author: Mr. Justice Black Mr. Justice White, Mr. Justice Fortas, Me. Justice Marshall, Mr. Justice Harlan,

text:
    PERMA LIFE MUFFLERS, INC., et al. v. INTERNATIONAL PARTS CORP. et al.
    No. 733.
    Argued April 22-23, 1968.
    Decided June 10, 1968.

      Robert F. Rolnick argued the cause for petitioners. With him on the briefs were Raymond R. Dickey and Bernard Gordon.

      Glenn W. McGee argued the cause for respondents. With him on the brief were John T. Chadwell, David J. Gibbons, John C. Berghoff, Jr., David Silbert, and Jay Erens.

   Mr. Justice Black

delivered the opinion of the Court.

The principal question presented is whether the plaintiffs in this private antitrust action were barred from recovery by a doctrine known by the Latin phrase in pari delicto, which literally means “of equal fault.” The plaintiffs, petitioners here, were all dealers who had operated “Midas Muffler Shops” under sales agreements granted by respondent Midas, Inc. Their complaint charged that Midas had entered into a conspiracy with the other named defendants — its parent corporation International Parts Corp., two other subsidiaries, and six individual defendants who were officers or agents of the corporations — to restrain and substantially lessen competition in violation of § 1 of the Sherman Act and § 3 of the Clayton Act. They also charged that the defendants had violated § 2 (a) of the Clayton Act, as amended by the Robinson-Patman Act, by granting discriminations in prices and services to some of their customers without offering the same advantages to the plaintiffs. The District Court entered summary judgment for respondents with respect to all of petitioners’ claims. On appeal the Court of Appeals reversed the judgment for respondents on the Robinson-Patman claim but, over Judge Cummings’ dissent, affirmed the District Court’s ruling that the other claims were barred by the doctine of in pari delicto. The court also held that petitioners’ Sherman Act claim was barred because Midas and International, while functioning as separate corporations, had a common ownership and therefore could cooperate without creating an illegal conspiracy. 376 F. 2d 692 (1967). Because these rulings by the Court of Appeals seemed to threaten the effectiveness of the private action as a vital means for enforcing the antitrust policy of the United States, we granted certiorari. 389 U. S. 1034 (1968). For reasons to be stated, we reverse.

The economic arrangements that led to this lawsuit have a long history. Respondent International Parts has been in the business of manufacturing automobile mufflers and other exhaust system parts since 1938. In 1955 the owners of International initiated a detailed plan for promoting the sale of mufflers by extensively advertising the “Midas” trade name and establishing a nationwide chain of dealers who would specialize in selling exhaust system equipment. Each prospective dealer was offered a sales agreement prepared by Midas, Inc., a wholly owned subsidiary of International. The agreement obligated the dealer to purchase all his mufflers from Midas, to honor the Midas guarantee on mufflers sold by any dealer, and to sell the mufflers at resale prices fixed by Midas and at locations specified in the agreement. The dealers were also obligated to purchase all their exhaust system parts from Midas, to carry the complete line of Midas products, and in general to refrain from dealing with any of Midas’ competitors. In return Midas promised to underwrite the cost of the muffler guarantee and gave the dealer permission to use the registered trademark “Midas” and the service mark “Midas Muffler Shops.” The dealer was also granted the exclusive right to sell “Midas” products within his defined territory. He was not required to pay a franchise fee or to purchase or lease substantial capital equipment from Midas, and the agreement was cancelable by either party on 30 days’ notice.

Petitioners’ complaint challenged as illegal restraints of trade numerous provisions of the agreements, such as the terms barring them from purchasing from other sources of supply, preventing them from selling outside the designated territory, tying the sale of mufflers to the sale of other products in the Midas line, and requiring them to sell at fixed retail prices. Petitioners alleged that they had often requested Midas to eliminate these restrictions but that Midas had refused and had threatened to terminate their agreements if they failed to comply. Finally they alleged that one of the plaintiffs had had his agreement canceled by Midas for purchasing exhaust parts from a Midas competitor, and that the other plaintiff dealers had themselves canceled their agreements. All the plaintiffs claimed treble damages for the monetary loss they had suffered from having to abide by the restrictive provisions.

The Court of Appeals, agreeing with the District Court, held the suit barred because petitioners were in pari delicto. The court noted that each of the petitioners had enthusiastically sought to acquire a Midas franchise with full knowledge of these provisions and had “solemnly subscribed” to the agreement containing the restrictive terms. Petitioners had all made enormous profits as Midas dealers, had eagerly sought to acquire additional franchises, and had voluntarily entered into additional franchise agreements, all while fully aware of the restrictions they now challenge. Under these circumstances, the Court of Appeals concluded, “[i]t would be difficult, to visualize a case more appropriate for the application of the pan delicto doctrine.” 376 F. 2d, at 699.

We find ourselves in complete disagreement with the Court of Appeals. There is nothing in the language of the antitrust acts which indicates that Congress wanted to make the common-law in pari delicto doctrine a defense to treble-damage actions, and the facts of this case suggest no basis for applying such a doctrine even if it did exist. Although in pari delicto literally means “of equal fault,” the doctrine has been applied, correctly or incorrectly, in a wide variety of situations in which a plaintiff seeking damages or equitable relief is himself involved in some of the same sort of wrongdoing. We have often indicated the inappropriateness of invoking broad common-law barriers to relief where a private suit serves important public purposes. It was for this reason that we held in Kiefer-Stewart Co. v. Seagram & Sons, 340 U. S. 211 (1951), that a plaintiff in an antitrust suit could not be barred from recovery by proof that he had engaged in an unrelated conspiracy to commit some other antitrust violation. Similarly, in Simpson v. Union Oil Co., 377 U. S. 13 (1964), we held that a dealer whose consignment agreement was canceled for failure to adhere to a fixed resale price could bring suit under the antitrust laws even though by signing the agreement he had to that extent become a participant in the illegal, competition-destroying scheme. Both Simpson and Kiefer-Stewart were premised on a recognition that the purposes of the antitrust laws are best served by insuring that the private action will be an ever-present threat to deter anyone contemplating business behavior in violation of the antitrust laws. The plaintiff who reaps the reward of treble damages may be no less morally reprehensible than the defendant, but the law encourages his suit to further the overriding public policy in favor of competition. A more fastidious regard for the relative moral worth of the parties would only result in seriously undermining the usefulness of the private action as a bulwark of antitrust enforcement. And permitting the plaintiff to recover a windfall gain does not encourage continued violations by those in his position since they remain fully subject to civil and criminal penalties for their own illegal conduct. Kiefer-Stewart, supra.

In light of these considerations, we cannot accept the Court of Appeals’ idea that courts have power to undermine the antitrust acts by denying recovery to injured parties merely because they have participated to the extent of utilizing illegal arrangements formulated and carried out by others. Although petitioners may be subject to some criticism for having taken any part in respondents’ allegedly illegal scheme and for eagerly seeking more franchises and more profits, their participation was not voluntary in any meaningful sense. They sought the franchises enthusiastically but they did not actively seek each and every clause of the agreement. Rather, many of the clauses were quite clearly detrimental to their interests, and they alleged that they had continually objected to them. Petitioners apparently accepted many of these restraints solely because their acquiescence was necessary to obtain an otherwise attractive business opportunity. The argument that such conduct by petitioners defeats their right to sue is completely refuted by the following statement from Simpson: “The fact that a retailer can refuse to deal does not give the supplier immunity if the arrangement is one of those schemes condemned by the anti-trust laws.” 377 U. S., at 16. Moreover, even if petitioners actually favored and supported some of the other restrictions, they cannot be blamed for seeking to minimize the disadvantages of the agreement once they had been forced to accept its more onerous terms as a condition of doing business. The possible beneficial byproducts of a restriction from a plaintiff’s point of view can of course be taken into consideration in computing damages, but once it is shown that the plaintiff did not aggressively support and further the monopolistic scheme as a necessary part and parcel of it, his understandable attempts to make the best of a bad situation should not be a ground for completely denying him the right to recover which the antitrust acts give him. We therefore hold that the doctrine of in pari delicto, with its complex scope, contents, and effects, is not to be recognized as a defense to an antitrust action.

Respondents, however, seek to support the judgment below on a considerably narrower ground. They picture petitioners as actively supporting the entire restrictive program as such, participating in its formulation and encouraging its continuation. We need not decide, however, whether such truly complete involvement and participation in a monopolistic scheme could ever be a basis, wholly apart from the idea of in pari delicto, for barring a plaintiff’s cause of action, for in the present case the factual picture respondents attempt to paint is utterly refuted by the record. One of the restrictions which petitioners most strenuously challenge is the requirement that dealers purchase their supplies exclusively from Midas. Another is the requirement that dealers carry Midas’ full line of parts. Neither of these provisions could be in a dealer’s self-interest since they obligate him to buy from Midas regardless of whether more favorable prices can be-obtained from other sources of supply and regardless of whether he needs certain parts at all. In addition, the depositions refer to numerous instances in which petitioners asked Midas for permission to purchase from some other source of supply. The record shows that these requests were repeatedly refused by Midas representatives, who underscored the refusals by describing the very requests as “heresy” and by ■ commenting that dealers who bought from outside sources of supply were “asking for trouble” or “were going to be punished.” A Midas official warned petitioner Pierce, who had been buying some exhaust parts from other manufacturers, “Joe, this is just like cheating on your wife; it is grounds for divorce.”

These statements completely refute respondents’ argument that petitioners were active participants and show, to the contrary, that the illegal scheme was thrust upon them by Midas.

There remains for consideration only the Court of Appeals’ alternative holding that the Sherman Act claim should be dismissed because respondents were all part of a single business entity and were-therefore entitled to cooperate without creating an illegal conspiracy. But since respondents Midas and International availed themselves of the privilege of doing business through separate corporations, the fact of common ownership could not save them from any of the obligations that the law imposes on separate entities. See Timken Co. v. United States, 341 U. S. 593, 598 (1951); United States v. Yellow Cab Co., 332 U. S. 218, 227 (1947). In any event each petitioner can clearly charge a combination between Midas and himself, as of the day he unwillingly complied with the restrictive franchise agreements, Albrecht v. Herald Co., 390 U. S. 145, 150, n. 6 (1968); Simpson v. Union Oil Co., supra, or between Midas and other franchise dealers, whose acquiescence in Midas’ firmly enforced restraints was induced by “the communicated danger of termination,” United States v. Arnold, Schwinn & Co., 388 U. S. 365, 372 (1967); United States v. Parke, Davis & Co., 362 U. S. 29 (1960). Although respondents object that these particular theories of conspiracy now pressed by petitioners were not alleged with sufficient specificity in their complaint, this suggestion is completely without merit. Our modern rules provide for trying cases to serve the ends of justice and require that pleadings “be so construed as to do substantial justice.” Rule 8 (f), Fed. Rules Civ. Proc. The gist of petitioners’ cause of action has been clear from the outset, and respondents will in no way be prejudiced if petitioners are permitted to rely on these alternative theories of conspiracy.

It follows that the judgment of the Court of Appeals must be reversed. The case is remanded to that court with directions to reverse in full the judgment of the District Court and to remand the case for trial.

It is so ordered.

Mr. Justice White,

concurring.

I join the opinion and judgment of the Court with the following observations.

As long ago as 1927, in Eastman Kodak Co. of N. Y. v. Southern Photo Materials Co., 273 U. S. 359, the Court recognized that participation in an unlawful course of conduct would not bar recovery where the defendant’s superior bargaining power led to plaintiff’s participation in the unlawful arrangement. In Kiefer-Stewart Co. v. Joseph E. Seagram & Sons, Inc., 340 U. S. 211 (1951), where plaintiff was said to have participated in an illegal scheme other than the one charged in his complaint, the Court made it clear that a plaintiff’s own delinquency under the antitrust laws would not always bar his treble-damage suit. See also Bales v. Kansas City Star Co., 336 F. 2d 439, 444 (C. A. 8th Cir. 1964); Jewel Tea Co. v. Local Unions, 274 F. 2d 217, 223 (C. A. 7th Cir.), cert. denied, 362 U. S. 936 (1960). These cases are enough to warrant reversal in this case, once it is concluded that the illegal arrangement in which petitioners participated was thrust on them by respondents. This is the conclusion reached by the Court and I agree with it.

I also agree that the in pari delicto defense in its historic formulation is not a useful concept for sorting out those situations in which the plaintiff might be barred because of his own conduct from those in which he may have been a party to an illegal venture but is still entitled to damages from other participants. Judgments like these would be better made by hewing closer to the aims and purposes of § 4 of the Clayton Act, 38 Stat. 731, 15 U. S. C. § 15, which gives treble-damage recovery to the private plaintiff injured by conduct which violates the antitrust laws.

Under § 4, plaintiff must show not only that the defendant violated the antitrust laws but that his conduct caused the damages alleged in the complaint. Normally, it would be enough with respect to causation if the defendant “materially contributed” to plaintiff’s injury, Continental Ore Co. v. Union Carbide & Carbon Corp., 370 U. S. 690, 702 (1962); or “substantially contributed, notwithstanding other factors contributed also," Momand v. Universal Film, Exchanges, Inc., 172 F. 2d 37, 43 (C. A. 1st Cir. 1948), cert. denied, 336 U. S. 967 (1949). The plaintiff need not show that the illegality was a more substantial cause than any other. Haverhill Gazette Co. v. Union Leader Corp., 333 F. 2d 798, 805-806 (C. A. 1st Cir.), cert. denied, 379 U. S. 931 (1964).

Under this rule, a third party proving an illegal undertaking between two defendants may recover for all damages caused by the combination. Those damages normally may be had from either or both defendants without regard to their relative responsibility for originating the combination or their different roles in effectuating its ends. This is because neither defendant, if he acted alone, could be charged with the violation; some degree of participation by both is essential to create a combination within the reach of § 1 of the Sherman Act. ' Either defendant is therefore deemed to have been a material cause of the damages, sufficient to permit a third party to recover.

This may be the result required under § 4 when conspirators are sued by an injured outsider. But what is the situation when one party to the combination sues the other? Assume three situations: first, A, a manufacturer, sells to B, a retailer. A, over B’s objection, insists on B’s adhering to specified resale prices. B agrees since A’s product is an important part of his business and he can get it nowhere else. B suffers a decline in business because of an inability to match or better the price for competing products. B sues A. He is obviously in a position to prove that A was a substantial cause of his injury.

Second, suppose that when B maintains the suggested prices on A’s product, he simply sells more of C’s competing product, which he also handles. B is not hurt, but A is. A sues B.

Third, suppose that D and E, competitors, combine to fix higher prices. D’s best customer sets up his own source of supply to D’s great damage. D sues E, claiming that E was a substantial cause of his injury.

It is arguable that in each supposed situation recovery should be denied because the plaintiff was a party to the illegality and wrongdoers should be left where they are found. In terms of the deterrent aims of the statute permitting injured plaintiffs to recover treble damages, however, this undiscriminating approach makes little sense. When those with market power and leverage persuade, coerce, or influence others to cooperate in an illegal combination to their damage, allowing recovery to the latter is wholly consistent with the purpose of § 4, since it will deter those most likely to be responsible for organizing forbidden schemes. The principles of Eastman Kodak Co. of N. Y. v. Southern Photo Materials Co., supra, clearly permit recovery by the less responsible, but injured, party. In the first hypothetical case, therefore, B should recover from A in order to deter A and others like him from imposing resale price maintenance schemes on their customers.

In the second case, where manufacturer A, contrary to his expectations, was injured and retailer B was not, there is no reason, based on the deterrent purposes of § 4, to permit recovery from B, even though his cooperation was essential to the combination and even though had a third party been injured he could have recovered from either A or B, or from both. A, the moving force, should not be rewarded for his efforts to further an unlawful price arrangement and in effect to take from B the profits, trebled, that B made by selling the products of A’s competitor. B was unwilling to enter the illegal scheme, was motivated principally by what he thought was economic necessity — the need to avoid losing business by being unable to offer a major product line — and would have been only marginally deterred by the prospect of antitrust liability.

In the third case, where D and E are competitors, if D simply proves the agreement and the resulting loss, should he recover from E, absent some believable showing that E was the more responsible for the illegal scheme? No doubt E was a substantial factor in the combination and hence in the injury; a judgment for damages might deter him and others from violating the law. But D is equally responsible for his own damages. To permit him a recovery may be a counter-deterrent. By assuring him illegal profits if the agreement in restraint of trade succeeds, and treble damages if it fails, it may encourage what the Act was designed to prevent. In this situation, it is doubtful that the ends of § 4 would be measurably served by permitting D’s recovery. If judge or jury finds the parties equally responsible for the conduct which caused injury, D’s recovery under § 4 should be denied for failure of proof that E was the more substantial cause of the injury.

No simple formula can encompass the infinite variety of possible situations. Generally speaking, however, I would deny recovery where plaintiff and defendant bear substantially equal responsibility for injury resulting to one of them but permit recovery in favor of the one less responsible where one is more responsible than the other. This rule would simply pose the issue of causation in particularized form. There will be little mystery as to what evidence would be relevant proof: facts as to the relative responsibility for originating, negotiating, and implementing the scheme; evidence as to who might reasonably have been expected to benefit from the provision or conduct making the scheme illegal under § 1; proof of whether one party attempted to terminate the arrangement and encountered resistance or counter-measures from the other; facts showing who ultimately profited or suffered from the arrangement.

As I view the record in the case before us, the evidence is insufficient to show that petitioners were as responsible as respondents, of more so, for the admittedly illegal scheme. The evidence before us does not suggest that petitioners were equal partners with respondents with respect to the origin and implementation of this scheme for distributing respondents’ mufflers, or in terms of benefits from the scheme. In such circumstances summary judgment for respondents was improper.

Mr. Justice Fortas,

concurring in the result.

I agree with the result in this case. Petitioners’ right to recover in their own interest and as “private attorneys general” to enforce the antitrust laws cannot be denied on the basis of the doctrine of in pari delicto. Simpson v. Union Oil Co., 377 U. S. 13 (1964).

The doctrine has, however, a significant if limited role in private antitrust law. If the fault of the parties is reasonably within the same scale — if the “delictum” is approximately “par” — then the doctrine should bar recovery. This might be the case, for example, if a manufacturer of mufflers and a manufacturer of other parts had combined to formulate and operate a collusive scheme. One co-adventurer could not sue the other for discriminatory or restrictive practices which allegedly diminished its take from the enterprise.

But equality of position of this general nature is necessary before in pari delicto may apply to bar an antitrust remedy. Unless the doctrine is so limited, the private remedy provided by the antitrust laws is nullified to a significant extent. The owner of a gas station may enter into an arrangement with the distributor and may benefit from its restrictive provisions. But this less-than-equal participation in the crime must not bar him from recovering in his own and the public interest if he can show that he has suffered compensable harm. Our decision in Simpson indicates this quite clearly. The antitrust laws are intended to protect individuals “from combinations fashioned by others and offered to [them] ... as the only feasible method by which [they] may do business.” Ring v. Spina, 148 F. 2d 647, 653 (1945).

As the Court points out, it is possible that the franchisee may be proved to be a collaborator, or co-adventurer, or a true particeps criminis with respect to a particular aspect of the plan — for example, if he originated and insisted upon the inclusion of a territorial exclusivity clause which was not in the franchise as drafted by the franchisor. He could not recover damages based upon this, if, essentially, it is his own act.

Clearly, petitioners here are not co-adventurers or partners in the franchise arrangement as a whole, and they are not barred by in pari delicto. On remand, as the Court orders, if petitioners are chargeable with responsibility for a particular clause of the agreement or restrictive covenant because it is, in substance, their own act, they should not be allowed to recover for injury they may have suffered because of it.

Me. Justice Marshall,

concurring in the result.

While I agree with the result and much of the reasoning in the opinion of the Court in this case, I find myself unable to accept what I take to be the holding that the doctrine of in pari delicto has no place in a treble-damage antitrust action. Not only is it unnecessary to pass on such a broad proposition on the facts of this case, as the Court’s opinion reveals, but the holding itself is, in my opinion, incorrect.

I agree that the “complex scope, contents, and effects” of the doctrine as it has grown up in the common law should not be applied mechanically to private antitrust actions under the relevant federal statutes. On the other hand, I believe that a limited application of the basic principle behind the doctrine of in pari delicto is both proper and desirable in the antitrust field. As the Court notes, ante, at 138, the literal meaning of in pari delicto is of equal fault. I would hold that where a defendant in a private antitrust suit can show that the plaintiff actively participated in the formation and implementation of an illegal scheme, and is substantially equally at fault, the plaintiff should be barred from imposing liability on the defendant.

Such an approach would still require reversal of the decision of the Court of Appeals in this case. As this Court’s opinion makes perfectly clear, the mere fact that a party enters into an agreement containing provisions that are violative of the antitrust laws with the intent to make money by operating under the agreement is not in itself sufficient to show that he is equally responsible for the existence of the illegal provisions. Simpson v. Union Oil Co., 377 U. S. 13 (1964). Furthermore, the Court is certainly correct in concluding that the record is replete with evidence, relating to the tying and exclusive-dealing provisions of the franchise agreement, which indicates, with sufficient probative force to withstand respondents’ motion for summary judgment, that the petitioners did not actively seek out or support all the anticompetitive restraints embodied in the franchise.

However, the inquiry should not stop here. The franchise agreement also contains provisions requiring both resale price maintenance and the observance of territorial restrictions on sales by franchisees. Both of these sets of restrictions are ones which, at least on their face, would ordinarily be expected to benefit the franchisees more than Midas. Both restrict competition between franchisees, not between Midas and other suppliers competing to sell parts to Midas franchisees. If Midas can make an adequate showing that those provisions were inserted into the franchise agreement at the behest and for the benefit of petitioners and their fellow franchisees, petitioners should, in my opinion, be barred from contending that they were damaged by the existence and enforcement of the provisions.

I agree with the Court that petitioners should not be barred from recovering damages attributable to the enforcement of the tying and exclusive dealing provisions-against them on the sole ground that they participated in the formulation of other anticompetitive provisions in the agreement. Cf. Moore v. Mead Service Co., 340 U. S. 944 (1951), vacating 184 F. 2d 338 (C. A. 10th Cir. 1950). However, if Midas could show, which it has quite clearly not done at this stage of the litigation, that petitioners actually participated in the formulation of the entire agreement, trading off anticompetitive restraints on their own freedom of action (such as the tying and exclusive dealing provisions) for anticompeti-tive restraints intended for their benefit (such as resale price maintenance or exclusive territories), petitioners should be barred from seeking damages as to the agreement as a whole.

It may be argued that the course I propose unduly complicates private antitrust litigation. A holding that a party who voluntarily enters into an agreement containing provisions that violate the antitrust laws is barred from any recovery on that agreement altogether (as the Court of Appeals has held here) or, at the other extreme, is absolutely free to recover any damages that he can show to stem from his operations under the agreement (as this Court’s opinion seems to hold) would presumably be considerably easier to apply in most cases. It seems to me, however, that neither holding would represent a satisfactory resolution of the difficult problems concerning the administration of the antitrust laws raised by agreements such as the one involved in the present case.

The reasons for rejecting the approach taken by the Court of Appeals are, as I have said, persuasively set forth in the opinion of the Court. The reasons I see for rejecting the approach taken by this Court are, perhaps, less related to the public interest in eliminating all forms of anticompetitive business conduct and more related to the equities as between the parties. The principle that a wrongdoer shall not be permitted to profit through his own wrongdoing is fundamental in our jurisprudence. The traditional doctrine of in pari delicto is itself firmly based on this principle. I nevertheless agree, because of the strong public interest in eliminating restraints on competition, that many of the refinements of moral worth demanded of plaintiffs by such traditional legal and equitable doctrines as volenti non fit injuria, unclean hands, and many of the variations of in pari delicto should not be applicable in the antitrust field. However, I cannot agree that the public interest requires that a plaintiff who has actively sought to bring about illegal restraints on competition for his own benefit be permitted to demand redress — in the form of treble damages — from a partner who is no more responsible for the existence of the illegality than the plaintiff.

The possible added deterrence to violations of the antitrust laws that would be produced by the Court’s holding may well be equaled, if not surpassed, by the new incentive it will create to commit such violations, for a potential violator will have less to lose if he can attempt to recover his losses from his partner should the scheme not work out to his benefit.

The Court’s opinion appears to seek to minimize the consequences of doing away with the to pari delicto defense by suggesting that a defendant will be able to have the “beneficial byproducts of a restriction” {ante, at 140) to the plaintiff taken into account in the computation of damages. This, of course, is to some extent already true in any antitrust case. Illegal conduct does not per se result in a money judgment for a plaintiff; injury must always be shown. However, a defendant might also be permitted to show that the plaintiff’s financial rewards from some of the illegal provisions of an agreement outweighed the harm suffered from other illegal provisions, and accordingly on some sort of offset theory the plaintiff would recover nothing.

If such an offset approach on the issue of damages is envisioned by the Court, it hardly seems an adequate means of preventing unjust enrichment. First, that approach clearly permits damages to be awarded when injury is shown to outweigh benefit regardless of the nature of the plaintiff’s participation in the scheme. Second, it adds an unnecessarily speculative element to the factual inquiry required in an antitrust case. While a trier of fact may have some difficulty in allocating responsibility between the parties to an agreement, the allocation can be made for the most part on the basis of hard evidence as to the facts surrounding the making of the agreement. The determination of damages in an antitrust suit, however, almost invariably requires a certain amount of speculation, no matter how informed. Cf. Bigelow v. RKO Pictures, Inc., 327 U. S. 251, 264-266 (1946). Such speculation is ordinarily unavoidable if damages a.re to be provable. Here there is no necessity for permitting additional speculation as to offsetting benefits in order to prevent unjust enrichment because the same goal can be achieved by a factual evaluation of the parties’ respective fault.

For example, it is obviously much easier to determine in this case whether petitioners actively participated in the formulation and implementation of the various illegal provisions of the franchise agreement than it is to decide whether the monetary benefits that petitioners obtained through the resale price maintenance and exclusive territorial provisions surpassed the losses they suffered from the exclusive dealing and tying arrangements. Since I regard a respective-fault approach as superior to a damage-offset approach on principle, the complications inherent in the latter inquiry merely reinforce my conviction that the Court is being unwise in broadly rejecting the doctrine of in pari delicto.

Mr. Justice Harlan,

with whom Mr. Justice Stewart joins,

concurring in part and dissenting in part.

The variety of views this case has engendered seems to me to stem from lack of agreement on a definition of the term “in pari delicto,” as well as a disagreement, perhaps, on the standards that should govern the use of the defense to which that term is properly applied. I believe that the courts below misused the term, but that properly used it refers to a defense that should be permitted in antitrust cases. Consequently, I would remand this case not for immediate trial but for fresh consideration of the motion for summary judgment upon proper standards.

Plaintiffs who are truly in pari delicto are those who have themselves violated the law in cooperation with the defendant. If the law is the Sherman Act, both are, in principle, liable equally to criminal prosecution. For example, two manufacturers who agree on a price at which they will sell are “of equal fault,” as are a manufacturer and a dealer who strike a bargain whereby each accepts an illegal restriction that benefits the other.

When a person suffers losses as a result of activities the law forbade him to engage in, I see no reason why the law should award him treble damages from his fellow offenders. It seems to me a bizarre way to “further the overriding public policy in favor of competition,” ante, at 139, to pay violators three times their losses in doing what public policy seeks to deter them from doing. Even if the threat of intra-conspiracy treble damages had some deterrent effect, however, I should not think it a too “fastidious regard for the relative moral worth of the parties,” ibid., to decline to sanction a kind of antitrust enforcement that rests upon a principle of well-compensated dishonor among thieves.

There are, however, three situations quite distinct from that to which I think the term in pari delicto is properly applied. The first is the “consent” situation in which the Latin maxim “volenti non fit injuria” is sometimes invoked. Where X and Y conspire to fix prices at which they will sell, they are in pari delicto. If Z, knowing of the conspiracy, nevertheless purchases from X, he is not in pari delicto. He has committed no offense: the most that can be said is that he knowingly allowed an offense to be committed against him. I would agree, for many of the reasons stated in the opinions of Mr. Justice Black, Mr. Justice Fortas, and Mr. Justice Marshall, that there should be no defense in such a situation, where the plaintiff has done nothing the law told him not to do.

A second situation distinguishable from true in pari delicto is illustrated by Kiefer-Stewart Co. v. Seagram & Sons, 340 U. S. 211, relied on by the Court. It was there alleged in defense to a treble-damage action that the defendants’ illegal actions were taken in reprisal against altogether independent illegal actions by the plaintiff. Here again, I accept the decision that this is no defense. Our law frowns on vigilante justice. Since the plaintiff is in part enforcing the public interest against the defendants’ violations, I would permit him to do so, and leave punishment for any independent violation by him to proper means of enforcement.

The third distinguishable situation may or may not be illustrated by Simpson v. Union Oil Co., 377 U. S. 13, and Albrecht v. Herald Co., 390 U. S. 145, two cases that I find it quite difficult to understand. In each of them, the plaintiff had been offered a dealership, on terms that he did not participate in formulating, and in each case he at first “accepted” such a dealership. Since neither case stated satisfactorily where the alleged combination in restraint of trade was to be found, it is not clear whether the plaintiff’s acceptance of a dealership was itself a forbidden act. If it was not, then these cases fall under the heading of “consent” cases. A person who engaged in a lawful business on the terms offered should not be prevented from suing merely by his knowledge that others violated the law in contriving those terms. If, however, those plaintiffs were doing something the law told them not to do, I suggest that recovery in those cases can best be understood on the theory of a “coercion” exception to the in pari delicto doctrine. That is, although a large business with the power to dictate terms and a small business that can only accept them or cease doing business may both, in principle, be liable to legal sanctions for the contract that results from the offer and acceptance, it is considered that the liability is not “par,” and that the business accepting dictation is only minimally blameworthy.

In my view, the District Court and the Court of Appeals did not apply the true to pari delicto standard to this case. The District Court said that “each plaintiff voluntarily entered into the franchise agreement . . . and accepted the benefits therefrom. They are . . . [therefore?] in pari delicto with defendants . ...” At another point the court said, “We have repeatedly held that a person who freely assents to an act suffers ‘no legal injury’ if harm results therefrom.” Although the District Court made a passing distinction of the “coercion” and “unclean hands” doctrines, it is not clear that it meant to hold that the violation of the Sherman Act, if any, was one for which plaintiffs were subject to public-law sanctions along with the defendants.

The Court of Appeals decision was similar. That court relied on the District Court’s language quoted above, adding that each of the plaintiffs had made a substantial profit from selling auto parts, a fact that might bear on the measure of any damages but which, apart from illegal action on the part of the plaintiffs, should not afford an absolute defense.

It is by no means clear on this record, however, that the plaintiffs may not be said to have been in pari delicto in the proper sense of that term. This question is rendered more difficult by the complexity of the record history of plaintiffs’ activities, and by the formidable obscurity of the law of dealer liability for vertical restraints, an obscurity fostered by Simpson, supra, Albrecht, supra, and above all by United States v. Parke, Davis & Co., 362 U. S. 29. Although I make no attempt to drain the bog at this point, I am of the view that before this case goes to trial the lower courts should be given another opportunity to consider the in pari delicto defense. I would remand this case to determine whether any agreement alleged to be in restraint of trade was one for which the plaintiffs were substantially as much responsible, and as much legally liable, as the defendants. I would permit the lower courts to consider this question upon the existing affidavits and such additional material as either side may wish to adduce.

       26 Stat. 209,15 ü. S. C. § 1.

       38 Stat. 731,15 U. S. C. § 14.

       49 Stat. 1526,15 U. S. C. § 13.

         In their motion for summary judgment respondents also argued that the restraints were permissible as reasonable means to protect their registered trade and service marks, but because they had failed to answer interrogatories pertinent to this defense, the district judge ordered it stricken, without prejudice to renewal if respondents promptly answered the relevant interrogatories. Because of its disposition of the case, the Court of Appeals reached neither the merits of this defense nor the question whether respondents had ever properly renewed it. In the circumstances of this case, we think the merits of this defense cannot be decided as a summary judgment question but must be resolved, along with all the other issues, by a trial on the merits.

       Respondents suggest that these requirements were beneficial to a dealer because they helped him win customers who had confidence in the “Midas” brand, and some dealers evidently did try to reap some benefit from these, requirements by advertising, “You get only nationally-advertised Midas products.” It seems highly unlikely, however, that benefits of this kind could do more than mitigate very slightly the losses that a dealer would suffer when forced to buy higher-priced Midas products, particularly since dealers would have bought the higher-priced Midas products voluntarily if they thought customer preferences for the brand would be sufficiently strong to offset the higher price.

       This is at least the traditional use of the term. See, e. g., Williams v. Hedley, 8 East 378, 381-382, 103 Eng. Rep. 388, 389. See generally Note, In Pari Delicto and Consent as Defenses in Private Antitrust Suits, 78 Harv. L. Rev. 1241, distinguishing the two defenses. The present case is as good an illustration as any of the usefulness of maintaining distinct terms for the distinct situations properly characterized by “in pari delicto,” "consent,” “unclean, hands,” and so forth.

       See my dissenting opinion in Albrecht, 390 U. S., at 156.

       1966 Trade Cases ¶ 71,801, at 82,705.

        Id., at 82,706.

       See 376 F. 2d 692, at 693, 695.


source: Caselaw Access Project

author: Mr. Justice Harlan Mr. Justice White,

license: Public Domain

text:
    UNITED STATES et al. v. SOUTHWESTERN CABLE CO. et al.
    No. 363.
    Argued March 12-13, 1968.
    Decided June 10, 1968.

      Henry Oeller argued the cause for the United States et al. With him on the briefs were Solicitor General Griswold, Assistant Attorney General Turner, Francis X. Beytagh, Jr., Howard E. Shapiro, and DanielR. Ohlbaum.

      Ernest W. Jennes argued the cause for petitioners in No. 428. With him on the briefs was Charles A. Miller.

      Arthur Scheiner argued the cause for respondent Southwestern Cable Co. in both cases. With him on the brief were Morton H. Wilner and Harold F. Reis. Rob

      ert L. Heald argued the cause for respondents Mission Cable TV, Inc., et al. in both cases. With him on the brief were Frank U. Fletcher, Edward F. Kenehan, and James P. Riley.

      Michael Finkelstein filed a brief for the All-Channel Television Society, as amicus curiae, urging reversal.
    Briefs of amici curiae, urging affirmance, were filed by Robert A. Marmet, Thomas W. Wilson, John D. Matthews, and Robert H. Young for the Alice Cable Television Corp. et al., and by Wayne W. Owen, Harry M. Plot-kin, and George H. Shapiro for the Black Hills Video Corp. et al.

      Together with No. 428, Midwest Television, Inc., et al. v. Southwestern Cable Co. et al., also on certiorari to the same court.

   Mr. Justice Harlan

delivered the opinion of the Court.

These cases stem from proceedings conducted by the Federal Communications Commission after requests by Midwest Television for relief under §§ 74.1107 and 74.1109 of the rules promulgated by the Commission for the regulation of community antenna television (CATV) systems. Midwest averred that respondents’ CATV systems transmitted the signals of Los Angeles broadcasting stations into the San Diego area, and thereby had, inconsistently with the public interest, adversely affected Midwest’s San Diego station. Midwest sought an appropriate order limiting the carriage of such signals by respondents’ systems. After consideration of the petition and of various responsive pleadings, the Commission restricted the expansion of respondents’ service in areas in which they had not operated on February 15, 1966, pending hearings to be conducted on the merits of Midwest’s complaints. 4 F. C. C. 2d 612. On petitions for review, the Court of Appeals for the Ninth Circuit held that the Commission lacks authority under the Communications Act of 1934, 48 Stat. 1064, 47 U. S. C. § 151, to issue such an order. 378 F. 2d 118. We granted certiorari to consider this important question of regulatory authority. 389 U. S. 911. For reasons that follow, we reverse.

I.

CATV systems receive the signals of television broadcasting stations, amplify them, transmit them by cable or microwave, and ultimately distribute them by wire to the receivers of their subscribers. CATV systems characteristically do not produce their own programming, and do not recompense producers or broadcasters for use of the programming which they receive and redistribute. Unlike ordinary broadcasting stations, CATV systems commonly charge their subscribers installation and other fees.

The CATV industry has grown rapidly since the establishment of the first commercial system in 1950. In the late 1950’s, some 50 new systems were established each year; by 1959, there were 550 “nationally known and identified” systems serving a total audience of 1,500,000 to 2,000,000 persons. It has been more recently estimated that “new systems are being founded at the rate of more than one per day, and . . . subscribers . . . signed on at the rate of 15,000 per month.” By late 1965, it was reported that there were 1,847 operating CATY systems, that 758 others were franchised but not yet in operation, and that there were 938 applications for additional franchises. The statistical evidence is incomplete, but, as the Commission has observed, “whatever the estimate, CATY growth is clearly explosive in nature.” Second Report and Order, 2 F. C. C. 2d 725, 738, n. 15.

CATV systems perform either or both of two functions. First, they may supplement broadcasting by facilitating satisfactory reception of local stations in adjacent areas in which such reception would not otherwise be possible; and second, they may transmit to subscribers the signals of distant stations entirely beyond the range of local antennae. As the number and size of CATV systems have increased, their principal function has more frequently become the importation of distant signals. In 1959, only 50 systems employed microwave relays, and the maximum distance over which signals were transmitted was 300 miles; by 1964, 250 systems used microwave, and the transmission distances sometimes exceeded 665 miles. First Report and Order, 38 F. C. C. 683, 709. There are evidently now plans “to carry the programing of New York City independent stations by cable to . . . upstate New York, to Philadelphia, and even as far as Dayton.” And see Chan nel 9 Syracuse, Inc. v. F. C. C., 128 U. S. App. D. C. 187, 385 F. 2d 969; Hubbard Broadcasting, Inc. v. F. C. C., 128 U. S. App. D. C. 197, 385 F. 2d 979. Thus, “while the CATV industry originated in sparsely settled areas and areas of adverse terrain ... it is now spreading to metropolitan centers . . . .” First Report and Order, supra, at 709. CATV systems, formerly no more than local auxiliaries to broadcasting, promise for the future to provide a national communications system, in which signals from selected broadcasting centers would be transmitted to metropolitan areas throughout the country.

The Commission has on various occasions attempted to assess the relationship between community antenna television systems and its conceded regulatory functions. In 1959, it completed an extended investigation of several auxiliary broadcasting services, including CATV. CATV and TV Repeater Services, 26 F. C. C. 403. Although it found that CATV is “related to interstate transmission,” the Commission reasoned that CATV systems are neither common carriers nor broadcasters, and therefore are within neither of the principal regulatory categories created by the Communications Act. Id., at 427-428. The Commission declared that it had not been given plenary authority over “any and all enterprises which happen to be connected with one of the many aspects of communications.” Id., at 429. It refused to premise regulation of CATV upon assertedly adverse consequences for broadcasting, because it could not “determine where the impact takes effect, although we recognize that it may well exist.” Id., at 431.

The Commission instead declared that it would forthwith seek appropriate legislation “to clarify the situation.” Id., at 438. Such legislation was introduced in the Senate in 1959, favorably reported, and debated on the Senate floor. The bill was, however, ultimately returned to committee.

Despite its inability to obtain amendatory legislation, the Commission has, since 1960, gradually asserted jurisdiction over CATV. It first placed restrictions upon the activities of common carrier microwave facilities that serve CATV systems. See Carter Mountain Transmission Corp., 32 F. C. C. 459, aff’d, 321 F. 2d 359. Finally, the Commission in 1962 conducted a rule-making proceeding in which it re-evaluated the significance of CATV for its. regulatory responsibilities. First Order and Report, supra. The proceeding was explicitly restricted to those systems that are served by microwave, but the Commission's conclusions plainly were more widely relevant. The Commission found that “the likelihood or probability of [CATV’s] adverse impact upon potential and existing service has become too substantial to be dismissed.” Id., at 713-714. It reasoned that the importation of distant signals into the service areas of local stations necessarily creates “substantial competition” for local broadcasting. Id., at 707. The Commission acknowledged that it could not “measure precisely the degree of . . . impact,” but found that “CATV competition can have a substantial negative effect upon station audience and revenues . . . .” Id., at 710-711.

The Commission attempted to “accommodat[e]” the interests of CATV and of local broadcasting by the imposition of two rules. Id., at 713. First, CATV systems were required to transmit to their subscribers the signals of any station into whose service area they have brought competing signals. Second, CATV systems were forbidden to duplicate the programming of such local stations for periods of 15 days before and after a local broadcast. See generally First Report and Order, supra, at 719-730. These carriage and nonduplication rules were expected to “insur[e] many stations’ ability to maintain themselves as their areas’ outlets for highly popular network and other programs . . . .” Id., at 715.

The Commission in 1965 issued additional notices of inquiry and proposed rule-making, by which it sought to determine whether all forms of CATV, including those served only by cable, could properly be regulated under the Communications Act. 1 F. C. C. 2d 453. After further hearings, the Commission held that the Act confers adequate regulatory authority over all CATV systems. Second Report and Order, supra, at 728-734. It promulgated revised rules, applicable both to cable and to microwave CATV systems, to govern the carriage of local signals and the nonduplication of local programming. Further, the Commission forbade the importation by CATV of distant signals into the 100 largest television markets, except insofar as such service was offered on February 15, 1966, unless the Commission has previously found that it “would be consistent with the public interest,” id., at 782; see generally id., at 781-785, “particularly the establishment and healthy maintenance of television broadcast service in the area,” 47 CFR § 74.1107 (c). Finally, the Commission created “summary, nonhearing procedures” for the disposition of applications for separate or additional relief. 2 F. C. C. 2d, at 764; 47 CFR § 74.1109. Thirteen days after the Commission’s adoption of the Second Report, Midwest initiated these proceedings by the submission of its petition for special relief.

II.

We must first emphasize that questions as to the validity of the specific rules promulgated by the Commission for the regulation of CATY are not now before the Court. The issues in these cases are only two: whether the Commission has authority under the Communications Act to regulate CATV systems, and, if it has, whether it has, in addition, authority to issue the prohibitory order here in question.

The Commission’s authority to regulate broadcasting and other communications is derived from the Communications Act of 1934, as amended. The Act’s provisions are explicitly applicable to “all interstate and foreign communication by wire or radio . . . .” 47 U. S. C. § 152 (a). The Commission’s responsibilities are no more narrow: it is required to endeavor to “make available ... to all the people of the United States a rapid, efficient, Nation-wide, and world-wide wire and radio communication service . . . .” 47 U. S. C. § 151. The Commission was expected to serve as the “single Government agency” with “unified jurisdiction” and “regulatory power over all forms of electrical communication, whether by telephone, telegraph, cable, or radio.” It was for this purpose given “broad authority.” As this Court emphasized in an earlier case, the Act’s terms, purposes, and history all indicate that Congress “formulated a unified and comprehensive regulatory system for the [broadcasting] industry.” F. C. C. v. Pottsville Broadcasting Co., 309 U. S. 134, 137.

Respondents do not suggest that CATV systems are not within the term “communication by wire or radio.” Indeed, such communications are defined by the Act so as to encompass “the transmission of . . . signals, pictures, and sounds of all kinds,” whether by radio or cable, “including all instrumentalities, facilities, apparatus, and services (among other things, the receipt, forwarding, and delivery of communications) incidental to such transmission.” 47 U. S. C. §§ 153 (a), (b). These very general terms amply suffice to reach respondents' activities.

Nor can we doubt that CATV systems are engaged in interstate communication, even where, as here, the intercepted signals emanate from stations located within the same State in which the CATY system operates. We may take notice that television broadcasting consists in very large part of programming devised for, and distributed to, national audiences; respondents thus are ordinarily employed in the simultaneous retransmission of communications that have very often originated in other States. The stream of communication is essentially uninterrupted and properly indivisible. To categorize respondents’ activities as intrastate would disregard the character of the television industry, and serve merely to prevent the national regulation that “is not only appropriate but essential to the efficient use of radio facilities.” Federal Radio Comm’n v. Nelson Bros. Co., 289 U. S. 266, 279.

Nonetheless, respondents urge that the Communications Act, properly understood, does not permit the regulation of CATV systems. First, they emphasize that the Commission in 1969 and again in 1966 sought legislation that would have explicitly authorized such regulation, and that its efforts were unsuccessful. In the circumstances here, however, this cannot be dispositive. The Commission’s requests for legislation evidently reflected in each instance both its uncertainty as to the proper width of its authority and its understandable preference for more detailed policy guidance than the Communications Act now provides. We have recognized that administrative agencies should, in such situations, be encouraged to seek from Congress clarification of the pertinent statutory provisions. Wong Yang Sung v. McGrath, 339 U. S. 33, 47.

Nor can we obtain significant assistance from the various expressions of congressional opinion that followed the Commission’s requests. In the first place, the views of one Congress as to the construction of a statute adopted many years before by another Congress have “very little, if any, significance.” Rainwater v. United States, 356 U. S. 590, 593; United States v. Price, 361 U. S. 304, 313; Haynes v. United States, 390 U. S. 85, 87, n. 4. Further, it is far from clear that Congress believed, as it considered these requests for legislation, that the Commission did not already possess regulatory authority over CATV. In 1959, the proposed legislation was preceded by the Commission’s declarations that it “did not intend to regulate CATV,” and that it preferred to recommend the adoption of legislation that would impose specified requirements upon CATV systems. Congress may well have been more troubled by the Commission’s unwillingness to regulate than by any fears that it was unable to regulate. In 1966, the Commission informed Congress that it desired legislation in order to “confirm [its] jurisdiction and to establish such basic national policy as [Congress] deems appropriate.” H. R. Rep. No. 1635, 89th Cong., 2d Sess., 16. In response, the House Committee on Interstate and Foreign Commerce said merely that it did not “either agree or disagree” with the jurisdictional conclusions of the Second Report, and that “the question of whether or not . . . the Commission has authority under present law to regulate CATV systems is for the courts to decide . . . .” Id., at 9. In these circumstances, we cannot derive from the Commission’s requests for legislation anything of significant bearing on the construction question now before us.

Second, respondents urge that § 152 (a) does not independently confer regulatory authority upon the Commission, but instead merely prescribes the forms of communication to which the Act's other provisions may separately be made applicable. Respondents emphasize that the Commission does not contend either that CATY systems are common carriers, and thus within Title II of the Act, or that they are broadcasters, and thus within Title III. They conclude that CATV, with certain of the characteristics both of. broadcasting and of common carriers, but with all of the characteristics of neither, eludes altogether the Act’s grasp.

We cannot construe the Act so restrictively. Nothing in the language of § 152 (a), in the surrounding language, or in the Act’s history or purposes limits the Commission’s authority to those activities and forms of communication that are specifically described by the Act’s other provisions. The section itself states merely that the “provisions of [the Act] shall apply to all interstate and foreign communication by wire or radio . . . .” Similarly, the legislative history indicates that the Commission was given “regulatory power over all forms of electrical communication . . . .” S. Rep. No. 781, 73d Cong., 2d Sess., 1. Certainly Congress could not in 1934 have foreseen the development of community antenna television systems, but it seems to us that it was precisely because Congress wished “to maintain, through appropriate administrative control, a grip on the dynamic aspects of radio transmission,” F. C. C. v. Pottsville Broadcasting Co., supra, at 138, that it conferred upon the Commission a “unified jurisdiction” and “broad authority.” Thus, “ [underlying the whole [Communications Act] is recognition of the rapidly fluctuating factors characteristic of the evolution of broadcasting and of the corresponding requirement that the administrative process possess sufficient flexibility to adjust itself to these factors.” F. C. C. v. Pottsville Broadcasting Co., supra, at 138. Congress in 1934 acted in a field that was demonstrably “both new and dynamic,” and it therefore gave the Commission “a comprehensive mandate,” with “not niggardly but expansive powers.” National Broadcasting Co. v. United States, 319 U. S. 190, 219. We have found no reason to believe that § 152 does not, as its terms suggest, confer regulatory authority over “all interstate . . . communication by wire or radio.”

Moreover, the Commission has reasonably concluded that regulatory authority over CATV is imperative if it is to perform with appropriate effectiveness certain of its other responsibilities. Congress has imposed upon the Commission the “obligation of providing a widely dispersed radio and television service,” with a “fair, efficient, and equitable distribution” of service among the “several States and communities.” 47 U. S. C. § 307 (b). The Commission has, for this and other purposes, been granted authority to allocate broadcasting zones or areas, and to provide regulations “as it may deem necessary” to prevent interference among the various stations. 47 U. S. C. §§ 303 (f), (h). The Commission has concluded, and Congress has agreed, that these obligations require for their satisfaction the creation of a system of local broadcasting stations, such that “all communities of appreciable size [will] have at least one television station as an outlet for local self-expression.” In turn, the Commission has held that an appropriate system of local broadcasting may be created only if two subsidiary goals are realized. First, significantly wider use must be made of the available ultra-high-frequency channels. Second, communities must be encouraged “to launch sound and adequate programs to utilize the television channels now reserved for educational purposes.” These subsidiary-goals have received the endorsement of Congress.

The Commission has reasonably found that the achievement of each of these purposes is “placed in jeopardy by the unregulated explosive growth of CATV.” H. R. Rep. No. 1635, 89th Cong., 2d Sess., 7. Although CATV may in some circumstances make possible “the realization of some of the [Commission’s] most important goals,” First Report and Order, supra, at 699, its importation of distant signals into the service areas of local stations may also “destroy or seriously degrade the service offered by a television broadcaster,” id,., at 700, and thus ultimately deprive the public of the various benefits of a system of local broadcasting stations. In particular, the Commission feared that CATY might, by dividing the available audiences and revenues, significantly magnify the characteristically serious financial difficulties of TJHF and educational television broadcasters. The Commission acknowledged that it could not predict with certainty the consequences of unregulated CATV, but reasoned that its statutory responsibilities demand that it “plan in advance of foreseeable events, instead of waiting to react to them.” Id., at 701. We are aware that these consequences have been variously estimated, but must conclude that there is substantial evidence that the Commission cannot “discharge its overall responsibilities without authority ovér this important aspect of television service.” Staff of Senate Comm, on Interstate and Foreign Commerce, 85th Cong., 2d Sess., The Television Inquiry: The Problem of Television Service for Smaller Communities 19 (Comm. Print 1959).

The Commission has been charged with broad responsibilities for the orderly development of an appropriate system of local television broadcasting. The significance of its efforts can scarcely be exaggerated, for broadcasting is demonstrably a principal source of information and entertainment for a great part of the Nation’s population. The Commission has reasonably found that the successful performance of these duties demands prompt and efficacious regulation of community antenna television systems. We have elsewhere held .that we may not, “in the absence of compelling evidence that such was Congress’ intention . . . prohibit administrative action imperative for the achievement of an agency’s ultimate purposes.” Permian Basin Area Rate Cases, 390 U. S. 747, 780. Compare National Broadcasting Co. v. United States, supra, at 219-220; American Trucking Assns. v. United States, 344 U. S. 298, 311. There is no such evidence here, and we therefore hold that the Commission’s authority over “all interstate . . . communication by wire or radio” permits the regulation of CATV systems.

There is no need here to determine in detail the limits of the Commission’s authority to regulate CATV. It is enough to emphasize that the authority which we recognize today under § 152 (a) is restricted to that reasonably ancillary to the effective performance of the Commission’s various responsibilities for the regulation of television broadcasting. The Commission may, for these purposes, issue “such rules and regulations and prescribe such restrictions and conditions, not inconsistent with law,” as “public convenience, interest, or necessity requires.” 47 U. S. C. § 303 (r). We express no views as to the Commission’s authority, if any, to regulate CATV under any other circumstances or for any other purposes.

III.

We must next determine whether the Commission has authority under the Communications Act to issue the particular prohibitory order in question in these proceedings. In its Second Report and Order, supra, the Commission concluded that it should provide summary procedures for the disposition both of requests for special relief and of “complaints or disputes.” Id., at 764. It feared that if evidentiary hearings were in every situation mandatory they would prove “time consuming and burdensome” to the CATV systems and broadcasting stations involved. Ibid. The Commission considered that appropriate notice and opportunities for comment or objection must be given, and it declared that “additional procedures, such as oral argument, evidentiary hearing, or further written submissions” would be permitted "if they appear necessary or appropriate . . . .” Ibid. See 47 CFR § 74.1109 (f). It was under the authority of these provisions that Midwest sought, and the Commission granted, temporary relief.

The Commission, after examination of various responsive pleadings but without prior hearings, ordered that respondents generally restrict their carriage of Los An-geles signals to areas served by them on February 15, 1966, pending hearings to determine whether the carriage of such signals into San Diego contravenes the public interest. The order does not prohibit the addition of new subscribers within areas served by respondents on February 15, 1966; it does not prevent service to other subscribers who began receiving service or who submitted an “accepted subscription request” between February 15, 1966, and the date of the Commission’s order; and it does not preclude the carriage of San Diego and Tijuana, Mexico, signals to subscribers in new areas of service. 4 F. C. C. 2d 612, 624-625. The order is thus designed simply to preserve the situation as it existed at the moment of its issuance.

Respondents urge that the Commission may issue prohibitory orders only under the authority of § 312 (b), by which the Commission is empowered to issue cease-and-desist orders. We shall assume that, consistent with the requirements of § 312 (c), cease-and-desist orders are proper only after hearing or waiver of the right to hearing. Nonetheless, the requirement does not invalidate the order issued in this case, for we have concluded that the provisions of §§312 (b), '(c) are inapplicable here. Section 312 (b) provides that a cease-and-desist order may issue only if the respondent “has violated or failed to observe” a provision of the Communications Act or a rule or regulation promulgated by the Commission under the Act’s authority. Respondents here were not found to have violated or to have failed to observe any such restriction; the question before the Commission was instead only whether an existing situation should be preserved pending a determination “whether respondents’ present or planned CATV operations are consistent with the public interest and what, if any, action should be taken by the Commission.” 4 F. C. C. 2d, at 626. The Commission’s order was thus not, in form or function, a cease-and-desist order that must issue under §§312 (b), (c).

The Commission has acknowledged that, in this area of rapid and significant change, there may be situations in which its generalized regulations are inadequate, and special or additional forms of relief are imperative. It has found that the present case may prove to be such a situation, and that the public interest demands “interim relief . . . limiting further expansion,” pending hearings to determine appropriate Commission action. Such orders do not exceed the Commission’s authority. This Court has recognized that “the administrative process [must] possess sufficient flexibility to adjust itself” to the “dynamic aspects of radio transmission,” F. C. C. v. Pottsville Broadcasting Co., supra, at 138, and that it was precisely for that reason that Congress declined to “stereo-typ[e] the powers of the Commission to specific details . . . .” National Broadcasting Co. v. United States, supra, at 219. And compare American Trucking Assns. v. United States, 344 U. S. 298, 311; R. A. Holman & Co. v. S. E. C., 112 U. S. App. D. C. 43, 47-48, 299 F. 2d 127, 131-132. Thus, the Commission has been explicitly authorized to issue “such orders, not inconsistent with this [Act], as may be necessary in the execution of its functions.” 47 U. S. C. § 154 (i). See also 47 U. S. C. § 303 (r). In these circumstances, we hold that the Commission’s order limiting further expansion of respondents’ service pending appropriate hearings did not exceed or abuse its authority under the Communications Act. And there is no claim that its procedure in this respect is in any way constitutionally infirm.

The judgments of the Court of Appeals are reversed, and the cases are remanded for further proceedings consistent with this opinion. R ü s0 orderefL

Mr. Justice Douglas and Mr. Justice Marshall took no part in the consideration or decision of these cases.

Mr. Justice White,

concurring in the result.

My route to reversal of the Court of Appeals is somewhat different from the Court’s. Section 2 (a) of the Communications Act, 47 U. S. C. § 152 (a), says that “[t]he provisions of this chapter shall apply to all interstate and foreign communication by wire or radio . . . .” (Emphasis added.) I am inclined to believe that this section means that the Commission must generally base jurisdiction on other provisions of the Act. This position would not, however, require invalidation of the assertion of jurisdiction before us today. Section 301, 47 U. S. C. § 301, gives the Commission broad authority over broadcasting, and § 303, 47 U. S. C. § 303, confers authority to “[m]ake such regulations not inconsistent with law as it may deem necessary to prevent interference between stations and to carry out the provisions of this chapter” and also the authority to establish areas or zones to be served by any station. The Commission has ample power under these provisions to prevent a Los Angeles television broadcaster from interfering with broadcasting in San Diego. For example, the Commission could stop a Los Angeles television station from owning and operating a wire CATV system which carried the station’s signals into San Diego. The Commission should also be able to prevent a third party from disrupting Commission-licensed broadcasting in the San Diego market.

Even if §§ 301 and 303 in themselves furnish insufficient basis for the Commission to enjoin extraneous interference with the San Diego broadcasting scheme it has authorized, § 2 (a), supra, makes the provisions of the Act, including §§301 and 303, applicable to all wire and radio communication. Hence the Commission is authorized to regulate wire communications to implement the ends of §§301 and 303, and authorized as well to use its express authority over broadcasting to enforce its specific powers over common carriers by wire.

       Midwest’s petition was premised upon its status as licensee of KFMB-TV, San Diego, California. It is evidently also the licensee of various other broadcasting stations. See Second Report and Order, 2 F. C. C. 2d 725, 739.

       47 CFR § 74.1107 (a) provides that “[n]o CATV system operating in a community within the predicted Grade A contour of a television broadcast station in the 100 largest television markets shall extend the signal of a television broadcast station beyond the Grade B contour of that station, except upon a showing approved by the Commission that such extension would be consistent with the public interest, and specifically the establishment and healthy maintenance of television broadcast service in the area. Commission approval of a request to extend a signal in the foregoing circumstances will be granted where the Commission, after consideration of the request and all related materials in a full evidentiary hearing, determines that the requisite showing has been made. The market size shall be determined by the rating of the American Research Bureau, on the basis of the net weekly circulation for the most recent year.” San Diego is the Nation’s 54th largest television market. Midwest Television, Inc., 11 Pike & Fischer Radio Reg. 2d 273, 276.

       47 CFR § 74.1109 creates “procedures applicable to petitions for waiver of the rules, additional or different requirements and rulings on complaints or disputes.” It provides that petitions for special relief “may be submitted informally, by letter, but shall be accompanied by an affidavit of service on any CATV system, station licensee, permittee, applicant, or other interested person who may be directly affected if the relief requested in the petition should be granted.” 47 CFR §74.1109 (b). Provisions are made for comments or opposition to the petition, and for rejoinders by the petitioner. 47 CFR §§74.1109 (d), (e). Finally, the Commission “may specify other procedures, such as oral argument, evidentiary hearing, or further written submissions directed to particular aspects, as it deems appropriate.” 47 CFR §74.1109 (f).

       Midwest asserted that respondents’ importation of Los Angeles signals had fragmented the San Diego audience, that this would reduce the advertising revenues of local , stations, and that the ultimate consequence would be to terminate or to curtail the services provided in the San Diego area by local broadcasting stations. Respondents’ CATV systems now carry the signals of San Diego stations, but Midwest alleged that the quality of the signals, as they are carried by respondents, is materially degraded, and that this serves only to accentuate the fragmentation of the local audience.

       February 15, 1966, is the date on which grandfather rights accrued under 47 CFR § 74.1107 (d). The initial decision of the hearing examiner, issued October 3, 1967, concluded that permanent restrictions on the expansion of respondents’ services were unwarranted. Midwest Television, Inc., 11 Pike & Fischer Radio Reg. 2d 273. The Commission has declined to terminate its interim restrictions pending consideration by the Commission of the examiner’s decision. Midwest Television, Inc., id., at 721.

       The opinion of the Court of Appeals could be understood to hold either that the Commission may not, under the Communications Act, regulate CATV, or, more narrowly, that it may not issue the prohibitory order involved here. We take the court’s opinion, in fact, to have encompassed both positions.

       We note that the Court of Appeals for the District of Columbia Circuit has concluded that the Communications Act permits the regulation of CATV systems. See Buckeye Cablevision, Inc. v. F. C. C., 128 U. S. App. D. C. 262, 387 F. 2d 220.

       CATV systems are defined by the Commission for purposes of its rules as “any facility which . . . receives directly or indirectly over the air and amplifies or otherwise modifies the signals transmitting programs broadcast by one or more television stations and distributes such signals by wire or cable to subscribing members of the public who pay for such service, but such term shall not include (1) any such facility which serves fewer than 50 subscribers, or (2) any such facility which serves only the residents of one or more apartment dwellings under common ownership, control, or management, and commercial establishments located on the premises of such an apartment house.” 47 CFR §74.1101 (a).

       There is, however, no technical reason wiry they may not. See Note, The Wire Mire: The FCC and CATV, 79 Harv. L. Rev. 366, 367. Indeed, the examiner was informed in this case that respondent Mission Cable TV “intends to commence program origination in the near future.” Midwest Television, Inc., supra, at 283.

       The installation costs for CATV systems in 16 Connecticut communities were, for example, found to range from $31 to $147 per home. M. Seiden, An Economic Analysis of Community Antenna Television Systems and the Television Broadcasting Industry 24 (1965).

       CATV systems were evidently first established on a noncommercial basis in 1949. H. R. Rep. No. 1635, 89th Cong., 2d Sess., 5.

       CATV and TV Repeater Services, 26 F. C. C. 403, 408; Note, The Wire Mire: The FCC and CATV, supra, at 368.

       Note, The Wire Mire: The FCC and CATV, supra, at 368.

       Second Report and Order, 2 F. C. C. 2d 725, 738. The franchises are granted by state or local regulatory agencies. It was reported in 1965 that two States, Connecticut and Nevada, regulate CATY systems, and that some 86% of the systems are subject at least to some local regulation. Seiden, supra, at 44-47. See Conn. Gen. St-at. Rev., Tit. 16, c. 289 (1958); Nev. Stat. 1967, c. 458.

       The term "distant signal” has been given a specialized definition by the Commission, as a signal “which is extended or received beyond the Grade B contour of that station.” 47 CFR § 74.1101 (i). The Grade B contour is a line along which good reception may be expected 90% of the time at 50% of the locations. See 47 CFR §73.683 (a).

       Note, The Wire Mire: The FCC and CATV, supra, at 368 (notes omitted).

       It has thus been suggested that “a nationwide grid of wired CATV systems, interconnected by microwave frequencies and financed by subscriber fees, may one day offer a viable economic alternative to the advertiser-supported broadcast service.” Levin, New Technology and the Old Regulation in Radio Spectrum Management, 56 Am. Econ. Rev. 339, 341 (Proceedings, May 1966).

       See S. 2653, 86th Cong., 1st Sess.

       S. Rep. No. 923, 86th Cong., 1st Sess.

       See 106 Cong. Rec. 10416-10436, 10520-10548.

        Id., at 10547. The Commission in 1966 made additional efforts to obtain suitable modifications in the Communications Act. See n. 30, infra.

       See generally First Report and Order, supra, at 716-719. The Commission held that a CATV system must, within the limits of its channel capacity, carry the signals of stations that place signals over the community served by the system. The stations are to be. given priority according to the strength of the signal available in the community, with the strongest signals given first priority. Exceptions are made for situations in which there would be substantial duplication or in which an independent or noncommercial station would be excluded. Id., at 717.

       It must also be noted that the CATY systems involved in these cases evidently do not employ microwave. We intimate no views on what differences, if any, there might be in the scope of the Commission’s authority over microwave and nonmicrowave systems.

       The phrase is taken from the message to Congress from President Roosevelt, dated February 26, 1934, in which he recommended the Commission’s creation. See H. R. Rep. No. 1850, 73d Cong., 2d Sess., 1.

       S. Rep. No. 781, 73d Cong., 2d Sess., 1.

        Ibid. The Committee also indicated that there was a “vital need” for such a commission, with jurisdiction “over all of these methods of communication.” Ibid.

       The phrase is taken from President Roosevelt’s message to Congress. H. R. Rep. No. 1850, supra, at 1. The House Committee added that “the primary purpose of this bill [is] to create such a commission armed with adequate statutory powers to regulate all forms of communication . . . .” Id., at 3.

       Respondents assert only that this “is subject to considerable question.” Brief for Respondent Southwestern Cable Co. 24, n. 25. They rely chiefly upon the language of § 152 (b), which provides that nothing in the Act shall give the Commission jurisdiction over “carriers” that are engaged in interstate communication solely through physical connection, or connection by wire or radio, with the facilities of another carrier, if they are not directly or indirectly controlled by such other carrier. The terms and history of this provision, however, indicate that it was “merely a perfecting amendment” intended to “obviate any possible technical argument that the Commission may attempt to assert common-carrier jurisdiction over point-to-point communication by radio between two points within a single State ...” S. Rep. No. 1090, 83d Cong., 2d Sess., 1. See also H. R. Rep. No. 910, 83d Cong., 1st Sess. The Commission and the respondents are agreed, we think properly, that these CATV systems are not common carriers within the meaning of the Act. See 47 U. S. C. § 153 (h); Frontier Broadcasting Co. v. Collier, 24 F. C. C. 251; Philadelphia Television Broadcasting Co. v. F. C. C., 123 U. S. App. D. C. 298, 359 F. 2d 282; CATV and TV Repeater Services, supra, at 427-428.

       See H. R. 13286, 89th Cong., 2d Sess. The bill was favorably reported by the House Committee on Interstate and Foreign Commerce, H. R. Rep. No. 1635, 89th Cong., 2d Sess., but failed to reach the floor for debate.

       See, for the legislation proposed in 1959, CATV and TV Repeater Services, supra, at 427-431, 438-439. The Commission in 1966 explicitly stated in its explanation of its proposed amendments to the Act that “we believe it highly desirable that Congress . . . confirm [the Commission’s] jurisdiction and . . . establish such basic national policy as it deems appropriate.” H. R. Rep. No. 1635, supra, at 16.

       See S. Rep. No. 923, 86th Cong., 1st Sess., 5-6.

       Thus, the Senate Committee on Interstate and Foreign Commerce observed in its 1959 Report that although the Commission’s staff had recommended that authority be asserted over CATV, the Commission had “long hesitated,” and had only recently made clear “that it did not intend to regulate CATV systems in any way whatsoever.” S. Rep. No. 923, supra, at 5. Nonetheless, it must be acknowledged that the debate on the Senate floor centered on the broad question whether the Commission should have authority to regulate CATV. See, e. g., 106 Cong. Rec. 10426.

       47 U. S. C. § 152 (a) provides that “[t]he provisions of this chapter shall apply to all interstate and foreign communication by wire or radio and all interstate and foreign transmission of energy by radio, which originates and/or is received within the United States, and to all persons engaged within the United States in such communication or such transmission of energy by radio, and to the licensing and regulating of all radio stations as hereinafter provided; but it shall not apply to persons engaged in wire or radio communication or transmission in the Canal Zone, or to wire or radio communication or transmission wholly within the Canal Zone.”

       S. Rep. No. 781, supra, at 1.

       H. R. Rep. No. 1850, supra, at 1.

       Respondents argue, and the Court of Appeals evidently concluded, that the opinion of the Court in Regents v. Carroll, 338 U. S. 586, supports the inference that the Commission’s authority is limited to licensees, carriers, and others specifically reached by the Act’s other provisions. We find this unpersuasive. The Court in Carroll considered the very general contention that the Commission had been given authority “to determine the validity of contracts between licensees and others.” Id., at 602. It was concerned, not with the limits of the Commission’s authority over a form of communication by wire or radio, but with efforts to enforce a contract that had been repudiated upon the demand of the Commission. The Court’s discussion of the Commission’s authority under § 303 (r), see id., at 600, must be read in that context, and as thus read it cannot be controlling here.

       S. Rep. No. 923, supra, at 7. The Committee added that “Congress and the people” have no particular interest in the success of any given broadcaster, but if the failure of a station “leaves a community with inferior service,” this becomes “a matter of real and immediate public concern.” Ibid.

       H. R. Rep. No. 1559, 87th Cong., 2d Sess., 3; Sixth Report and Order, 17 Fed. Reg. 3905. And see Staff of the Senate Comm, on Interstate and Foreign Commerce, 85th Cong., 2d Sess., The Television Inquiry: The Problem of Television Service for Smaller Communities 3-4 (Comm. Print 1959). The Senate Committee has elsewhere stated that “[t]here should be no weakening of the Commission’s announced goal of local service.” S. Rep. No. 923, supra, at 7.

       The Commission has allocated 82 channels for television broadcasting, of which 70 are in the UHF portion of the radio spectrum. This permits a total of 681 VHF stations and 1,544 UHF stations. H. R. Rep. No. 1559, supra, at 2. In December 1964, 454 VHF stations were on the air, 25 permittees were not operating, and 11 applications were awaiting Commission action, leaving 63 unreserved VHF allocations available. Seiden, supra, 162, n. 11, at 10. At the same time, 90 UHF stations were operating, 66 were assigned but not operating, 52 applications were pending before the Commission, and 1,108 allocations were still available. Ibid. The Commission has concluded that, in these circumstances, “an adequate national television system can be achieved” only if more of the available UHF channels are utilized. H. R. Rep. No. 1559, supra, at 4.

       S. Rep. No. 67, 87th Cong., 1st Sess., 8-9. The Committee indicated that it was “of utmost importance to the Nation that a reasonable opportunity be afforded educational institutions to use television as a noncommercial educational medium.” Id., at 3. Similarly, the House Committee on Interstate and Foreign Commerce has concluded that educational television will “provide a much needed source of cultural and informational programing for all audiences . . . .” H. R. Rep. No. 1559, supra, at 3. It is thus an essential element of “an adequate national television system.” Id., at 4. See also H. R. Rep. No. 572, 90th Cong., 1st Sess.; S. Rep. No. 222, 90th Cong., 1st Sess.

       Legislation was adopted in 1962 to amend the Communications Act in order to require that all television receivers thereafter shipped in interstate commerce for sale or resale to the public be capable of receiving both UHF and YHF frequencies. 76 Stat. 150. The legislation was plainly intended to assist the growth of UHF broadcasting. See H. R. Rep. No. 1559, supra. Moreover, legislation has been adopted to provide construction grants and other assistance to educational television systems. 76 Stat. 68, 81 Stat. 365.

       See generally Second Report and Order, supra, at 736-745. It is pertinent that the Senate Committee on Interstate and Foreign Commerce feared even in 1959 that the unrestricted growth of CATV would eliminate local broadcasting, and that, in turn, this would have four undesirable consequences: (1) the local community “would be left without the local service which is necessary if the public is to receive the maximum benefits from the television medium”; (2) the “suburban and rural areas surrounding the central community may be deprived not only of local service but of any service at all”; (3) even “the resident of the central community may be deprived of all service if he cannot afford the connection charge and monthly service fees of the CATV system”; (4) “[u]nrestrained CATV, booster, or translator operation might eventually result in large regions, or even entire States, being deprived of all local television service — or being left, at best, with nothing more than a highly limited satellite service.” S. Rep. No. 923, supra, at 7-8. The Committee concluded that CATV competition “does have an effect on the orderly development of television.” Id., at 8.

       The Commission has found that “we are in a critical period with respect to UHF development. Most of the new UHF stations will face considerable financial obstacles.” First Report and Order, supra, at 712. It concluded that “one general factor giving cause for serious concern,” ibid., was that there is “likely” to be a "severe” impact between new local stations, particularly UHF stations, and CATV systems. Id., at 713. Further, the Commission believed that there was danger that CATV systems would “siphon off sufficient local financial support” for educational television, with the result that such stations would fail or not be established at all. It feared that “the loss would be keenly felt by the public.” Second Report and Order, supra, at 761. The Commission concluded that the hazards to educational television were "sufficiently strong to warrant some special protection . . . .” Id., at 762. Similarly, a recent study has found that CATV systems may have a substantial impact upon station revenues, that many stations, particularly in small markets, cannot readily afford such competition, and that in consequence a “substantial percentage of potential new station entrants, particularly UHF, are likely to be discouraged Fisher & Ferrall, Community Antenna Television Systems and Local Television Station Audience, 80 Q. J. Econ. 227, 250.

       Compare the following. Seiden, supra, at 64-90; Note, The Federal Communications Commission and Regulation of CATV, 43 N. Y. U. L. Rev. 117, 133-139; Note, The Wire Mire: The FCC and CATV, supra, at 376-383; Fisher & Ferrall, supra. We note, in addition, that the dispute here is in part whether local, advertiser-supported stations are an appropriate foundation for a national system of television broadcasting. See generally Coase, The Economics of Broadcasting and Government Policy, 56 Am. Econ. Rev. 440 (May 1966); Greenberg, Wire Television and the FCC’s Second Report and Order on CATV Systems, 10 J. Law & Econ. 181.

       Respondents urge that the legislative history of § 312 (b) indicates that the Commission may issue prohibitory orders only under, and in conformity with, that section. We find this unpersuasive. Nothing in that history suggests that the Commission was deprived of its authority, granted elsewhere in the Act, to issue orders “necessary in the execution of its functions.” 47 U. S. C. § 154 (i). See also 47 U. S. C. §303 (r).