source: Caselaw Access Project

author: Mr. Justice White Mr. Justice Stevens,

license: Public Domain

text:
    UNITED STATES et al. v. COUNTY OF FRESNO
    No. 75-1262.
    Argued November 8-9, 1976
    Decided January 25, 1977

      Howard E. Shapiro argued the cause for the United States et al. On the brief were Solicitor General Bork, Assistant Attorney General Crampton, Stuart A. Smith, Crombie J. D. Garrett, and David English Carmack.

      James B. Waterman argued the cause for appellee County of Fresno. With him on the brief was Robert M. Wash. Stephen Dietrich, Jr., argued the cause and filed a brief for appellee County of Tuolumne.

      Together with United States et al. v. County of Tuolumne, also on appeal from the same court (see this Court’s Rule 15 (3)).

   Mr. Justice White

delivered the opinion of the Court.

The issue in this case is whether, consistent with the Federal Government’s immunity from state taxation inherent in the Supremacy Clause of the United States Constitution, see M‘Culloch v. Maryland, 4 Wheat. 316 (1819), the State of California may tax federal employees on their possessory interests in housing owned and supplied to them by the Federal Government as part of their compensation. We hold that it may.

I

The individual appellants in this case are employees of the Forest Service, a branch of the United States Department of Agriculture responsible for administering the national forests. These appellants work in the Sierra, Sequoia, and Stanislaus National Forests which are located in Fresno and Tuolumne Counties in California. During the year 1967 each appellant lived with his family in a house which was built and owned by the Forest Service in one of these national forests. Appellants were required by the Forest Service to live in these houses so that they would be nearer to the place where they performed their duties and so that they would be better able to perform those duties. Structurally, the houses were very similar to residential houses of the same size available in the private sector. The Forest Service viewed the occupancy of these houses as partial compensation for the services of its employees, and made a deduction from the salary of the employee for each two-week pay period in which the employee occupied such a house. The Forest Service fixed the amount of the deduction by estimating the fair rental value of a similar house in the private sector and then discounting that figure to take account of the distance between the Forest Service house and the nearest established community and the absence, if any, of any customary amenities in or near the house. Adjustment was also made for the fact that the Forest Service reserved the right to remove employees from their houses at any time, to enter the houses with or without notice for inspection purposes, and to use part or all of the houses for official purposes in an emergency.

Pursuant to 16 U. S. C. § 480, the States retain civil and criminal jurisdiction over the national forests notwithstanding the fact that the national forests are owned by the Federal Government. Under the California Revenue and Taxation Code, §§ 104, 107 (West 1970), and § 21 (b) of Title 18 of the California Administrative Code (1971), counties in California are authorized to impose an annual use or property tax on possessory interests in improvements on tax-exempt land. The Counties of Fresno and Tuolumne imposed such a tax on the appellants — Forest Service employees who live in the federally owned houses in the national forests located in those counties. In computing the value of the possessory interests on which the tax is imposed, the counties used the annual estimated fair rental value of the houses, discounted to take into account essentially the same factors considered by the Forest Service in computing the amount that it deducted from the salaries of employees who used the houses.

Appellants paid the taxes under protest and they, together with the United States, sued for a refund in California courts in Fresno and Tuolumne Counties. They claimed, inter alia, that the tax interfered with a federal function — i. e., the running of the Forest Service — that it discriminated against employees of the Federal Government, and that it was therefore forbidden by the Supremacy Clause of the United States Constitution. E. g., M‘Culloch v. Maryland, supra. The trial courts each sustained appellants' claims, holding, inter alia, that appellants had no taxable possessory interest under state law. The California Court of Appeal, Fifth Appellate District, reversed, 50 Cal. App. 3d 633, 123 Cal. Rptr. 548 (1975) (County of Fresno case, followed in County of Tuolumne case (unreported)). It held that each appellant had a possessory interest in the houses owned by the Forest Service that was subject to taxation under state law. The court then held that the tax on such possessory interests is not a tax on the Federal Government, on Government property, or on a “federal function.” Rather, it is a tax imposed on “the private citizen, and it is the private citizen’s usufructuary interest in the government land and improvements alone that is being taxed. (City of Detroit v. Murray Corp., 355 U. S. 489 . . . ; United States v. Township of Muskegon, 355 U. S. 484 . . . ; United States v. City of Detroit, 355 U. S. 466 .. . .)” Id., at 640, 123 Cal. Rptr., at 552. Consequently, the court held, the tax is not barred by the Supremacy Clause of the Federal Constitution. The California Court of Appeal also rejected appellants’ contention that the tax operates to discriminate against the Federal Government and its employees. The Supreme Court of California denied review. We noted probable jurisdiction to review the decision of the California Court of Appeal, 425 U. S. 970 (1976).

Appellants argue that the tax is “a levy upon the activities of the United States” because the occupancy of the houses by the Forest Service employees was “for the sole purpose of discharging their governmental function of running the national forests.” Brief for Appellants 11. Consequently, the Government argues, the tax is forbidden by the doctrine announced in M‘Culloch v. Maryland, that under the Supremacy Clause of the Federal Constitution the States may not tax the properties, functions, or instrumentalities of the Federal Government. We disagree with the Government, and affirm the judgment below.

II

The Government relies principally on the landmark case of M‘Culloch v. Maryland. There the State of Maryland imposed a tax on notes issued by “any Bank ... established without authority from the State.” ' The only such bank in Maryland was the Bank of the United States, created and incorporated by Act of Congress in order to carry out Congress’ enumerated powers. No similar tax was imposed on the issuance of notes by any other bank in Maryland. The Court held the tax to violate that part of the Federal Constitution which declares that the laws of the United States are the “supreme law of the land.” An Act of Congress had created the bank in order to carry out functions of the National Government enumerated in the United States Constitution. The Court noted that the power to tax the bank “by the States may be exercised so as to destroy it,” 4 Wheat., at 427, and consequently that the power to tax, if admitted, could be exercised so as effectively to repeal the Act of Congress which created the bank. If the State’s power to tax the bank were recognized in principle, the Court doubted 'the ability of federal courts to review each exercise of such power to determine whether the tax would or would not destroy a federal function. Finally, the Court rejected the State’s argument that the power to tax involves the power to destroy only where the taxing power is abused, and that the Court should simply trust the States not to abuse their power to tax a federal function just as it must trust a State not to abuse its power to tax its own citizens. The Court rejected the argument because the political check against abuse of the power to tax a State’s constituents is absent when the State taxes only a federal function. A State’s constituents can be rebed on to vote out of office any legislature that imposes an abusively high tax on them. They cannot be relied upon to be similarly motivated when the tax is instead solely on a federal function.

The Court was careful to limit the reach of its decision. It stated that its opinion does not

_ “extend to a tax . . . imposed on the interest which the citizens of Maryland may hold in this institution [the bank], in common with other property of the same description throughout the State.” Id., at 436. (Emphasis added.)

Since M‘Culloch, this Court has adhered to the rule that States may not impose taxes directly on the Federal Government, nor may they impose taxes the legal incidence of which falls on the Federal Government. The decisions of this Court since M‘Culloch have been less uniform on the question whether taxes, the economic but not the legal incidence of which falls in part or in full on the Federal Government, are invalid.

For many years the Court read the decision in M‘Culloch as forbidding taxes on those who had contractual relationships with the Federal Government or with its instrumentalities whenever the <■ feet of the tax was or might be to increase the cost to the Federal Government of performing its functions. In later years, however, the Court departed from this interpretation of M'Culloch. In James v. Dravo Contracting Co., 302 U. S. 134 (1937), a contractor sought immunity from a state occupation tax measured by the gross receipts, insofar as those receipts had been received under a contract with the Federal Government. The Court declared the tax valid even if “the gross receipts tax may increase the cost to the Government” under the contract. Id., at 160. So long as the tax is not directly laid on the Federal Government, it is valid if nondiscriminatory, id., at 150, or until Congress declares otherwise. Id., at 161. Similarly, in Graves v. New York ex rel. O’Keefe, 306 U. S. 466 (1939), the Court sustained a nondiscriminatory tax on the income of a federal employee, thereby overruling Dobbins v. Commis sioners of Erie County, 16 Pet. 435 (1842). See also Alabama v. King & Boozer, 314 U. S. 1 (1941), overruling Panhandle Oil Co. v. Mississippi ex rel. Knox, 277 U. S. 218 (1928).

Finally, and for the purposes of this case dispositively, in City of Detroit v. Murray Corp., 356 U. S. 489 (1958), United States v. City of Detroit, 355 U. S. 466 (1958), and United States v. Township of Muskegon, 355 U. S. 484 (1958), this Court sustained state use taxes on the use by private companies of machinery and other property owned by the United States and leased to them .for use in their businesses — even though in two of these cases the companies had cost-plus contracts with the Government requiring the Government to reimburse them for state taxes paid by them. These cases make clear that a State may, in effect, raise revenues on the basis of property owned by the United States as long as that property is being used by a private citizen or corporation and so long as it is the possession or use by the private citizen that is being taxed. See also Esso Standard Oil Co. v. Evans, 345 U. S. 495 (1953).

The rule to be derived from the Court’s more recent decisions, then, is that the economic burden on a federal function of a state tax imposed on those who deal with the Federal Government does not render the tax unconstitutional so long as the tax is imposed equally on the other similarly situated constituents of the State. This rule returns to the original intent of M‘Culloch v. Maryland. The political check against abuse of the taxing power found lacking in M'Culloch, where the tax was imposed solely on the Bank of the United States, is present where the State imposes a nondiscriminatory tax only on its constituents or their artificially owned entities; and M'Culloch foresaw the unfairness in forcing a State to exempt private individuals with beneficial interests in federal property from taxes imposed on similar interests held by others in private property. Accordingly, M‘Culloch expressly excluded from its rule a tax on “the interest which the citizens of Maryland may hold [in a federal instrumentality] in common with other property of the same description throughout the State.” 4 Wheat., at 436.

Ill

Applying the rule set forth above, decision of this case is relatively simple. The “legal incidence” of the tax involved in this case falls neither on the Federal Government nor on federal property. The tax is imposed solely on private citizens who work for the Federal Government. The tax threatens to interfere with federal laws relating to the functions of the Forest Service only insofar as it may impose an economic burden on the Forest Service — causing it to reimburse its employees for the taxes legally owed by them or, failing reimbursement, removing an advantage otherwise enjoyed by the Federal Government in the employment market. There is no other respect in which the tax involved in this case threatens to obstruct or burden a federal function. The tax can be invalidated, then, only if it discriminates against the Forest Service or other federal employees, which it does not do.

Although .the tax is imposed by the appellee counties on renters of real property only if the owner is exempt from taxation — and consequently is not imposed on the vast majority of renters of real property in California — the tax is not for that reason discriminatory. In this respect this case is governed by United States v. City of Detroit, 355 U. S. 466 (1958). There the city of Detroit imposed a use tax on those who used tax-exempt property owned by the United States. The tax was measured by the value of the property. With respect to nonexempt property, a similar tax was imposed on the owner and none on the user. In answering an argument that the tax discriminated against those dealing with the Federal Government, the Court said:

“As suggested before the legislature apparently was trying to equate the tax burden imposed on private enterprise using exempt property with that carried by similar businesses using taxed property. Those using exempt property are required to pay no greater tax than that placed on private owners or passed on by them to their business lessees.” Id., at 473-474. (Emphasis added.)

Similarly, here the State of California imposes a property tax on owners of nonexempt property which is “passed on by them to their . . . lessees.” Consequently, the appellants who rent from the Forest Service are no worse off under California tax laws than those who work for private employers and rent houses in the private sector.

The Government argues nonetheless that the appellants are required to occupy the houses owned by the Forest Service not for their own personal benefit but for the sole benefit of the Forest Service and that “[t]here is accordingly no constitutionally permissible way to isolate any 'personal residence’ portion of these possessory interests that could be deemed to be unrelated to the official duties of these Forest Service employees.” Brief for United States 18. The argument is at odds with the Government’s own concessions during this lawsuit, with its treatment of its employees apart from this lawsuit, and with common sense. The Government’s complaint in this case alleges that the occupancy of the Forest Service houses constitutes part of appellants’ “compensation” for services performed- — -thus conceding that the occupancy is of personal benefit to the employee. At oral argument the Government conceded that a state income tax could be imposed on the employees for the value of the occupancy — thus conceding that its value to the employee is capable of being severed from its value to the Forest' Service and of being accurately measured. The Forest Service itself purports to measure the personal benefit of the occupancy to the employee and collects rent in such an amount through deductions from the employee’s paycheck. Since virtually everyone in this country pays for housing for himself or herself and family, common sense compels the conclusion that the occupancy of a house provided by an employer for an employee’s family is of personal financial benefit to the employee — relieving him of the expense of paying for housing elsewhere. The disadvantages attendant on living in Forest Service housing may affect the amount of the value of the house to the employee, but it is unquestionably of some value to him. Here both appellees have sought to take account of these disadvantages and to tax the employees only on the portion of the total value of the houses which may be properly attributed to their possessory interest. In this respect, the taxes are valid even under United States v. Allegheny County, 322 U. S. 174 (1944), see n. 10, supra, so heavily relied on by the Government. There the Court invalidated a tax on use by a private corporation of Government-owned property because “the State has made no effort to segregate [the corporation’s] interest and tax it.” Id., at 187. The Court stated, however:

“Actual possession and custody of Government property nearly always are in someone who is not himself the Government but acts in its behalf and for its purposes. . . . His personal advantages from the relationship by way of salary, profit or beneficial personal use of the property may be taxed as we have held.” Id., at 187-188. (Emphasis added.)

This statement ripened into holdings in United States v. City of Detroit, supra, at 472, and United States v. Township of Muskegon, 355 U. S. 484 (1958). The only difference between Township of Muskegon — where Government-owned property was being used by a private corporation in complying with a Government contract — and this case is that there the property was being used by business for “profit” and here the property is being put to “beneficial personal use.” Under the rule of United States v. Allegheny County and United States v. City of Detroit, this difference is inconsequential. The two types of interests are equally taxable.

In conclusion, as the Court said in City of Detroit v. Murray Corp., 355 U. S., at 495:

“There was no discrimination against the Federal Government, its property or those with whom it does business. There was no crippling obstruction of any of the Government’s functions, no sinister effort to hamstring its power, not even the slightest interference with its property. Cf. M’Culloch v. Maryland, 4 Wheat. 316. In such circumstances the Congress is the proper agency, as we pointed,out in United States v. City of Detroit, to make the difficult policy decisions o necessarily involved in determining whether and to what extent private parties who do business with the Government should be given immunity from states taxes.”

Affirmed.

Mr. Justice Stevens,

dissenting.

The application of the California possessory interest tax to federal employees’ use of real estate located in a national forest is significantly different from other forms of state taxation and, in my opinion, creates the kind of potential for friction between two sovereigns that the doctrine of constitutional immunity was intended to avoid.

I

If a State were to tax the income of federal employees without imposing a like tax on others, the tax would be plainly unconstitutional. Cf. M‘Culloch v. Maryland, 4 Wheat. 316. On the other hand, if the State taxes the income of all its residents equally, federal employees must pay the tax. Graves v. New York ex rel. O’Keefe, 306 U. S. 466. This case involves a tax more like the former than the latter and, in my opinion, is invalid.

There are two alternatives between the two extremes just posited. Instead of just taxing federal employees, the State might impose a special tax on both state and federal employees but no one else; or, making the tax base somewhat broader, the State might impose a special tax on employees of all tax-exempt entities, including private organizations. Arguably, in the latter situation, the tax would affect enough voters in the State to provide the type of political safeguard envisioned in M‘Culloch and thereby protect federal employees from the risk of disparate treatment. In the former situation, however, that protection might be illusory because the sovereign imposing the tax could adjust the compensation of its own employees to avoid any special tax burden on them and thereby cause the tax to have a significant impact on federal employees and no one else. Under the rationale of M‘Culloch, the Supremacy Clause protects federal employees, as well as federal instrumentalities, from that kind of potential discrimination.

A

The California possessory interest tax discriminates against the individual appellants as compared with persons who rent private, nonexempt property. The Federal Government has adopted a policy of charging its employees a rent equal to the fair rental value of their residences as determined by the prevailing rental value of comparable residences in the vicinity of the national forest. A federal employee residing in a Forest Service residence and a private tenant residing in a comparable home both pay the same rent. But the federal employee also pays a possessory interest tax while the private tenant does not pay that tax or any other real estate tax.

The amount of the possessory interest tax paid by the federal employee is not determined by his rent. Whether the rent collected by the Forest Service is over, under, or equal to the fair rental value of the premises, the employee’s tax is the same. For the tax is measured by the value of his possessory interest in the real estate, and, under the valuation systems employed by the counties, that value is the same regardless of whether the Federal Government elects to subsidize, in whole or in part, its employee’s use of the property. The analogy, ante, at 466, to a state income tax on compensation provided by means of permission to use property for less than its fair rental value is therefore inapplicable.

The discrimination between the federal employee and the private tenant is not eliminated by the fact that the owner of the private residence pays a real estate tax which the Federal Government does not. The private owner’s tax obligation is one of the factors that determines the fair rental value of his property — and, no doubt, the fair rental value of Government-owned property as well — but it is not correct to say that the owner’s tax is paid by the tenant. When the private and the public tenant are both charged the same rent, a special tax on the latter is stirely not justified by the Federal Government’s tax exemption. To the extent that the exemption has significance, it provides a limit on the State’s taxing power; it cannot provide an affirmative justification for an otherwise invalid tax. In short, federal employees like these appellants are required to pay a discriminatory tax; Graves v. New York ex rel. O’Keefe, supra, does not control this case.

B

This California tax does not even apply to all users of tax-exempt property. By its terms the possessory interest tax applies only to “publicly owned real property.” It does not, for example, apply to the residential use of real estate owned by private hospitals, schools, or religious organizations, all of which are exempt from taxation under the laws of California. In fact it appears that the only individuals who are similar to the federal employees with respect to the possessory interest tax are state employees living in state-owned houses. But since the State of California, and its political subdivisions, can fix their rent, the State has the practical power to adjust the economic burden of the possessory interest tax assessed against its own tenant employees. Potentially, therefore, the tax may have a practical effect on the Federal Government and its employees which is different from its effect on the owners or users of any other tax-exempt property in the State.

Thus, whether the federal tenants are compared with persons occupying property owned by taxpayers or with persons occupying other tax-exempt property, they are vulnerable to a discriminatory tax.

II

Whereas the California tax scheme creates a discrimination between users of property that would not otherwise exist, the Michigan taxes upheld in United States v. City of Detroit, 355 U. S. 466; United States v. Township of Muskegon, 355 U. S. 484; and City of Detroit v. Murray Corp. of America, 355 U. S. 489, were designed to eliminate disparity in the tax treatment of different users of similar property. The Michigan taxes were designed to equalize the tax burden of competing commercial enterprises whether they used tax-exempt or taxable property in the conduct of their businesses.

The Michigan tax at issue in the first two cases applied to every private party using any type of exempt property in the State. The tax base included not only property owned by the Federal and State Governments, but also all privately owned exempt real estate. In the first case the Court expressly relied on the undisputed evidence that lessees of other exempt property were being taxed as- foreclosing any claim of discrimination against those using federal property. 355 U. S., at 474. In the third case, the tax was a general personal property tax which was applied indiscriminately throughout the State, 355 U. S., at 494.

The critical importance of the absence of any discrimination in the Michigan scheme, and its sharp contrast with the California scheme challenged in this case, are both apparent from this passage:

“It still remains true, as it has from the beginning, that a tax may be invalid even though it does not fall directly on the United States if it operates so as to discriminate against the Government or those with whom it deals. Cf. M’Culloch v. Maryland, 4 Wheat. 316. But here the tax applies to every private party who uses exempt property in Michigan in connection with a business conducted for private gain. Under Michigan law this means persons who use property owned by the Federal Government, the State, its political subdivisions, churches, charitable organizations and a great host of other entities. The class defined is not an arbitrary or invidiously discriminatory one. As suggested before the legislature apparently was trying to equate the tax burden imposed on private enterprise using exempt property with that carried by similar businesses using taxed property. Those using exempt property are required to pay no greater tax than that placed on private owners or passed on by them to their business lessees. In the absence of such equalization the lessees of tax-exempt property might well be given a distinct economic preference over their neighboring competitors, as well as escaping their fair share of local tax responsibility.” United States v. City of Detroit, supra, at 473-474 (footnote omitted).

The case now before us does not involve any question of economic preference between competing private parties. Indeed, unlike the Michigan cases in which the Court identified as “vital” the fact that the taxpayers were engaged in commercial activities, this ease only involves an application of the California tax to the use of Government property in the performance of a traditional governmental function: managing the national forests. The Government requires the taxpayer-forester to occupy the property. The Michigan opinions do not hold or imply that required Government service is comparable to private commercial activity. Indeed, as I read those opinions, they direct us to focus on the question whether there is equality or inequality between users of public and private property. The Michigan tax was valid because there was no discrimination between users; the California tax is invalid because it creates such inequality.

Ill

This case is not squarely controlled by M’Culloch v. Maryland, because this tax applies to the use of state as well as federal property. Apparently, employees of state parks are treated like employees of national forests. If this is sufficient to save the tax, I would suppose the State could tax a soldier’s use of Army barracks if the State also taxed its police officers whenever they resided in state quarters. Such a tax, I submit, would be patently invalid for reasons which also apply to this case. It would have an impact on federal servants different from its impact on most constituents of the taxing sovereign; and it would create a significant potential conflict between the interests of two sovereigns in the .same territory.

As explained by Mr. Justice Frankfurter in his separate opinion in City of Detroit v. Murray Corp. of America, 355 U. S., at 503-504:

“A principle with the uninterrupted historic longevity attributable to the immunity of government property from state taxation has a momentum of authority that reflects, if not a detailed exposition of considerations of policy demanded by our federal system, certainly a deep instinct that there are such considerations, and that the distinction between a tax on government property and a tax on a third person for the privilege of using such property is not an ‘empty formalism.’ The distinction embodies a considered judgment as to the minimum safeguard necessary for the National Government to carry on its essential functions without hindrance from the exercise of power by another sovereign within the same territory. That in a particular case there may in fact be no conflict in the exercise of the two governmental powers is not to the point. It is in avoiding the potentialities of friction and furthering the smooth operation of complicated governmental machinery that the constitutional doctrine of immunity finds its explanation and justification.”

The specific distinction which Mr. Justice Frankfurter draws in that paragraph appears to support the validity of the California tax on the use by “a third person” of real estate in a national forest. I do not, of course, know whether Mr. Justice Frankfurter would have regarded a Government employee, like the appellants in this case, as the kind of “third person” whose use of federal property in the performance of a traditional governmental function would be taxed. I am convinced, however, that the principle which he articulated supports the immunity claim of these appellants. I therefore respectfully dissent.

      Some of the appellants were not required but simply permitted to live in houses owned by the Forest Service, in the sense that these particular appellants might have been able to live in a privately owned house outside the forest if they had so elected. However, the Forest Service required that some employee occupy each house owned by the Forest Service, and if no employee had volunteered, some employee, perhaps including some of these appellants, would have been required to live there. In light of our disposition of this case, the distinction between employees required to live in Forest Service housing and those permitted to live there is unimportant and we will not refer to it again.

       Examples of the amenities considered are, according to the testimony of a Forest Service official:
      “Paved streets, street lighting at least at intersections, sidewalks, lawns, trees and landscaping, general attractiveness of the neighborhood, community sanitation services, reliability and adequacy of water safe for household use, reliability of [sic] adequacy of electrical service, reliability and adequacy of telephone service, reliability and adequacy of fuel for heating, hot water and cooking, police protection, fire protection, unusual design features of a dwelling, absence of disturbing noises or offensive odors and standards of maintenance.” App. 32.

       Section 107, Cal. Rev. & Tax. Code (West 1970), provides:
      ■‘“Possessory interests’ means the following:
      “(a) Possession of, claim to, or right to the possession of land or improvements, except when, coupled with ownership of the land or improvements in the same person.”
      Title 18 Cal. Adm. Code § 21 (b) (1971) provides:
      “ ‘Taxable possessory interest’ means a possessory interest in nontaxable publicly owned real property, as such property is defined in section 104 of the Revenue and Taxation Code . . . .”
      Section 104, Cal. Rev. & Tax. Code (West 1970), provides:
      “ ‘Real estate’ or ‘real property’ includes:
      “(a) The possession of, claim to, ownership of, or right to the possession of land.”
      All parties agree that the national forests owned by the Federal Government are tax-exempt land by reason of the Supremacy Clause of the United States Constitution, e. g., United States v. Allegheny County, 322 U. S. 174 (1944), and that no tax may be imposed either on the land itself or on the United States.
      With respect to non-tax-exempt land, California imposes a property tax on the owner. No tax is imposed directly on a renter of non-tax-exempt land. However, the tax on the owner is presumably reflected in the rent and the renter may thus pay the tax indirectly.

         In computing the value of appellants’ possessory interests on which the tax was imposed, Fresno County used the value of one year of occupancy. Tuolumne County used the present discounted value of five years’ occupancy — the length of time which it estimated the average Forest Service employee remained in a Forest Service house.

       The tax was in the form of a forced purchase from a state official of stamped paper on which such notes were required to be printed. The tax could be avoided by an annual lump-sum payment to the state official of $15,000.

       The Court stated:
      '‘[Normally in] imposing a tax the legislature acts upon its constituents. This is in general a sufficient security against erroneous and oppressive taxation.
      “The people of a State, therefore, give to their government a right of taxing themselves and their property, . . . resting confidently on the interest of the legislator, and on the influence of the constituents over their representative, to guard them against its abuse.” 4 Wheat., at 428. “. . . When they tax the chartered institutions of the States, they tax their constituents; and these taxes must be uniform. But, when a State taxes the operations of the government of the United States, it acts upon institutions created, not by their own constituents, but by people over whom they claim no control.” Id., at 435.
      Accordingly, the Court concluded:
      “The result is a conviction that the States have no power, by taxation or otherwise, to retard, impede, burden, or in any manner control, the operations of the constitutional laws enacted by Congress to carry into execution the powers vested in the general government. This is, we think, the unavoidable consequence of that supremacy which the constitution has declared.” Id., at 436.

       Thus the Court invalidated a state law which required a seller of liquor to United States post exchanges to collect a markup — the practical equivalent of a tax — from the post exchange and to remit it to the State Tax Commission. United States v. Mississippi Tax Comm’n, 421 U. S. 599 (1975). There, although the tax was nominally collected from the seller, the legal incidence of the tax was said to fall on the United States because state law required it to be charged to and collected from the United States by the seller. See First Agricultural Nat. Bank v. Tax Comm’n, 392 U. S. 339 (1968). Kern-Limerick, Inc. v. Scurlock, 347 U. S. 110 (1954), heavily relied on by appellants, also stands only for the proposition that the State may not impose a tax the legal incidence of which falls on the Federal Government. Id., at 122. There the State imposed a sales tax on purchasers. Kern-Limerick, Inc., had a cost-plus contract with the Department of the Navy which provided that all purchases made in furtherance of the contract were made by the Department of the Navy, with Kern-Limerick acting only as its agent. The Court held that the question of who was the purchaser for state-tax purposes was a federal question, and it held the Department of the Navy to be the purchaser and the tax to be thus unenforceable. See also Federal Land Bank v. Bismarck Lumber Co., 314 U. S. 95 (1941); Van Brocklin v. Tennessee, 117 U. S. 151 (1886).

         E. g., Dobbins v. Commissioners of Erie County, 16 Pet. 435 (1842) (holding unconstitutional a state tax on the income of a federal employee); Panhandle Oil Co. v. Mississippi ex rel. Knox, 277 U. S. 218 (1928) (holding unconstitutional a sales tax imposed on one who made sales to the Federal Government); Gillespie v. Oklahoma, 257 U. S. 501 (1922) (holding unconstitutional a state income tax as it applied to income generated from property leased from the Federal Government). See also United States v. Rickert, 188 U. S. 432 (1903).

       In Graves, the Court said:
      “The theory, which once won a qualified approval, that a tax on income is legally or economically a tax on its source, is no longer tenable.” 306 U. S., at 480.
      “[T]he only possible basis for implying a constitutional immunity from state income tax of the salary of an employee of the national government or of a governmental agency is that the economic burden of the tax is in some way passed on so as to impose a burden on the national government tantamount to an interference by one government with the other in the performance of its functions.” Id., at 481. (Emphasis added.)
      The Court rejected this economic burden as a justification for immunizing the employee from income taxation:
      “[T]he purpose of the immunity was not to confer benefits on the employees by relieving them from contributing their share of the financial support of the other government, whose benefits they enjoy, or to give an advantage to a government by enabling it to engage employees at salaries lower than those paid for like services by other employers, public or private, but to prevent undue interference with the one government by imposing on it the tax burdens of the other.
      “[A] non-discriminatory tax laid on the income of all members of the community could not be assumed to obstruct the function which [a government entity] had undertaken to perform, or to cast an economic burden upon them, more than does the general taxation of property and income which, to some extent, incapable of measurement by economists, may tend to raise the price level of labor and materials.” Id., at 483-484.
      “So much of the burden of a non-discriminatory general tax upon the incomes of employees of a government, state or national, as may be passed on economically to that government, through the effect of the tax on the price level of labor or materials, is but the normal incident of the organization within the same territory of two governments, each possessing the taxing power.” Id., at 487.

       The single arguable departure from this principle since 1937 is United States v. Allegheny County, 322 U. S. 174 (1944). There the Mesta Machine Company had a contract with the Federal Government to produce field guns for the War Department during 1941. Some of the machinery with which Mesta produced the guns was owned by the United States and was in the possession of Mesta. There were limitations on Mesta’s right to use this machinery: Mesta’s “leasehold interest [in the machines] is subject to some qualification of the right to use the property except for gun manufacture . . . and is perhaps burdened by other contractual conditions.” Id., at 186-187. Pennsylvania, the State in which Mesta’s factory was located, imposed a property tax on Mesta’s land and machinery attached thereto, including the machinery owned by the United States. This Court ruled the tax invalid, stating: “Mesta has some legal and beneficial interest in this property. It is a bailee for mutual benefit. Whether such a right of possession and use in view of all the circumstances could be taxed by appropriate proceedings we do not decide. . . . [T]he state has made no effort to segregate Mesta’s interest [in the machinery] and tax it. The full value of the property including the whole ownership interest, as well as whatever value proper appraisal might attribute to the leasehold, was included in Mesta’s assessment.” Ibid.

      Insofar as United States v. Allegheny County, supra, holds that a tax measured by the value of Government-owned property may never be imposed on a private party who is using it, that decision has been overruled by United States v. City of Detroit, 355 U. S. 466 (1958), and its companion cases. See id., at 495 (Frankfurter, J., concurring and dissenting). Insofar as it stands for the proposition that Government property used by a private citizen may not be taxed at its full value where contractual restrictions on its use for the Government’s benefit render the property less valuable to the user, the case has no application here. Appellee counties have sought to tax only the individual appellants’ interests in the Forest Service houses and have reduced their assessments to take account of the limitations on the use of the houses imposed by the Government.

       A tax on the income of federal employees, or a tax on the possessory interest of federal employees in Government houses, if imposed only on them, could be escalated by a State so as to destroy the federal function performed by them either by making the Federal Government unable to hire anyone or by causing the Federal Government to pay prohibitively high salaries. This danger would never arise, however, if the tax is also imposed on the income and property interests of all other residents and voters of the State.

       The Federal Government would otherwise have had the power— enjoyed by no other employer — of giving its employees housing on which no property tax is paid by them either directly or indirectly as rent paid to a landlord who himself paid a property tax.

       The Government has expressly abandoned its claim, made below, that the tax treats federal employees who live in federally owned houses differently from state employees who lived in state-owned houses.

       If it were factually accurate that the use of Forest Service housing is of no personal benefit to appellants, the tax would chscrhninate against those who work for the Federal Government since California imposes no other tax on its citizens with respect to property in which those citizens have no beneficial personal or business interest. The tax would thus run afoul at least of the Supremacy Clause. M‘Culloch v. Maryland, 4 Wheat. 316 (1819); United States v. City of Detroit, 355 U. S., at 473.

       An attempt by California to impose a use tax on a Forest Service employee for his fire ax — which he used only in performing his job — or on' a fire tower inhabited by such employee in the daytime and solely in order to- perform his job would present a different question. The employee does not put either the ax or the tower to “‘beneficial personal use,’ ” and it is not part of his “ ‘profit’ ” or his “ ‘salary.’ ” United States v. City of Detroit, supra, at 471. See n. 14, supra.

       The court below endorsed the undisputed finding of the trial court that this policy was in effect at the time this litigation arose, 50 Cal. App. 3d 633, 637, 123 Cal. Rptr. 548, 550 (1975).

       It is true, as the majority notes, ante, at 466, that appellee counties have sought to tax the individual appellants only on that portion of the total value of the residences which may be properly attributed to their personal, non-job-related, possessory interest. This fact affects the amount of the tax but not its discriminatory character.

       Although the Federal Government’s complaint alleged that the occupancy of the residences constituted part of appellants’ “compensation,” the proof established that the Forest Service charged its employees the fair rental value of similar houses in the private sector. The state courts so found, see n. 1, supra.

       The fact that the Federal Government receives higher net rents than those received by private landlords is a consequence of its tax-exempt status which avoids one of the burdens of ownership of property regardless of how the Government elects to use its property.

       The majority states that the only burden the tax imposes on the Forest Service is economic — causing it to reimburse its employees for “the taxes legally owed by them” or, failing reimbursement, removing an advantage otherwise enjoyed by the Government in the employment market, ante, at 464. But an attempt to reimburse all federal employees for taxes legally owed would entail a great deal more than the economic burden represented by the value of the taxes. Appellees Fresno and Tuolumne Counties have different methods of computing the value of the possessory' interest, ante, at 456 n. 4. Once these counties determine the assessed vahiation of the possessory interests, presumably they apply different tax rates to determine the actual dollar value of each appellant’s tax. The Forest Service owns residences in many counties throughout the United States. The administrative burden of determining the correct amount of tax owed on each unique residence operating under myriad payment systems and due dates would be immense. In my judgment, this administrative cost provides another reason why this exercise of a State’s taxing power runs afoul of the Supremacy Clause. Moreover, I do not believe the State’s power can be exercised in a manner which requires the Federal Government to surrender its own tax exemption in order to protect its employees from a discriminatory tax. I do not understand the relevance of the Federal Government’s so-called advantage in the employment market.

       Title 18 Cal. Adm. Code § 21 (b) (1971), quoted ante, at 455 n. 3.

       See Cedars of Lebanon Hospital v. County of Los Angeles, 35 Cal. 2d 729, 221 P. 2d 31 (1950) (private hospital); Church Divinity School v. County of Alameda, 152 Cal. App. 2d 496, 314 P. 2d 209 (1957) (college-level private school); Serra Retreat v. County of Los Angeles, 35 Cal. 2d 755, 221 P. 2d 59 (1950), and Saint Germain Foundation v. County of Siskiyou, 212 Cal. App. 2d 911, 28 Cal. Rptr. 393 (1963) (religious organizations).

       “The United States asks this Court to strike down as unconstitutional a tax statute of the State of Michigan as applied to a lessee of government property. In general terms this statute, Public Act 189 of 1953, provides that when tax-exempt real property is used by a private party in a business conducted for profit the private party is subject to taxation to the same extent as though he owned the property.” United States v. City of Detroit, 355 U. S., at 467.

       “The vital thing under the Michigan statute, and we think permissibly so, is that Continental was using the property in connection with its own commercial activities. The case might well be different if the Government had reserved such control over the activities and financial gain of Continental that it could properly be called a ‘servant’ of the United States in agency terms. But here Continental was not so assimilated by the Government as to become one of its constituent parts. It was free within broad limits to use the property as it thought advantageous and convenient in performing its contracts and maximizing its profits from them.” United States v. Township of Muskegon, 355 U. S., at 486.
      The Michigan tax at issue in the first two cases applied only to use in connection with a business conducted for profit, United States v. City of Detroit, 355 U. S., at 467-468, n. 1.
      See also City of Detroit v. Murray Corp. of America, 355 U. S., at 493, where there is emphasis on the fact that the taxpayer used the Federal Government’s personal property “in the course of its own business.”

       In M‘Culloch v. Maryland, the State taxed notes issued by the Bank of the United States differently from any other property. But if the state tax in that case had applied to a national bank and also to a group of state-operated institutions which the State could subsidize in order to eliminate the economic burden of the tax — but to no other taxpayers — it surely would have been equally invalid. In such a situation, as in M‘Culloch itself and as in this case, the federal instrumentality would have been vulnerable to discriminatory treatment by the State different from that accorded to the State’s own constituents.


author: Mr. Justice Marshall

text:
    BRUNSWICK CORP. v. PUEBLO BOWL-O-MAT, INC., et al.
    No. 75-904.
    Argued November 3, 1976
    Decided January 25, 1977

      Bernard G. Segal argued the cause for petitioner. With him on the briefs were Ira P. Tiger, Joseph A. Tate, Miles G. Seeley, and Thomas B. McNeill.

      Malcolm A. Hoffmann argued the cause for respondents. With him on the brief was Edward A. Woolley.

        John L. Endicott and John J; Swenson filed a brief for Purex Corp. as amicus curiae.

   Mr. Justice Marshall

delivered the opinion of the Court.

This case raises important questions concerning the interrelationship of the antimerger and private damages action provisions of the Clayton Antitrust Act.

I

Petitioner is one of the two largest manufacturers of bowling equipment in the United States. Respondents are three of the 10 bowling centers owned by Treadway Companies, Inc. Since 1965, petitioner has acquired and operated a large number of bowling centers, including six in the markets in which respondents operate. Respondents instituted this action contending that these acquisitions violated various provisions of the antitrust laws.

In the late 1950’s, the bowling industry expanded rapidly, and petitioner’s sales of lanes, automatic pinsetters, and ancillary equipment rose accordingly. Since this equipment requires a major capital expenditure — $12,600 for each lane and pinsetter, App. A1576 — most of petitioner’s sales were for secured credit.

In the early 1960’s, the bowling industry went into a sharp decline. Petitioner’s sales quickly dropped to preboom levels. Moreover, petitioner experienced great difficulty in collecting money owed it; by the end of 1964 over $100,000,000, or more than 25%, of petitioner’s accounts were more than 90 days delinquent. Id., at A1884. Repossessions rose dramatically, but attempts to sell or lease the repossessed equipment met with only limited success. Because petitioner had borrowed close to $250,000,000 to finance its credit sales, id., at A1900, it was, as the Court of Appeals concluded, “in serious financial difficulty.” NBO Industries Treadway Cos., Inc. v. Brunswick Corp., 523 F. 2d 262, 267 (CA3 1975).

To meet this difficulty, petitioner began acquiring and operating defaulting bowling centers when their equipment could not be resold and a positive cash flow could be expected from operating the centers. During the seven years preceding the trial in this case, petitioner acquired 222 centers, 54 of which it either disposed of or closed. Ibid. These acquisitions made petitioner by far the largest operator of bowling centers, with over five times as many centers as its next largest competitor. Ibid. Petitioner’s net worth in 1965 was more than eight times greater, and its gross revenue more than seven times greater, than the total for the 11 next largest bowling chains. App. A1675. Nevertheless, petitioner controlled only 2% of the bowling centers in the United States. Id., at A1096.

At issue here are acquisitions by petitioner in the three markets in which respondents are located: Pueblo, Colo., Poughkeepsie, N. Y., and Paramus, N. J. In 1965, petitioner acquired one defaulting center in Pueblo, one in Poughkeepsie, and two in the Paramus area. In 1969, petitioner acquired a third defaulting center in the Paramus market, and in 1970 petitioner acquired a 'fourth. Petitioner closed its Poughkeepsie center in 1969 after three years of unsuccessful operation; the Paramus center acquired in 1970 also proved unsuccessful, and in March 1973 petitioner gave notice that it would cease operating the center when its lease expired. The other four centers were operational at the time of trial.

Respondents initiated this action in June 1966, alleging, inter alia, that these acquisitions might substantially lessen competition or tend to create a monopoly in violation of § 7 of the Clayton Act, 15 U. S. C. § 18. Respondents sought damages, pursuant to § 4 of the Act, 15 U. S. C. § 15, for three times “the reasonably expectable profits to be made [by respondents] from the operation of their bowling centers.” App. A24. Respondents also sought a divestiture order, an injunction against future acquisitions, and such “other further and different relief” as might be appropriate under § 16 of the Act, 15 U. S. C. § 26. App. A27.

Trial was held in the spring of 1973, following an initial mistrial due to a hung jury. To establish a § 7 violation, respondents sought to prove that because of its size, petitioner had the capacity to lessen competition in the markets it had entered by driving smaller competitors out of business. To establish damages, respondents attempted to show that had petitioner allowed the defaulting centers to close, respondents’ profits would have increased. At respondents’ request, the jury was instructed in accord with respondents’ theory as to the nature of the violation and the basis for damages. The jury returned a verdict in favor of respondents in the amount of $2,358,030, which represented the minimum estimate by respondents of the additional income they would have realized had the acquired centers been closed. Id., at A1737. As required by law, the District Court trebled the damages. It also awarded respondents costs and attorneys’ fees totaling $446,977.32, and, sitting as a court of equity, it ordered petitioner to divest itself of the centers involved here, Treadway Cos. v. Brunswick Corp., 389 F. Supp. 996 (NJ 1974). Petitioner appealed.

The Court of Appeals, while endorsing the legal theories upon which respondents’ claim was based, reversed the judgment and remanded the case for further proceedings. NBO Industries Treadway Cos. v. Brunswick Corp., supra. The court found that a properly instructed jury could have concluded that petitioner was a “giant” whose entry into a “market of pygmies” might lessen horizontal retail competition, because such a “giant”

“has greater ease of entry into the market, can accomplish cost-savings by investing in new equipment, can resort to low or below cost sales to sustain itself against competition for a longer period, and can obtain more favorable credit terms.” 523 F. 2d, at 268.

The court also found that there was sufficient evidence to permit a jury to conclude that but for petitioner’s actions, the acquired centers would have gone out of business. Id., at 273, 275-277. And the court held that if a jury were to make such findings, respondents would be entitled to damages for threefold the income they would have earned. After reviewing the instructions on these issues, however, the court decided that the jury had not been properly charged and that therefore a new trial was required. Id., at 275-277. It also decided that since “an essential predicate” for the District Court’s grant of equitable relief was the jury verdict on the § 7 claim, the equitable decree should be vacated as well. Id., at 277-278. And it concluded that in any event equitable relief “should be restricted to preventing those practices by which a deep pocket market entrant harms competition .... [D]ivestiture was simply inappropriate.” Id., at 279.

Both sides petitioned this Court for writs of certiorari. Brunswick’s petition challenged the theory the Court of Appeals had approved for awarding damages; the plaintiffs’ petition challenged the Court of Appeals’ conclusions with respect to the jury instructions and the appropriateness of a divestiture order. We granted Brunswick’s petition. 424 U. S. 908 (1976).

II

The issue for decision is a narrow one. Petitioner does not presently contest the Court of Appeals’ conclusion that a properly instructed jury could have found the acquisitions unlawful. Nor does petitioner challenge the Court of Appeals’ determination that the evidence would support a finding that had petitioner not acquired these centers, they would have gone out of business and respondents’ income would have increased. Petitioner questions only whether antitrust damages are available where the sole injury alleged is that competitors were continued in business, thereby denying respondents an anticipated increase in market shares.

To answer that question it is necessary to examine the anti-merger and treble-damages provisions of the Clayton Act. Section 7 of the Act proscribes mergers whose effect “may be substantially to lessen competition, or to tend to create a monopoly.” (Emphasis added.) It is, as we have observed many times, a prophylactic measure, intended “primarily to arrest apprehended consequences of intercorporate relationships before those relationships could work their evil . . . .” United States v. E. I. du Pont de Nemours & Co., 353 U. S. 586, 597 (1957). See also Brown Shoe Co. v. United States, 370 U. S. 294, 317-318 (1962); United States v. Philadelphia Nat. Bank, 374 U. S. 321, 362-363 (1963); United States v. Penn-Olin Chemical Co., 378 U. S. 158, 170-171 (1964); United States v. Von’s Grocery Co., 384 U. S. 270, 277 (1966); FTC v. Procter & Gamble Co., 386 U. S. 568, 577-578 (1967); Gulf Oil Corp. v. Copp Paving Co., 419 U. S. 186, 201 (1974).

Section 4, in contrast, is in essence a remedial provision. It provides treble damages to “[a]ny person who shall be injured in his business or property by reason of anything forbidden in the antitrust laws . . . .” Of course, treble damages also play an important role in penalizing wrongdoers and deterring wrongdoing, as we also have frequently observed. Perma Life Mufflers v. International Parts Corp., 392 U. S. 134, 139 (1968); Fortner Enterprises v. United States Steel Corp., 394 U. S. 495, 502 (1969); Zenith Radio Corp. v. Hazeltine Research, 395 U. S. 100, 130 (1969); Hawaii v. Standard Oil Co., 405 U. S. 251, 262 (1972). It nevertheless is true that the treble-damages provision, which makes awards available only to injured parties, and measures the awards by a multiple of the injury actually proved, is designed primarily as a remedy.

Intermeshing a statutory prohibition against acts that have a potential to cause certain harms with a damages action intended to remedy those harms is not without difficulty. Plainly, to recover damages respondents must prove more than that petitioner violated § 7, since such proof establishes only that injury may result. Respondents contend that the only additional element they need demonstrate is that they are in a worse position than they would have been had petitioner not committed those acts. The Court of Appeals agreed, holding compensable any loss “causally linked” to “the mere presence of the violator in the market.” 523 F. 2d, at 272-273. Because this holding divorces antitrust recovery from the purposes of the antitrust laws without a clear statutory command to do so, we cannot agree with it.

Every merger of two existing entities into one, whether lawful or unlawful, has the potential for producing economic readjustments that adversely affect some persons. But Congress has not condemned .mergers _on UAatme,count,i t has condemned them only when they may produce anticompetitive effects. Yet under the Court of Appeals’ holding, once a merger is found to violate § 7, all dislocations caused by the merger are actionable, regardless of whether those dislocations have anything to do with the reason the merger was condemned. This holding would make § 4 recovery entirely fortuitous, and would authorize damages for losses which are of no concern to the antitrust laws.

Both of these consequences are well illustrated by the facts of this case. If the acquisitions here were unlawful, it is because they brought a “deep pocket” parent into a market of “pygmies.” Yet respondents’ injury — the loss of income that would have accrued had the acquired centers gone bankrupt — bears no relationship to the size of either the acquiring company or its competitors. Respondents would have suffered the identical “loss” — but no compensable injury — had the acquired centers instead obtained refinancing or been purchased by “shallow pocket” parents, as the Court of Appeals itself acknowledged, 523 F. 2d, at 279. Thus, respondents’ injury was not of “the type that the statute was intended to forestall,” Wyandotte Co. v. United States, 389 U. S. 191, 202 (1967).

But the antitrust laws are not merely indifferent to the injury claimed here. At base, respondents complain that by acquiring the failing centers petitioner preserved competition, thereby depriving respondents of the benefits of increased concentration. The damages respondents obtained are designed to provide them with the profits they would have realized had competition been reduced. The antitrust laws, however, were enacted for “the protection of competition, not competitors,” Brown Shoe Co. v. United States, 370 U. S., at 320. It is inimical to the purposes of these laws to award damages for the type of injury claimed here.

Of course, Congress is free, if it desires, to mandate damages awards for all dislocations caused by unlawful mergers despite the peculiar consequences of so doing. But because of these consequences, “we should insist upon a clear expression of a congressional purpose,” Hawaii v. Standard Oil Co., 405 U. S., at 264, before attributing such an intent to Congress. We can find no such expression in either the language or the legislative history of § 4. To the contrary, it is far from clear that the loss of windfall profits that would have accrued had the acquired centers failed even constitutes “injury” within the meaning of § 4. And it is quite clear that if respondents were injured, it was not “by reason of anything forbidden in the antitrust laws”: while respondents’ loss occurred “by reason of” the unlawful acquisitions, it did not occur “by reason of” that which made the acquisitions unlawful.

We therefore hold that for plaintiffs to recover treble damages on account of § 7 violations, they must prove more than injury causally linked to an illegal presence in the market. Plaintiffs must prove antitrust injury, which is to say injury of the type the antitrust laws were intended to prevent and that flows from that which makes defendants’ acts unlawful. The injury should reflect the anticompetitive effect either of the violation or of anticompetitive acts made possible by the violation. It should, in short, be “the type of loss that the claimed violations . . . would be likely to cause.” Zenith Radio Corp. v. Hazeltine Research, 395 U. S., at 125.

Ill

We come, then, to the question of appropriate disposition of this case. At the very least, petitioner is entitled to a new trial, not only because of the instructional errors noted by the Court of Appeals that are not at issue here, see n. 6, supra, but also because the District Court’s instruction as to the basis for damages was inconsistent with our holding as outlined above., Our review of the record, however, persuades us that a new trial on the damages claim is unwarranted. Respondents based their case solely on their novel damages theory which we have rejected. While they produced some conclusory testimony suggesting that in operating the acquired centers petitioner had abused its deep pocket by engaging in anticompetitive conduct, they made no attempt to prove that they had lost any income as a result of such predation. Rather, their entire proof of damages was based on their claim to profits that would have been earned had the acquired centers closed. Since respondents did not prove any cognizable damages and have not offered any justification for allowing respondents, after two trials and over 10 years of litigation, yet a third opportunity to do so, it follows that, petitioner is entitled, in accord with its motion made pursuant to Rule 50 (b), to judgment on the damages claim notwithstanding the verdict. Neely v. Eby Constr. Co., 386 U. S. 317, 326-330 (1967); United States v. Generes, 405 U.S. 93, 106-107 (1972).

Respondents’ complaint also prayed for equitable relief, and the Court of Appeals held that if respondents established a § 7 violation, they might be entitled to an injunction against “those practices by which a deep pocket market entrant harms competition.” 523 F. 2d, at 279. Because petitioner has not contested this holding, respondents remain free, on remand, to seek such a decree.

The judgment of the Court of Appeals is vacated, and the case is remanded for further proceedings consistent with this opinion.

It is so ordered.

       Sales of automatic pinsetters, for example, went from 1,890 in 1956 to 16,288 in 1961. App. A1866.

       Repossessions of pinsetters increased from 300 in 1961 to 5,996 in 1965. Ibid. In 1963, petitioner resold over two-thirds of the pinsetters repossessed; more typically, only one-third were resold, and in 1965, less than one-quarter were resold. Id., at A1879.

       The complaint contained two additional counts. Count one alleged that petitioner had violated § 1 of the Sherman Act, 15 U. S. C. § 1, by-fixing resale prices for bowling supplies sold by petitioner to respondents. This count was abandoned prior to trial. Count two alleged that by virtue of the acquisitions and other acts, petitioner was guilty of monopolization or an attempt to monopolize in violation of § 2 of the Sherman Act, 15 U. S. C. § 2. The jury found for petitioner on this count, and respondents did not appeal.
      The complaint also named as plaintiffs National Bowl-O-Mat, the predecessor to Treadway Companies, and the seven other bowling center subsidiaries of Treadway. These plaintiffs were unsuccessful on all counts, however, and they did not appeal the judgments entered against them.

       Judgment ultimately was entered for $6,575,040, which is $499,050 less than three times the jury’s damages award, after respondent Pueblo Bowl-O-Mat consented to a remittitur which the District Court proposed as an alternative to a retrial on damages. Treadway Cos. v. Brunswick Corp., 364 F. Supp. 316, 324-326 (NJ 1973). The remittitur was deemed necessary because the jury apparently awarded damages to that respondent in accord with its minimum claim dating back to 1963, when the alleged § 2 violation began, rather than back to 1965, when the alleged § 7 violation began. The District Court thought that the jury might have been confused by the instruction to use the same" methods for calculating damages under the two sections. Ibid.

       Petitioner’s appeal and respondents’ cross-appeal with respect to the amount of the attorneys’ fee award initially were dismissed by the Court of Appeals for want of jurisdiction because the District Court had neither disposed of respondents’ equitable claim nor certified the judgment entered on the legal claims pursuant to Fed. Rule Civ. Proc. 54 (b). Treadway Cos. v. Brunswick Corp., 500 F. 2d 1400 (CA3 1974) (order reported) ; App. A1563-A1566 {per curiam opinion reprinted). The District Court then certified the previously entered judgment, and the parties reappealed. While the appeals were pending, the District Court granted equitable relief, and the appeal from that judgment was consolidated with the pending appeals.

       With respect to the instruction on the issue of liability, the court concluded that since petitioner’s acquisitions “did not increase concentration,” the District Court had erred by focusing on the size of the market shares acquired by petitioner rather than on “indicators of qualitative substantiality” such as the “relative financial strength of Brunswick, Treadway, and other competitors,” or “any retail market advantage” enjoyed by petitioner because of its status as financier and manufacturer. NBO Industries Treadway Cos. v. Brunswick Corp., 523 F. 2d, at 274-275 (CA3 1975). With respect to the instruction on damages, the Court of Appeals concluded that the District Court had failed to direct the jury to decide whether petitioner’s actions were responsible for keeping the acquired centers in business before considering how much additional income respondents would have earned if the acquired centers had been closed. Id., at 276-277.
      The Court of Appeals also held, id., at 275, that in instructing the jury on the statutory requirement that the acquired company be “engaged ... in commerce,” the District Court had not anticipated this Court’s decision in United States v. American Bldg. Maint. Industries, 422 U. S. 271 (1975), which read the “in commerce” requirement more restrictively than had the leading decision of the Third Circuit, Transamerica Corp. v. Board of Governors, 206 F. 2d 163, cert. denied, 346 U. S. 901 (1953). Indeed, the court indicated that there might not be sufficient evidence in the record to satisfy the “in commerce” test. 523 F. 2d, at 271. The court concluded, however, that given the change in the law, it would be “unjust” to find the evidence insufficient and thereby deny plaintiffs an opportunity to meet the new test on retrial.

        Both petitions also questioned the Court of Appeals’ decision to require relitigation of the “in commerce” issue, see n. 6, supra. Brunswick maintained it was entitled to a directed verdict on this issue; plaintiffs argued that they had satisfied the new test and that therefore no new trial was required.

       The grant of certiorari excluded the question Brunswick sought to present concerning the suificiency of the evidence that the acquired companies were engaged “in commerce,” see nn. 6, 7, supra.

      No action has been taken with respect to respondents’ petition.

       Petitioner raises this issue directly through the first question presented, and indirectly through the second, which asks:
      “Does not the ‘failing company’ principle require dismissal of a treble-damage action based on alleged violations of Section 7 of the Clayton Act where the plaintiffs’ entire damage theory is based on the premise that the ‘acquired’ businesses would have failed and disappeared from the market had the defendant not kept them alive by making the challenged ‘acquisitions?’ ” Pet. for Cert. 3.
      In light of our holding, we have no occasion to consider the applicability of the failing-company defense to the conglomerate-like acquisitions involved here.

       Treble-damages antitrust actions were first authorized by § 7 of the Sherman Act, 26 Stat. 210 (1890). The discussions of this section on the floor of the Senate indicate that it was conceived of primarily as a remedy for "[t]he people of the United States as individuals,” especially consumers. 21 Cong. Rec. 1767-1768 (1890) (remarks of Sen. George); see id., at 2612 (Sens. Teller and Reagan), 2615 (Sen. Coke), 3146-3149. Treble damages were provided in part for punitive purposes, id., at 3147 (Sen. George), but also to make the remedy meaningful by counterbalancing “the difficulty of maintaining a private suit against a combination such as is described” in the Act. Id., at 2456 (Sen. Sherman).
      When Congress enacted the Clayton Act in 1914, it “extend[ed] the remedy under section 7 of the Sherman Act” to persons injured by virtue of any antitrust violation. H. R. Rep. No. 627, 63d Cong., 2d Sess., 14 (1914). The initial House debates concerning provisions related to private damages actions reveal that these actions were conceived primarily as “open[ing] the door of justice to every man, whenever he may be injured by those who violate the antitrust laws, and giv[ing] the injured party ample damages for the wrong suffered.” 51 Cong. Rec. 9073 (1914) (remarks of Rep. Webb); see, e. g., id., at 9079 (Rep. Volstead), 9270 (Rep. Carlin), 9414-9417, 9466-9467, 9487-9495. The House debates following the conference committee report, however, indicate that the sponsors of the bill also saw treble-damages suits as an important means of enforcing the law. Id., at 16274H6275 (Rep. Webb), 16317-16319 (Rep. Floyd). In the Senate there was virtually no discussion of the enforcement value of private actions, even though the bill was attacked as lacking meaningful sanctions, e. g., id., at 15818-15821 (Sen. Reed), 16042-16046 (Sen. Norris).

       See Areeda, Antitrust Violations Without Damage Recoveries, 89 Harv. L. Rev. 1127, 1130-1136 (1976); Symposium, Private Enforcement of the Antimerger Laws, 31 Record of N. Y. C. B. A., 239, 260-261 (1976).

       Conversely, had petitioner acquired thriving centers — acquisitions at least as violative of § 7 as the instant acquisitions — respondents would not have lost any income that they otherwise would have received.

       For instances in which plaintiffs unsuccessfully sought damages for injuries unrelated to the reason the merger was prohibited, see Reibert v. Atlantic Richfield Co., 471 F. 2d 727 (CA10), cert. denied, 411 U. S. 938 (1973); Peterson v. Borden Co., 50 F. 2d 644 (CA7 1931); Kirihara v. Bendix Corp., 306 F. Supp. 72 (Haw. 1969); Goldsmith v. St. Louis-San Francisco R. Co., 201 F. Supp. 867 (WDNC 1962).

       See generally GAF Corp. v. Circle Floor Co., 463 F. 2d 752 (CA2 1972), cert. dismissed, 413 U. S. 901 (1973); Comment, Section 7 of the Clayton Act: The Private Plaintiff’s Remedies, 7 B. C. Ind. & Comm. L. Rev. 333 (1966); Comment, Treble Damage Actions for Violations of Section 7 of the Clayton Act, 38 U. Chi. L. Rev. 404 (1971).
      This does not necessarily mean, as the Court of Appeals feared, 523 F. 2d, at 272, that § 4 plaintiffs must prove an actual lessening of competition in order to recover. The short-term effect of certain anticompetitive behavior — predatory below-cost pricing, for example — may be to stimulate price competition. But competitors may be able to prove antitrust injury before they actually are driven from the market and competition is thereby lessened. Of course, the case for relief will be strongest where competition has been diminished. See, e. g., Calnetics Corp. v. Volkswagen of America, Inc., 532 F. 2d 674 (CA9 1976); Metric Hosiery Co. v. Spartans Industries, Inc., 50 F. R. D. 50 (SDNY 1970); Klingsberg, Bull’s Eyes and Carom Shots: Complications and Conflicts on Standing to Sue and Causation Under Section 4 of the Clayton Act, 16 Antitrust Bull. 351, 364 (1971).

       Respondents’ testimony concerned price reductions at three centers, App. A170, A420, A431; unjustified capital expenses at three centers, id., at A503-A506, A829-A830; and extravagant “give-aways,” id., at A169-A170, A222-A223, A413-A414, A569. This testimony is rather unimpressive when viewed against both petitioner’s contemporaneous business records which reveal that it did not lower prices when it took over the centers, Defendant’s Exhibits D-32, D-33, D-36, D-38, and respondents’ own exhibits, which demonstrate that petitioner made a profit at two centers, App. A1700, generated a positive cash flow at three others, id., at A1717, A1720, and closed the two centers that were unsuccessful, id., at A1725, A1733.

       One of respondents’ witnesses did testify that he knew of one bowling league in Pueblo that had shifted from a respondent to petitioner after petitioner installed faster automatic pinsetters. Id., at 508. Assuming, arguendo, that such installations were not cost justified and constituted a form of predation, respondents still made no attempt to quantify the loss.


author: Per Curiam. Mr. Justice Marshall, Mr. Justice Stevens,

text:
    OREGON v. MATHIASON
    No. 76-201.
    Decided January 25, 1977
   Per Curiam.

Respondent Carl Mathiason was convicted of first-degree burglary after a bench trial in which his confession was critical to the State’s case. At trial he moved to suppress the confession as the fruit of questioning by the police not preceded by the warnings required in Miranda v. Arizona, 384 U. S. 436 (1966). The trial court refused to exclude the confession because it found that Mathiason was not in custody at the time of the confession.

The Oregon Court of Appeals affirmed respondent’s conviction, but on his petition for review in the Supreme Court of Oregon that court by a divided vote reversed the conviction. It found that although Mathiason had not been arrested or otherwise formally detained, “the interrogation took place in a ‘coercive environment’ ” of the sort to which Miranda was intended to apply. The court conceded that its holding was contrary to decisions in other jurisdictions, and referred in particular to People v. Yukl, 25 N. Y. 2d 585, 256 N. E. 2d 172 (1969). The State of Oregon has petitioned for certiorari to review the judgment of the Supreme Court of Oregon. We think that court has read Miranda too broadly, and we therefore reverse its judgment.

The Supreme Court of Oregon described the factual situation surrounding the confession as follows:

“An officer of the State Police investigated a theft at a residence near Pendleton. He asked the lady of the house which had been burglarized if she suspected anyone. She replied that the defendant was the only one she could think of. The defendant was a parolee and a 'close associate’ of her son. The officer tried to contact defendant on three or four occasions with no success. Finally, about 25 days after the burglary, the officer left his card at defendant’s apartment with a note asking him to call because ‘I’d like to discuss something with you.’ The next afternoon the defendant did call. The officer asked where it would be convenient to meet. The defendant had no preference; so the officer asked if the defendant could meet him at the state patrol office in about an hour and a half, about 5:00 p. m. The patrol office was about two blocks from defendant’s apartment. The building housed several state agencies.
“The officer met defendant in the hallway, shook hands and took him into an office. The defendant was told he was not under arrest. The door was closed. The two sat across a desk. The police radio in another room could be heard. The officer told defendant he wanted to talk to him about a burglary and that his truthfulness would possibly be considered by the district attorney or judge. The officer further advised that the police believed defendant was involved in the burglary and [falsely stated that] defendant’s fingerprints were found at the scene. The defendant sat for a few .minutes and then said he had taken the property. This occurred within five minutes after defendant had come to the office. The officer then advised defendant of his Miranda rights and took a taped confession.
“At the end of the taped conversation the officer told defendant he was not arresting him at this time; he was released to go about his job and return to his family. The officer said he was referring the case to the district attorney for him to determine whether criminal charges would be brought. It was 5:30 p. m. when the defendant left the office.
“The officer gave all the testimony relevant to this issue. The defendant did not take the stand either at the hearing on the motion to suppress or at the trial.” 275 Ore. 1, 3-4, 549 P. 2d 673, 674 (1976).

The Supreme Court of Oregon reasoned from these facts that:

“We hold the interrogation took place in a 'coercive environment.’ The parties were in the offices of the State Police; they were alone behind closed doors; the officer informed the defendant he was a suspect in a theft and the authorities had evidence incriminating him in the crime; and the defendant was a parolee under supervision. We are of the opinion that this evidence is not overcome by the evidence that the defendant came to the office in response to a request and was told he was not under arrest.” Id., at 5, 549 P. 2d, at 675.

Our decision in Miranda set forth rules of police procedure applicable to “custodial interrogation.” “By custodial interrogation, we mean questioning initiated by law enforcement officers after a person has been taken into custody or otherwise deprived of his freedom of action in any significant way.” 384 U. S., at 444. Subsequently we have found the Miranda principle applicable to questioning which takes place in a prison setting during a suspect’s term of imprisonment on a separate offense, Mathis v. United States, 391 U. S. 1 (1968), and to questioning taking place in a suspect’s home, after he has been arrested and is no longer free to go where he pleases, Orozco v. Texas, 394 U. S. 324 (1969).

In the present case, however, there is no indication that the questioning took place in a context where respondent’s freedom to depart was restricted in any way. He came voluntarily to the police station, where he was immediately informed that he was not under arrest. At the close of a %-hour interview respondent did in fact leave the police station without hindrance. It is clear from these facts that Mathiason was not in custody “or otherwise deprived of his freedom of action in any significant way.”

Such a noncustodial situation is not converted to one in which Miranda applies simply because a reviewing court concludes that, even in the absence of any formal arrest or restraint on freedom of movement, the questioning took place in a “coercive environment.” Any interview of one suspected of a crime by a police officer will have coercive aspects to it, simply by virtue of the fact that the police officer is part of a law enforcement system which may ultimately cause the suspect to be charged with a crime. But police officers are not required to administer Miranda warnings to everyone whom they question. Nor is the requirement of warnings to be ifnposed simply because the questioning takes place in the station house, or because the questioned person is one whom the police suspect. Miranda warnings are required only where there has been such a restriction on a person’s freedom as to render him “in custody.” It was that sort of coercive environment to which Miranda by its terms was made applicable, and to which it is limited.

The officer’s false statement about having discovered Mathiason’s fingerprints at the scene was found by the Supreme Court of Oregon to be another circumstance contributing to the coercive environment which makes the Miranda rationale applicable. Whatever relevance this fact may have to other issues in the case, it has nothing to do with whether respondent was in custody for purposes of the Miranda rule.

The petition for certiorari is granted, the judgment of the Oregon Supreme Court is reversed, and the case is remanded for proceedings not inconsistent with this opinion.

So ordered.

Mr. Justice Brennan would grant the writ but dissents from the summary disposition and would set the case for oral argument.

Mr. Justice Marshall,

dissenting.

The respondent in this case was interrogated behind closed doors at police headquarters in connection with a burglary investigation. He had been named by the victim of the burglary as a suspect, and was told by the police that they believed he was involved. He was falsely informed that his fingerprints had been found at the scene, and in effect was advised that by cooperating with the police he could help himself. Not until after he had confessed was he given the warnings set forth in Miranda v. Arizona, 384 U. S. 436 (1966).

The Court today holds that for constitutional purposes all this is irrelevant because respondent had not “ 'been taken into custody or otherwise deprived of his freedom of action in any significant way.’ ” Ante, at 494, quoting Miranda v. Arizona, supra, at 444. I do not believe that such a determination is possible on the record before us. It is true that respondent was not formally placed under arrest, but surely formalities alone cannot control. At the very least, if respondent entertained an objectively reasonable belief that he was not free to leave during the questioning, then he was "deprived of his freedom of action in a significant way.” Plainly the respondent could have so believed, after being told by the police that they thought he was involved in a burglary and that his fingerprints had been found at the scene. Yet the majority is content to note that “there is no indication that . . . respondent’s freedom to depart was restricted in any way,” ante, at 495, as if a silent record (and no state-court findings) means that the State has sustained its burden, see Lego v. Twomey, 404 U. S. 477, 489 (1972), of demonstrating that respondent received his constitutional due.

More fundamentally, however, I cannot agree with the Court’s conclusion that if respondent were not in custody no warnings were required. I recognize that Miranda is limited to custodial interrogations, but that is because, as we noted last Term, the facts in the Miranda cases raised only this “narrow issue.” Beckwith v. United States, 425 U. S. 341, 345 (1976). The rationale of Miranda, however, is not so easily cabined.

Miranda requires warnings to “combat” a situation in which there are “inherently compelling pressures which work to undermine the individual’s will to resist and to compel him to speak where he would not ’otherwise do so freely.” 384 U. S., at 467. It is of course true, as the Court notes, that “[a]ny interview of one suspected of a crime by a police officer will have coercive aspects to it.” Ante, at 495. But it does not follow that because police “are not required to administer Miranda warnings to everyone whom they question,” ibid., that they need not administer warnings to anyone, unless the factual setting of the Miranda cases is replicated. Rather, faithfulness to Miranda requires us to distinguish situations that resemble the “coercive aspects”' of custodial interrogation from those that more nearly resemble “[g]eneral on-the-scene questioning ... or other general questioning of citizens in the fact-finding process” which Miranda states usually can take place without warnings. 384 U. S., at 477.

In my view, even if respondent were not in custody, the coercive elements in the instant case were so pervasive as to require Miranda-type warnings. Respondent was interrogated in “privacy” and in “unfamiliar surroundings,” factors on which Miranda places great stress. Id., at 449-450; see also Beckwith v. United States, supra, at 346 n. 7. The investigation had focused on respondent. And respondent was subjected to some of the “deceptive stratagems,” Miranda v. Arizona, supra, at 455, which called forth the Miranda decision. I therefore agree with the Oregon Supreme Court that to excuse the absence of warnings given these facts is “contrary to the rationale expressed in Miranda.” 275 Ore. 1, 5, 549 P. 2d 673, 675 (1976).

The privilege against self-incrimination “has always been 'as broad as the mischief against which it seeks to guard.’ ” Miranda v. Arizona, supra, at 459-460, quoting Counselman v. Hitchcock, 142 U. S. 547, 562 (1892). Today’s decision means, however, that the Fifth Amendment privilege does not provide full protection against mischiefs equivalent to, but different from, custodial interrogation. See also Beck-with v. United States, supra. It is therefore important to note that the state courts remain free, in interpreting state constitutions, to guard against the evil clearly identified by this case.

I respectfully dissent.

Mr. Justice Stevens,

dissenting.

In my opinion the issues presented by this case are too important to be decided summarily. Of particular importan.ce is the fact that the respondent was on parole at the time of his interrogation in the police station. This fact lends support to inconsistent conclusions.

On the one hand, the State surely has greater power to question a parolee about his activities than to question someone else. Moreover, as a practical matter, it seems unlikely that a Miranda warning would have much effect on a parolee’s choice between silence and responding to police interrogation. Arguably, therefore, Miranda warnings are entirely inappropriate in the parole context.

On the other hand, a parolee is technically in legal custody continuously until his sentence has been served. Therefore, if a formalistic analysis of the custody question is to determine when the Miranda warning is necessary, a parolee should always be warned. Moreover, Miranda teaches that even if a suspect is not in custody, warnings are necessary if he is “otherwise deprived of his freedom of action in any significant way.” If a parolee being questioned in a police station is not described by that language, today’s decision qualifies that part of Miranda to some extent. I believe we would have a better understanding of the extent of that qualification, and therefore of the situations in which warnings must be given to a suspect who is not technically in custody, if we had the benefit of full argument and plenary consideration.

I therefore respectfully dissent from the Court’s summary disposition.

       See, e. g., United States v. Hall, 421 F. 2d 540, 544-545 (CA2 1969) (Friendly, J.); Lowe v. United States, 407 F. 2d 1391 (CA9 1969); People v. Arnold, 66 Cal. 2d 438, 426 P. 2d 515 (1967); People v. Rodney P., 21 N. Y. 2d 1, 233 N. E. 2d 255 (1967). See also eases collected in Annot., 31 A. L. R. 3d 565, 581-583 (1970 and Supp. 1976).
      It has been noted that as a logical matter, a person who honestly but unreasonably believes he is in custody is subject to the same coercive pressures as one whose belief is reasonable; this suggests that such persons also are entitled to warnings. See, e. g., LaFave, “Street Encounters” and the Constitution: Terry, Sibron, Peters, and Beyond, 67 Mich. L. Rev. 39, 105 (1968); Smith, The Threshold Question in Applying Miranda: What Constitutes Custodial Interrogation?, 25 S. C. L. Rev. 699, 711-714 (1974).

       The Court’s action is particularly inappropriate because the record of this case has not been transmitted to us, and thus our knowledge of the facts is limited to the information contained in the petition and in the opinions of the state courts.

       I do not rule out the possibility that lesser warnings would suffice when a suspect is not in custody but is subjected to a highly coercive atmosphere. See, e. g., Beckwith v. United States, 425 U. S. 341, 348-349 (1976) (Marshall, J., concurring in judgment); ALI, Model Code of Pre-Arraignment Procedure § 110.1 (2) (Approved Draft 1975) (suspects interrogated at police station must be advised of their right to leave and right to consult with counsel, relatives, or friends).

       See also Graham, What is “Custodial Interrogation?”: California’s Anticipatory Application of Miranda v. Arizona, 14 UCLA L. Rev. 59, 81-82 (1966); Smith, supra, n. 1, at 732, 735.

       I trust today’s decision does not suggest that police officers can circumvent Miranda by deliberately postponing the official “arrest” and the giving of Miranda warnings until the necessary incriminating statements have been obtained.

       See, e. g., South Dakota v. Opperman, 428 U. S. 364, 384 (1976) (Marshall, J., dissenting); Baxter v. Palmigiano, 425 U. S. 308, 324, 338-339 (1976) (Brennan, J., dissenting); Michigan v. Mosley, 423 U. S. 96, 120-121 (1975) (Brennan, J., dissenting); Wilkes, The New Federalism in Criminal Procedure: State Court Evasion of the Burger Court, 62 Ky. L. J. 421 (1974); Wilkes, More on the New Federalism in Criminal Procedure, 63 Ky. L. J. 873 (1975).
      In Opperman, this Court reversed a decision of the South Dakota Supreme Court holding that routine inventory searches of impounded automobiles, made without probable cause or consent, violated the Fourth Amendment. The case was remanded, like this one, “for further proceedings not inconsistent with [the] opinion.” 428 U. S., at 376. On remand, the South Dakota Supreme Court held that such searches violated a nearly identical provision of the State Constitution, and that therefore the seized evidence should have been suppressed. State v. Opperman, 89 S. D. —, 228 N. W. 2d 152 (1976).