# Western Coal Traffic League and Its Members v. United States of America and Interstate Commerce Commission

> Court of Appeals for the Fifth Circuit · March 7, 1983 · 694 F.2d 378

URL: https://www.frixlaw.com/law-library/cases/9469996

## Case

- **Full name:** WESTERN COAL TRAFFIC LEAGUE and Its Members, Et Al., Petitioners, v. UNITED STATES of America and Interstate Commerce Commission, Respondents
- **Court:** Court of Appeals for the Fifth Circuit
- **Decided:** March 7, 1983
- **Citations:** 694 F.2d 378; 1983 U.S. App. LEXIS 29906
- **Precedential status:** Published
- **Opinion:** Dissent by Brown
- **Judges:** Brown, Rubin, Reavley, Clark, Gee, Reayley, Politz, Tate, Johnson, Williams, Jolly, Higginbotham
- **Cited by:** 30 later opinions in the Frix Law Library

## Citator (automated)

- **Yellow flag:** Modified on other grounds by Western Coal Traffic League and Its Members v. United States of America and Interstate Commerce Commission, 719 F.2d 772 (1983).
- Negative treatments: 1
- Distinguished by: 0
- Full citator and citing cases: https://www.frixlaw.com/law-library/cases/9469996

## Opinion text

JOHN R. BROWN, Circuit Judge,
dissenting:
I dissent as to the Court’s holding “that the Commission’s rule allowing evidence of product and geographic competition in deciding whether a carrier has market dominance violates the limits contained in the statutory definition and is invalid,” and to the reasons assigned to that result. 1
The Railroad Revitalization and Regulatory Reform Act of 1976 (“4R Act”) constitutes a dramatic shift in government control of our nation’s railroads, a shift “from reliance on government control to serve the public interest to reliance on market forces.” Morton, Contract Rates by Rail — A Tool in Ratemaking, 49 I.C.C. Practitioners’ Journal 413, 414 (1982). The 4R Act, as relevant here, restricted the I.C.C.’s jurisdiction over railroad rates to situations of “market dominance”, but it left in the *395 agency’s lap the determination of appropriate standards and procedures relating to market dominance. The Commission, in Ex Parte No. 820, Special Procedures for Making Findings of Market Dominance, 353 1. C.C. 873, modified, 355 I.C.C. 12 (1976), adopted regulations to that end. It excluded geographic and product competition from the list of factors it would consider in making that jurisdictional determination.
In the Staggers Rail Act of 1980, Congress reiterated its intent that the I.C.C. deregulate. Taking the hint, the I.C.C. abandoned market dominance presumptions and replaced them with broader, flexible guidelines. Reversing its prior position, it approved the consideration of geographic and product competition as factors indirectly relevant to determining competitive effect. The I.C.C., relying upon five years’ experience with the original regulations, explained that its position had been too restrictive. Neither the 4R Act nor the Staggers Act, the I.C.C. stated, prevented such action. 2
Any agency’s freedom to change its mind, while neither guaranteed by the Constitution nor sanctioned by the Administrative Procedure Act, seems nonetheless a fundamental tenet in the effective and efficient administration of government. As times and business change, an agency may conclude that its policies should change as well. Prior policy, while not erroneous, simply no longer fits the bill. The Supreme Court has made that doubly clear as this Court recognized in Aberdeen & Rockfish R. Co. v. United States, 682 F.2d 1092 (5th Cir.1982):
[T]he Commission, faced with new developments or in light of reconsideration of the relevant facts and its mandate, may alter its past interpretation and overturn past administrative rulings and practice .... [Tjhis kind of flexibility and adaptability to changing needs and patterns of transportation is an essential part of the office of a regulatory agency. Regulatory agencies do not establish rules of conduct to last forever; they are supposed, within the limits of the law and of fair and prudent administration, to adapt their rules and practices to the Nation’s needs in a volatile, changing economy. They are neither required nor supposed to regulate the present and the future within the inflexible limits of yesterday. ,
American Trucking Associations, Inc. v. Atchison, Topeka & Santa Fe Railway, 387 U.S. 397,416 , 87 S.Ct. 1608, 1618 , 18 L.Ed.2d 847 (1967).
Indeed, as it must, the majority recognizes this. Ante, p. 391. The I.C.C., prodded 3 by Congress, made such a decision here. After a few years’ experience in administering the 4R Act, it chose to amend *396 its original stance on geographic and market dominance.
The case, as the Court puts it, comes down to the statutory terms limiting I.C.C. power to pass on rates to those in which the rail carrier has “market dominance over the transportation to which [the] particular rate applies, with “market dominance” being originally defined as “an absence of effective competition from other carriers or modes of transportation for the traffic or movement to which a rate applies.” 4
With stark simplicity, in the Court’s approach it is a prepositional controversy whether it is competition for the transportation or competition with that transportation. 5
This, in the words of the D.C. Circuit in its obviously reluctant, deferential approval of the I.C.C.’s order for not having credited the criticism of the Department of Justice and the F.T.C., “may appear to some as an attempt to attribute excessive significance to a terse statutory term.” Atchison, Topeka & Santa Fe Rwy. Co. v. I.C.C., 580 F.2d 623 , 634 (D.C.Cir.1978).
If the application of one, but not the other, of two simple words is the key to permissible response the Commission could make to relentless congressional pressure to successively relieve rail transportation from a half century of burdensome governmental control and leave it more and more to the regulatory competitive forces of the market place, it would certainly seem to me to be the situation in which considerable latitude had to be committed to the agency responsible for superintending the lessened regulation. This would include interpretation of the underlying statute. “The administrative interpretation of the Act by the enforcing agency is entitled to great deference.” Griggs v. Duke Power Co., 401 U.S. 424, 433-34 , 91 S.Ct. 849, 854-55 , 28 L.Ed.2d 158, 165 (1971).
It bears repeating what the Supreme Court said:
When faced with a problem of statutory construction, this Court shows great deference to the interpretation given the statute by the officers or agency charged with its administration. “To sustain the Commission’s application of this statutory term, we need not find that its construction is the only reasonable one, or even that it is the result we would have reached had the question arisen in the first instance in judicial proceedings” ... “Particularly is this respect due when the administrative practice at stake involves a contemporaneous construction of a statute by the men charged with the responsibility of setting its machinery in motion, of making the parts work efficiently and smoothly when they are yet untried and new.
Udall v. Tallman, 380 U.S. 1, 16 , 85 S.Ct. 792, 801 , 13 L.Ed.2d 616, 625 , (1965) (citations omitted).
The Court says little about the reasons, or more significantly, the reasons stated by the Commission in changing its views. The Commission, however, supplied a reasoned basis for its present holding that the statutory definition, properly construed, does not automatically preclude considering such evidence:
We believe that [our prior] interpretation was unnecessarily restrictive. There is no evidence in the 4R Act that we consider only “direct” competition from other carriers or modes. Since the traffic to which the rate applies faces competition from other sources or destinations of the same product or from substitute products the carriers transporting that traffic face “indirect” competition from other carriers ..... “[Effective competition from other carriers or modes of transportation, *397 for the traffic to which the rate applies” means that, if a carrier raises the rate for such traffic, then some or all of that traffic will be lost to other carriers or modes.
(emphasis added)
In disposing essentially of the “for” or “with” contention and in responding to contentions that consideration of product and geographic competition would not be attainable within the short time allotted, the Commission stated that with the new guidelines, determining the presence or absence of effective competition would be manageable. The I.C.C. described its conclusions and methods:
In general, geographic or product competition will be deemed to be present if it is established that alternative supplies of the same or a close substitute product exist and that carriers transporting these same or close substitute commodities from the various sources to the various destinations compete with one another for the traffic in question. Whether such competition is judged to be effective will depend on evidence concerning the substitutability of one supply source or destination for another or one product for another. If, in a particular case, the Commission finds that the evidence submitted is inconclusive, then such evidence will be given minimal weight in our determination of market dominance. We believe that this is an improvement over our 1976 position that evidence of geographic and product competition be always and automatically excluded from every proceeding.
We believe that this is an improvement over our 1976 position that evidence of geographic and product competition be always and automatically excluded from every proceeding.
365 I.C.C. 130 .
Both from the standpoint of Congressional awareness and revelations of the thinking of the I.C.C. the order under attack did not come as a bolt out of the blue. After Ex Parte No. 320, references began to appear in several Commission decisions indicating that product and geographic competition were relevant to the inquiry on market dominance. 6
And even more to the point was the Commission’s decision on remand from the D.C. Circuit’s decision in Santa Fe:
We will look at all pertinent evidence in arriving at a decision; see 353 I.C.C. 874 at 928. *
Ex Parte No. 320, supra, 359 I.C.C. at 736.
Whatever influence these expressions might have had on the Congress the most reasonable interpretation of the legislative history of the Staggers Act is that Congress was aware that the Commission was itself reexamining the geographic and product competition issue and determined not to decide the issue legislatively, but to leave the matter to the Commission. That interpretation is supported by the Conference Commission Report:
[Sjince other parts of the Conference substitute provide additional rate freedom for rail carriers beyond those found in *398 present law or under existing or proposed Commission regulations, the Commission must revise its market dominance regulations. In maintaining the term market dominance, in addition to statutory changes designed to provide more rate freedom to rail carriers, the conferees intend that whenever there is effective competition, such competition should continue to function as the regulator of the rate rather than the Commission. Maintenance of the “market dominance” standard is not intended in any way to restrict the ability of the Commission to apply this concept, both in its regulations and individual cases.
H.Rep. No. 96-1430, 96th Cong.2d. Sess. 88-89 (1980), U.S.Code Cong. & Admin. News 1980, 4120 (emphasis added).
Finally, rescuing the Court’s example (notes 55-56 and related text Ante 390-391) from the strictures of “for” and “with”, the idea of geographic competition makes economic sense to this untutored, and if so, the Commission with its half century experience could concur. For example, a Chicago coal purchaser might have two alternate sources of supply: Southern Illinois and Wyoming coal being a fungible commodity the Chicago purchaser has no preference between the two. The Wyoming producer must compete with the Illinois rival, and transportation costs figure in his calculations. The carrier, if it hopes to secure the Wyoming business, must and will take the alternative into account — a pure case of geographic competition within a market.
The Court, embracing all of the standards by which all are bound on the scope of judicial review, nevertheless reaches a conclusion which trespasses on the domain reserved -to the I.C.C. The result overrides the considerable deference due the Commission in its interpretation of the statute in the light of its experience and the meaning of the terms in the practical complex world of transportation.
There are areas “where angels fear to tread”. This is one for judges.
ON PETITIONS FOR REHEARING AND SUGGESTIONS FOR REHEARING EN BANC
Before CLARK, Chief Judge, BROWN, GEE, RUBIN, REAYLEY, POLITZ, TATE, JOHNSON, WILLIAMS, JOLLY and HIGGINBOTHAM, Circuit Judges.
BY THE COURT:
A member of the court in active service having requested a poll on the application for rehearing en banc and a majority of the judges in active service having voted in favor of granting a rehearing en banc,
IT IS ORDERED that these causes shall be reheard by the court en banc with oral argument on a date hereafter to be fixed. The Clerk will specify a briefing schedule for the filing of supplemental briefs.
. I concur in all other holdings and the opinion’s careful, exhaustive treatment of the background and development of the problem.
. I do not question the Court’s note 52 and related text.
. Congressional concern over the effectiveness of its actions and the response by the I.C.C. undoubtedly led to the hearing by the Subcommittee on Oversight and Investigations of the Committee on Interstate and Foreign Commerce. Petitioners’ brief points out:
See, Implementation of the 4-R Act, Hearing Before the Sub-comm. on Surface Transp. of the Committee on Commerce, Science and Transp. of the United States Senate, S.Rep. No. 96-5, 96th Cong. 1st Sess. 46 (1979) (Statement of Hon. A. Daniel O’Neal). Chairman O’Neal noted that “between October, 1978 [the effective date of the market dominance rules] and December, 1978, the Commission precluded only 15 rate increases from taking effect out of several thousand filed and 267 protested [under what is now 49 U.S.C. § 10707 ].” (id) He went on: This is in significant contrast to the period just before the enactment of the 4-R Act, when investigations and suspensions of rail rates ran at much higher levels. For example, in the first months of 1975, we suspended 75 rate schedules out of 170 protested. And if you translate that to a 2-year period, that would be 300 suspensions as opposed to 15 in the 2-year period after the act became effective.
Quite clearly, the market dominance concept [combined with procedural standards set forth in 4-R Act § 202] have had a very great effect on rate and ratemaking where traffic is competitive. Id. at 58.
And the Subcommittee issued a report praising the Commission’s implementations of the then market dominance regulations (see, Committee Print 96-I.F.C. 40 (February, 1980).)
However one slices it, the heat — Congressional heat, that is — was on.
. Pub.L. No. 94-210, § 202 (b), 90 Stat. 31 (1976), codified at 49 U.S.C. § l(5)(c) (1976) (emphasis added).
That language was subsequently revised, without substantive change, when the Interstate Commerce Act was recodified in 1978, Pub.L. No. 95-473, 92 Stat. 1337 (1978). The revised definition, as currently set forth in 49 U.S.C. 10709(a) refers to “transportation to which the rate applies” in lieu of “traffic or movement to which the rate applies.”
. See Court’s opinion at note 55 and related text. Ante at 390.
. The petitioner’s brief advises us:
For example, in 1979, some two and a half years after its original decision in Ex Parte No. 320, the Commission stated in a footnote to a subsequent decision in the same proceeding that evidence of geographic and product competition should be admitted in market dominance proceedings. Ex Parte No. 320, 359 I.C.C. 735 , 736 n. 7 (1979). This decision was issued in response to a remand from the D.C. Circuit seeking clarification on one aspect of the original decision. The footnote was unrelated to the purpose of the remand. The Commission also discussed geographic competition as being relevant to market dominance in two coal rate cases. In each of these cases the Commission found market dominance to exist, so no challenge was ever raised to its dicta concerning geographic competition. See Docket No. 37246,
Increased Rates on Coal, Midwestern Railroads, August, 1979, (November 15, 1979) (unprinted); I. & S. No. 9199, Unit Train Rates on Coal — Burlington Northern, Inc. 361 I.C.C. 651 (1979), remanded on other issues, Iowa Public Service Co. v. Interstate Commerce Commission, 643 F.2d 542 (8th Cir.1981).
Also in Docket No. 37226, Incentive Rates on Coal-Axial, Co. to Coleto Creek, Tx. (January 15, 1980) (“Coleto Creek”), the Commission actually relied on evidence of geographic competition to make a finding of no market dominance. That decision was reversed and remanded by this Court in Central Power & Light Co. v. United States, 634 F.2d 137 (1980), supplemented on rehearing, 639 F.2d 1104 (1981), cert. denied, 454 U.S. 831 , 102 S.Ct. 128 , 70 L.Ed.2d 108 (1982).
There has been some misunderstanding on this point. While certain evidence is not germane to computing market share, proponents of a rate may introduce evidence of potential competition from private carriage, alternative product competition or geographic competition to show that effective competition exists.

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Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/9469996. Public record. Not legal advice.