Macy & Co., Inc. (Macy’s) and Campeau Corp. (Campeau) engaged in a competitive bidding war, progressively driving up the price of Federated's stock.
- Recognizing the economic disadvantage of continuing to raise the price, Macy's and Campeau reached an agreement in April 1988.
- Under the agreement, Macy's agreed to withdraw its latest bid of $75.51 per share.
- In exchange, Campeau would be allowed to acquire Federated and would then sell two of Federated's divisions, I. Magnin and Bullock's Wilshire, to Macy's.
- Campeau also agreed to pay Macy's $60 million to cover its legal and investment banking expenses.
- Following the agreement, Campeau acquired Federated for $73.50 a share, a price lower than Macy's withdrawn bid.
- Michael Finnegan was a shareholder of Federated who alleged economic injury as a result of the agreement.
Procedural Posture:
- Michael Finnegan, on behalf of Federated shareholders, filed a complaint against Campeau Corp. and R.H. Macy & Co., Inc. in the U.S. District Court for the Southern District of New York.
- The complaint alleged that the agreement between the bidders constituted a conspiracy in violation of Section 1 of the Sherman Act.
- Macy's moved to dismiss the complaint for failure to state a claim under Fed. R. Civ. P. 12(b)(6).
- The district court granted the motion to dismiss, holding that the Sherman Act was inapplicable to the sale of stock and, alternatively, that it was impliedly repealed by the securities laws.
- Finnegan (appellant) appealed the district court's dismissal to the U.S. Court of Appeals for the Second Circuit.
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Issue:
Does an agreement between two competing bidders for a target corporation to cease bidding against one another, thereby lowering the final acquisition price, violate Section 1 of the Sherman Antitrust Act?
Opinions:
Majority - Cardamone, J.
No, the agreement does not violate Section 1 of the Sherman Act. The court held that the Williams Act, which comprehensively regulates tender offers, implicitly repeals the Sherman Act in this context to avoid a direct conflict between the two statutory schemes. The court's reasoning proceeded in several steps. First, it rejected the district court's view that the Sherman Act is inapplicable because the sale of stock does not constitute 'trade or commerce,' finding the Act's scope is broader than just tangible goods. The core of the holding rests on the doctrine of implied revocation, which applies only where there is a 'plain repugnancy' between antitrust and regulatory provisions. The Williams Act and its implementing SEC regulations (specifically Schedule 14D-1) explicitly contemplate agreements between bidders by requiring their full disclosure. Since the securities law framework permits such joint bidding arrangements provided they are disclosed, applying the Sherman Act to prohibit them would create an irreconcilable conflict. Congress could not have intended to permit conduct under the securities laws while simultaneously condemning it under the antitrust laws. Furthermore, applying the antitrust laws would upset the Williams Act's policy of 'evenhandedness' among bidders, target shareholders, and management by giving shareholders undue power and discouraging takeover bids, thereby protecting entrenched management.
Analysis:
This decision establishes that the comprehensive regulatory scheme of the Williams Act displaces the general application of the Sherman Antitrust Act in the specific context of disclosed agreements between rival bidders in a takeover contest. It solidifies the doctrine of implied repeal, demonstrating that where a specific statute pervasively regulates an activity, it can create an immunity from antitrust liability to prevent a direct conflict between legal commands. The case serves as a key precedent for analyzing the intersection of antitrust law and other regulated industries, clarifying that the securities law's emphasis on disclosure trumps the antitrust law's focus on pure competition in the market for corporate control. Consequently, the remedy for shareholders harmed by such agreements lies within the securities laws, not the antitrust laws.
