Motion to Affirm — Florida East Coast Railway Co. v. United States

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Meet {ATES OF AMERICA, ot al, _ Appolicss..

| ‘ SOUTHERN RAILWAY SYSTEM, © Appellent,-

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‘) , CAFERD GEAEED CF: EMNEIN, 10 he . Appelless. ~

‘ OM -APPEALA PROM THE UNITED STATES DIOTRIOT COtiET ee

; en? FOR THE MIDDLE DISTEIO? OF" FLORIDA e

™

. > INDEX

a Page

Question Presented ...........20-00.000 ~ ae 2

Statement ... ) wee iii : 2

Argument : St RE ORE ee 11

I. The Commission Correctly Applied the Stan-

_ dards Taught by This Court in Passing on the

.. Merger. It Estimated the Scope and Appraised

the Effects of the Curtailment of Competition

Which Would Result, and Considering This With

the Advantages to Flow From the Merger Acted -

Within Its Powers in Finding That the Merger,

Subject to the Conditions Which It Prescribed,

Would Be Consistent With the Public Interest .. 11

II.: The Specific Attacks on the Commission’s Find-

ings Are Baseless ....: , , 16

1. The Benefits to the Public , aides 18

2. The Effects of Reducing Rail Competition

Among Three Rail Carrier Systems to Two

-Rail Carrier. Systems : i 23

3. The Situation Within Central and Western —

Florida : 25

4. The Track Transfer Contention 30

5. The Divestiture of ‘the L&N nee | 33

Conclusion | —_ | sane 35

’ AppENDICES: .

Appendix The Routing and Gateway Condi-

tions ; i.

_* | Appenix B—The Commission’s Order. of raed

. ber 2, 1963 zi 6a

. Appendix C—The Commission’s Order of March 70

4, 1964, on Petitions for Reconsid-

eration , . 10a

ae

.

ye Senne chases dt ee Se de Se ene ene eee

= Leo Pa Index—Continued a Gi. °

CITATIONS i 7 of

_, Cases: a | 3 .

Alabama G.S.R. Co. v. United Statés, 340 US. 216

‘3 (1961) ~.. 17

Atlantic Coast Line R. Co. v. United States, 284 v S.

288 (1932) | 29, 31, 32

Chesapeake & O. R. Co ~Cenivel-Riatinens & Ohio

R. Co., 317 1.C.C. 261 (1962), order sustained, 221

F.Supp. 19 (E.D. Mich. 1963), aff'd; 375 US.

216 (1963) .......: 15

Great Northern Pac. & Burlington Lines, Inc.—

Merger, ICC Fin. Dkt. No. 21478, decided Ma¥ch

31, 1966 ‘ 15, 21, 22, 32

Louisville & N. R: Co. Merger, 295 I.C.C. 457 (1957)... 21

McLean Trucking Co. v. United States, 321 U.S. 67.

_ eo 10, 12, 13, 14, 21, 34, 35

-Minneapolis & St. is R. Co. v. United States, 361 U.S. -

173 (1959) ® vatssen10, 12, 13, 34, 35

Missouri Pac. R. Co—Control—Chicago & E. I. R.

-Co., ICC Fin. Dkt.. No. 21755 (1963), order sus-

tained, N.D. ‘IiL., No. 65-C-1393, August 4, 1966,

appeals docketed, Nos. 687, 688, 689, O.T. 1966 es 15

Norfolk & W. R. ‘Co.-Merger, 307 I.C.C. 401 (1959) .... 21

Norfolk & W. RB. Co. and New York, Chicago &

St. L. R. Co. Merger, 324 I.0.C. 1 (1964)> 2... 15

Pennsylvania R. Co —Merger—New York Cent. BR. €o.,

327 L.C.C. 475 (1966), injunction denied, S.D.N.Y.,

35 U.S.L.W. 2203, October'4, 1966, review granted,

35 US:L.W. “7 October 18, 1966, Nos. 642, 680,

691, O:T. 1966 . ms % 21, 24

_ Index—Continued

°o -:

| ' | . - Page

| Seaboard Air Line R. Co. v. United States, 382. US. |

154 (1965) -.......... weoeteeedye-e--LO, 13, 34-35

St. Joe Paper Co. v. Atlantic Coast Line R. Co., SG?

U.S. 298° (1954) 32

Southern Pac. Co.—Control—Western Pae. Co., icc.

Fin. Dkt. No. 21314 (1965) 15

United States v. Philadelphia Nat’l Bank, 374 U. S. 321

UIT - iceninenissaeniibicaiieaientenss 25

- United States v. Pierce ‘Auto Freight Lines, Inc., 327

U.S. 515 sete Sic “2 , 14, 35

_ *‘Srarures: |

Clayton Act, 38 Stat. 731, as amended, 15 U.S.C. J

$§ 12 et seq. 2 :

~ Seetion 7..... ee :....10, 17, 23, 25

. Interstate Commerce Act, §.5(2), 24 Stat. 380 (1887),

as amended, 49 U.S'C. $5(2) 2, 3, 8, 10,11, 18,

| 21, 23, 25, 31, 35

heeneltinn Commerce Act, §1(18), 24 Stat. 379 (1887),

as amended, 49 US.C. § 1(18) , 30, 31.

Interstate Commerce Act, § 15(4), 24 Stat. 384 (1887),

as amended, 49 U.S.C. § 15(4)

Transportation Act of 1920, 41 Stat. 456, 477

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IN THE

——_ Court nf the United. States

Octoser Term, 1966

Nos. 638, 639 and. 641

ae Frorma East Coast Rartway Company,

sath ‘Appellant,

v.

Unitep States or Amenica, et al., ee

Appellees.

Crry or Tampa, FLorma,

e Appellant,

v.

Unitep States or Amenica, et al.,

. Appellees.

SourHern Ramway System,

Appellant,

v. .

Unitep States or America, et al., ,

bey Appellees.

of APPEALS FROM THE UNITED STATES DISTRICT eee

FOR THE MIDDLE DISTRICT OF FLORIDA '

MOTION TO “AFFIRM OF. APPELLEES a

LINE RAILROAD COMPANY, ATLANTIC COAST ‘LINE

RAILROAD COMPANY, THE ATLANTIC COAST LINE

COMPANY, AND MERCANTILE-SAFE DEPOSIT AND ha

TRUST COMPANY “

hint Seaboard Air Line Railroad Company, Atlantic

Coast Line Railroad Company, The Atlantic Coast Line

Company, and Mercantile-Safe Deposit and Trust Com-

pany, pursuant to Rule 16 of the Rules of this Court, move .

that the judgment of the District Court be affirmed with —

respect. to the questions raised by. the appeals in Nos. 638,

639 and 641, on the ground that’ the questions raised by .

the appellants are so clearly lacking in substance as not

“4 warrant further briefing and oral argument."

1 Hereinafter, short name forms will sometimes be used as follows:

' The merger t applicants will be called “Seaboard” and “Coast Line” ;

¥

QUESTION PRESENTED

_ Whether the Interstate Commerce Commission acted °

’ within its statutory powers under §5(2) of the Interstate

Commerce Act in finding that the merger of Seaboard and

Coast Line, subject to the conditions prescribed, would be

consistent with the public interest.

‘STATEMENT

Seaboard and Coast Line are interstate railroads. Each

operates only in the six states of Virginia, North Carolina, ©

South Carolina, Georgia, Alabama and Florida.

‘In May, 1960, the rectors of Seaboard and Coast line

agreed to a Plan of“Merger for the merger of Coast Line

into Seaboard. The Plan was thereafter overwhelmingly

approved by the stockholders of each company. _

a

the carrier to result from the merger will be called the “Merged

Carrier”; the Interstate Commerce Commission will be called the

“Commission” ; the Southern Railway System, consisting ‘of the

Southern Railway Company and its subsidiaries and affiliates, will -

be called the “Southern” ;-the Florida East Coast Railway Company

will be called the “REC” ; the City of iat Florida, will be

called “Tampa.”

whee such as “Southern 10” are to pages of the indicated

jurisdictional statement filed by the three appellants, FEC, South-

ern and Tampa. References to “Tr.” and to “Ex.” are to the

Reporter’s Transcript and the Exhibits forming a part of the

| re hefore the Commission. References to “Ex. Rep.” are to the

Hearing Examiner’s Report, on file with this Court as Appendix, II

to our Jurisdictional Statement on the prior appeal of this case,

No. 425, O.T. 1965. Page references are to the indicated folio pages

(“fol. my of the Report, not to the printed page numbers in that Ap-

pendix. We have filed nine additional copies of the Appendix con-

taining the Examiner’s Report for the convenience of the Court.

Nine printed copies of the Commission’s Report, paginated as in -

320 I.C.C., are also being filed. ;

eS

Proceedings hen: -the Commission. —Seaboard and

Coast Line jointly applied in July, 1960, for authority to

merge pursuant to §5(2) of the Interstate Commerce Act.

Eighty-six parties who filed 166 pleadings participated in |

the extensive ensuing proceedings before the Commission.

Hearings were held before an:Bxaminer in seven cities in

the Southeast on 35 hearing days between November, 1960,

and July, 1961. The record of those hearings contains

5,729 pages of reporter’s transcript, 101 prepared testi-

mony statements containing 1,221 pages, and 271 docu-—

‘mentary exhibits.

More than. a year after the close of the hearings, and after

receiving briefs, the Examiner, on August 24, 1962, issued

an extensive report and recommended order approving the

merger upon certain prescribed conditions. Exceptions and

replies were filed with the Commission by. various of the

parties. . nae | ea?

“On May 7 and 8, 1963, the case was argued orally before _

the full Commission. On December 13, 1963, the Commis- _

sion issued and served an éxhaustive report,’ dated De-..—

cember 2, 1963, setting forth in detail the- Commission’s

reasons for approving the proposed merger, subject to cer-

_ -tain specified conditions.

The Commission’s report, among the other public interest

factors, extensively analyzed the competitive factors inher-. 7

e@t in the propaged merger, recognizing at the outset of its *

discussion the obvious ‘fact that: “The proposed merger

would result in the elimination of present competition be- ‘ay

tween Seaboard and Coast Line in * ices area.” (320

2 In printed form the Commission’s report itself covers 148. pages;

and the report of the Examiner, which the Commission’ s Order

incorporates by reference (App. B, p. 6a, infra), in the form in.

‘which we printed it in the Appendix on the prior we of this

came, covers 268 pages, including ne

4 oo

I.C.C., at 163) The Commission proceeded to’a full analy-

sis of the “intramodal” (rail) competition as it would be

affected by the merger. First, it analyzed the quantum of

fhe total competitive tonnage of the two roads and the

~ portion of that tonnage that would remain subject to- com-

.petition from other rail carriers after the merger.’ The

Commission observed that, in terms of points where the

merging: roads had agents, “there. would be only: 17 com-

. munities outside of Florida which would be without com-

‘petitive rail service after the merger, and these communi-

ties have an average population of approximately 6, 500

each. , (320 T.C.C., at 164)

The Commission noted that: “Though the merged com-

pany will be the biggest railroad in the area, whether

measured in terms of revenues, or assets or mileage, it will -

encounter vigorous -competition from other rail carriers.

The record here shows that rail competition will exist at

every major city with a population in excess of 200,000

except at-Tampa.” (320 L.C.C., at 164) The Commission .

further noted that the situation at Tampa and in central

and western Florida generally was unique since those areas

were Served by no other railroads besides the merger ap-

plicants. However, within this framework of local, origina- ° -

tion-point competition, the Commission analyzed: the pe- .

euliarities of the Florida situation in that in terms of.

points at which Seaboard and Coast Line had maintained

agents “the number of Florida points at which there has

been no competition hetrweae, the two carriers] is about

‘ times as great as the number of Florida points at which |

8 The Commiskion noted that 33.4% of the total tonnage of Sea-

board and Coast Line was competitive between them. Of this com-

petitive portion of the two railroads’ tonnage, over 65% would ~

remain competitive with other railroads —. the mange. «(320

1.C. C., at 211) : fe &

Hy)

Seaboard and Coast Line have heretofore pia Bis de (350

I.C.C., at 165)

Observing that: “The saianet of this iting both good.

-, and bad, will be felt throughout the southern region and in

‘,evaluating its competitive advantages and disadvantages;

we must consider the rail service provided by all rail car- ~~

. riers‘and, in fact, the sum of all of the competitive ‘trans-

portation. £ facilities that will remain available in this broad

area” (320 E.0.C., at 166), the Commission analyzed the

competitive effects of the merger in terms of both intra-

modal competition and ih terms of competition with trans- .

portation provided by competing forms of carriage.

The Commission considered the growth of competition

due to government ‘subsidies to highway, water, and air:

carriers; the constant decrease in the proportion of inter-

. city traffic handled by rail and the corresponding increase

- Of traffic by other modes; the increase in truck registra-

tions; the increase in air passenger travel; the increase in

' tonnage handled by the ports in the territory of Coast Line

. and Seaboard; the increase in products carried through

pipelines; the respective motor tonnages and rail tonnages —

_ at 21 representative points in the Southeast; the particular

inroads made by trucks in the movement of: perishable

commodities; the increase in waterbortie traffic at the port

of Tampa, largely competitive for the heavy, bulk-loading

commodities with rail carriage, and the decline of rail

revenue on traffic at Tampa. (320, LC.C., at 150-53)

Against this backdrop, the Comminsion noted the declin- -

ing income of Seaboard and of Coast Line, and the prob-

lems associated with their increased operating costs and

the problem of their excess “plant” capacity. The Commis-

sion reviewed the economies—so relevant to modern, effi-

™ d ‘

. we? ,

>: * ~

—,

6 y 4 . i

a

“ig cient. service—to flow from the merger. ‘Meticulously

3 "analyzing and toa considerable extent reducing.the es-

- €imates of economies. nade by the merger applicants, it

stantial and will approximate our estimate of at least $20

million a year.” (320 I.C.C., at 159)’ The Commission con-

_ eluded that: “In the light of these and other factors, par-

. it is evident that, following the merger, there will be greater

cient, adequate, and improved service to the snail in the

‘future.”: (320 LC.C., at 153) |

The Commission, recognizing that the real Saas

in the rail industry is “route competition” for the revenue-

producing long haul, used its administrative powers to bal-

. ance the ‘competitive situation with respect to the Southern

—the principal rail competitor of Seaboard and Coast Line.

This was done with particular reference to the long-haul on

- Florida,‘ where the merger’s effects on intramodal origina-

- tion-point competition were obviously: most pronounced.

prevent routing over Southern’s lines north of J ackson-

sion accordingly ordered the Merged Carrier to establish,

-. ih conjunction with Southern, joint rates on traffic through”

the Jacksonville gateway, even though this would: compel

_. the Merged Carrier to “short haul” itself and lose: the

_ beyond J. acksonville movement of this traffic. These rates

sonville and Palatka which ‘are, of course, in the northeast corner

of the state:

nonetheless: concluded “that the total:savings will be sub-

ticularly the accelerated growth of external competition,

- assurance of the ability of these railroads to provide effi- —

traffic that would be originated in central and western ,

The Commission recognized that tariffs presently in effect -

‘ville on certain traffic to and from Florida points on Sea- .

board and Coast Line. (320 I,C.C., at 182) The Commis- . -

- ¢ Soutkern’s operations i in Florida’ do not extend south of Jack- .

at

Wot ee nce wnat npeacrenartenynliny NAN IRR RO ANE TDD PAE RI PI

7

were to be no higher ‘than the Tetes applicable over the

lines of the Merged Carrier itself, through the, Jacksonville

gateway, or via any other gateway. The Commission stated

that this requirement (Condition 8, App. A, pp. 2a-3a;

App..C, p. 12a, mfra) ould make Southern “fully com- ©

_ petitive with the merged company with respect to north-

bound traffic out of Jacksonville.” (320 L.0.C., at 182) -Cer;

tain other conditions were imposed to insure the ability of |

other rail carriers to compete effectively with the Merged

Carrier, atid thus to provide the public the sivastages ¢ of

balanced a rail service.*

5 Thus, in order to ensure the maintenance of balanced competi-

tion after the merger: -

_. (a) The’Merged Carrier was rdhuired to give the Central of

Georgia -(a Southern affiliate) trackage rights over the present ~

line of Coast Line from Albany to Tifton, Georgia. This would give

Central of Georgia and Southern a continuous route from Birming-

. ham and Montgomery to Jacksonville, and’ when considered with -

the condition opening the Jacksonville gateway, the Commission

concluded, would not only “be particularly beneficial to Southern

- and Central” but “also provide a significant volume of interchange

trackage for [Florida] East Coast at the Jacksonville gateway.”

(320 I.C.C., at 183) (Condition 12; App. A, p. 4a, infra)

(b) The-Coast Line and Seaboard each operate a line between

Jacksonville and Quinlan, Florida, a industrial area which in-

cludes a large plant of the St. Regis Paper Company. St. Regis

and Southern, in order to keep service at- Quinlan competitive,

requested that: the: Merged Carrier be required to sell or lease one

of the two lines to Southern, and the Commission imposed this

condition. {Condition 11; ; App. A, p. 4a, infra)

(c) The Merged Carrier was fequired by the Commission to o .

new routes, with she Norfolk Southern Railway, an east-west

operating ‘primarily in Southern Virginia and North Shneline,

The Merged Carrier was ordered to open new routes and maintain

joint routes with Norfolk Southern through the Wilson, N. C.,

Fayetteville, N. C., and Raléigh, N. C., gateways. (Condition 1; :

App. A, p: 2a, infra)

__ ‘In addition, among other conditions, there were imposed on the.

Merged Carrier general traffic conditions ordering the maintenance

of all routes and channels of trade via existing junctions and gate-

ways; ordering preservation of neutrality in handling traffic ; order-

ing preservation of present traffic and operating relationships with

g

The Commission stated that it expected “positive results

_ to flow from consummation of this merger: subject to the

described conditions.” The Commission stressed, “‘it i is im-

portant to note’ that the conditions we have devised repre-

sent neither mere acceptance of the minimum concessions .

- offered by the applicants nor ‘full acquiescence in tlfe de-

_ mands of the intervening railroads, but rather are the

. - product of-our exhaustive study of the competitive situation

in the Southeast. We are convinced that these: ‘routing and .

_ gateway conditions will establish two balanced competitive ©

systems in that area and will result i in an increase rather.

than decrease in .intramodal rail competition that will con-

tribute to the present and future economic development of

this important section of the Nation.” (320 I.C.C., at 188).

‘Balancing the factors, the Commission decided that its

conditional authorization.of the proposed merger would be

‘consistent with the public interest, and, accordingly, made

the finding to that effect required by §5(2) of the Inter-,

+ state Commerce Act. The Commission concluded :

. “In our deterniination, we are required to give con-

sideration to the effect that the merger would have upon .

competitors ‘and on the general competitive situation

in the railroad: industry -in- the light of the objectives —

- of the national transportation policy. McLean Truck-

.

connecting lines ; imposing an obligation to handle the cars of other

lines without discrimination ; prohibiting interference with the right

of industries to select their own routing for traffic; ordering the’

‘maintenance of existing freight train schedules, so as to preserve

connections with other railroads; and allowing Southern to aban-

don certain trackage agreements with the Merged Carrier which

might prove to be burdensome to it. (Conditions 1, 2, 3, 4, 5, 6,.

9 and 10; App. A, pp. la-4a)

We set forth the text of the conditions imposed as Appendix A,

_ pp.. la-5a, infra, and the Order amending one of-them as Appen-

dix C, pp. seat — . :

ing Co. v. United Biotes; supra... We have carefully

evaluated the effects of the curtailment of competi-

tion that will result from the merger, and, whén con-

_ sidered in connection with the advantages of the

merger, including improved service, safer operations,

and lower costs, we are convinced that the advantages

of the merger far outweigh the potential disadvan- —

ee ” ne LC. C., at. 212) Pad :

- ‘Two commissioners dissented from the order of con

tional approval, essentially on the theory, later peer

by the. District Court in its first opinion, that the Com-

mission erred. through its “failure to make one critical -

. finding; viz., whether or not the proposed merger, bat for .

section 5(11) of the-Interstate Commerce Act, would run

afoul of section 7 of the Clayton Act.” (320 LC.C., at 226)

On reconsideration, the Commission modified oné of the

routing and gateway conditions and otherwise denied re-

consideration, on March 4, 1964. (See au. C, pp. 10a-

12a, infra) .

The judicial review proceedings——On March 18, 1964, -

FEC filed a ‘complaint to set aside the Commission’s orders, —-—

——and-a temporary restraining order is issued. Southern and

the Railway semee Executives’ Association were granted

leave to intervene’ as plaintiffs; the Justice Department,

answering for the statutory: defendant United States,

aligned the United States as a plaintiff. Seaboard, Coast

Line, and The. Atlantic Coast Line Company and. Mercan-

tile-Safe Deposit and Trust ny intervened as de-

* The last two eupenies are compaziiés in <ntin of Coast Line.

‘Various issues as to their status were raised before the oe

and pursued to some extent in the judicial review proceedings ; those

issues have now been abandoned by appellants. No question re-

lating to these companies has been preserved in the cureatnnel

' §$tatements. See FEC 3; Tampa 4-5; Southern 5-6.

a

SO RE ORS RN pe TREN ow

a .

10

‘fendaftts. ‘On May 13, 1965, the District Court entered an.

opinion and judgment setting aside fhe orders of the Com-

mission. (242 F. Supp. 14; FEC 54a-70a) The District —

Court.set aside ‘the orders because it concluded thgt the

‘ Commission’s analysis of the competitive effects of the

merger was fatally defective, since ‘the Commission had

not made certain determinations and findings. Those sup-

posedly lacking determinations and findings were whether,

. by reference to the relevant product and geographic mar-

“kets, the merger violated §7 of the Clayton Act.

- On appeals by the Commission and by the Seaboard si

Coast Line,’ this Court unanimously. and summarily va-

~ cated the judgment of the District Court. Seaboard Air

Lime R. Co. y. United States, 382-U.S. 154 (1965). This

Court held that the District Court erred ‘in its interpreta- .

tion of the proper standards to be applied by the Commis- .

sion in passing upon a rail merger proposal under §$5(2)

-of the Interstate Commerce Act. It emphasized that the

teachings of its decisions in M: cLean Trucking. Co. v. Umited

States, 321 US. 67 (1944), and’ Minneapolis & St. L. R:

‘Co. v. United States, 361-U.S:173(1959), remained in effect.

It “accordingly remanded the case to the District Court to

_ perform the normal judicial review functions.

After performing those functions, on June 8, 1966, the .

- District Court, in a lengthy opinion (FEC 2a-50a), after .

‘an. exhaustive analysis of the Commission’s action, sus-

tained sige seig gexiginmnrmeam “The District Court con-

~~ eluded that ,

. “the ICC splitted its reasoning and supported its ap-,

. plication of that reasoning by substantial evidence.

"1? And by the Coast Line’s two controlling companies.

Since the ICC correctly applied the proper standards |

_,and thus exhibited that familiarity with the complex

problems in the’ transportation industry which Con-

gress anticipated the ICC would achieve from its par-

ticulatized experience, we must ‘and do sustain its

order. ei (FEC ue):

From that judgment, FEC, Southern a Tampa’ have |

; mss to this Court. ' ig

ARGUMENT

77 THE COMMISSION CORRECTLY APPLIED THE STAN-

_ DARDS TAUGHT BY THIS COURT IN PASSING ON THE

MERGER. IT ESTIMATED THE S€OPE AND APPRAISED

- THE EFFECTS OF THE CURTAILMENT OF .COMPETI-

' TION WHICH WOULD RESULT, AND CONSIDERING

. 'THIS WITH THE ADVANTAGES TO FLOW FROM THE

MERGER ACTED WITHIN ITS POWERS IN FINDING .

| THAT THE MERGER, SUBJECT TO THE: CONDITIONS

WHICH IT PRESCRIBED, WOULD BE CONSISTENT ‘

- WITH THE PUBLIC INTEREST. —

The standards by which a proposed rail unification - is

‘to be judged by the Commission under §5(2) of the In-*

‘terstate Commerce Act—and the’ limits within which the

Commission’s judgment is to he reviewed by the courts—

have been laid: down ond reiterated sro this Court: »

; Tampa, was, after supporting the merger sii the Commis-

sion, permitted to intervene in opposition to the sere ca before the

District Court on remand. a

The Railway Labor Executives’ Association and the Brotherhood

of Locomotive Engineers have in No, 640 appealed to this Court

with respect-to certain issues concerning the scope and application

- of the labor-protective conditions imposed by the Commission upon

oe merger. This Motion to Affirm does not relate to that —

2

“In iii the Commission sient witnain the scope ;

and appraise the effects of the curtailment of competi-

tion which will result from the proposed consolidation

and consider ‘them along with the advantages of im-

proved service, safér operation, lower~ costs, etc., to -

determine whether the consolidation will assist .in ‘ef-

_ fectuating the over-all transportation policy. Resolv-- .

" ing ,these considerations is a complex task which re-

quires e extensive facilities, expert judgment and con-

siderable knowledge of the ‘transportation industry.

foe ase Congress left that. task to ‘the Commission ‘to the end

that. the wisdom and experience of that Commission

may be used not only in connection with this form of

transportation, but in its coordination of all other

forms.’ . ... ‘The wisdom and experience of that Com-

mission,’ oa of the courts, must determine whether

_ the proposed consolidation is ‘consistent with the pub-

lic interest’... .” McLean. Trucking Co. v. United

| States, 321 US. 67, 87-88 (1944). .

In.McLean, the Court made it plain that “in asians

‘ those consolidations {under §5(2) of the Interstate Com-

« merce Act] it [Congress] did not import the general poli-

cies of the anti-trust laws as a measure of their permis-

sibility.” IJd., at 85. And; more recently, in Minneapolis a

é St. L..R. Co..v. United States, 361 U.S. 173 (1959), this -

Court reiterated and entirely reaffirmed the standards gov-

- - erning Commission action set forth in M cLean. It reiterated

_ that the Commission’s power under § 5 is—as that section

' provides—“exclusive and plenary”; that while “the preser-

. vation of competition among carriers [is] . . . still a value,”

it is “significant chiefly as it aids in the attainment of the

objectives of the national transportation policy”; and: that

the Commission “is not to measure proposals for [acquisi-

ey tions] by. the standards of the antitrust laws.” Id., at 185.

en

Again only last Term, in the prior appéal in this case,

_. this Court expressly reaffirmed the teachings of McLean and . _—

a

jie interest under’ the Interstate Commerce Act” in the

Minneapolis. Seaboard Air Line R. Co. v: United States,

382 U.S. 154 (1965). ‘There, this Court. declared that:

“The same criteria [as set forth in McLean and

Minneapolis] should be applied here to the proposed

merger. It matters not that the merger might other-

wise violate the antitrust laws; the Commission has:

been’ authorized by the Congress to approve the merger —

of railroads if it makes adequate findings in accord-_

ance with the criteria quoted above that such a'merger

would be ‘consistent with. the public interest. aoe

at 156-57. mies pees. |

The basic thrust of FEC, Seuthers. inl Tampa in urging

this Court to devote its time to a plenary hearing on fur-

ther review of the voluminous record. made before. the Com-

misaion in this matter is essentially: First, that this is an

important railroad merger ease and the first ef the “cur-

rent wave” to be presented to this Court (Southern 19;

FEC 9-10; Tampa 18); second, that it is important for

this Court to fix the applicable legal standards governing .

the ‘Commission’s approval of rail mergers and “to decide

the standards-to be applied when appraising the anticom-

petitive effects of these proposed mergers” (Tampa 18;

see Southern 20; FEC 9-10); and, finally, that because of

what the appellants contend to be the importance of this

merger, the “ultimate issue of public interest under -the’

Interstate Commerce Act should be resolved. by this Court. -

(FEC 15) |

Each of these broadly-brashed contentions articulates

the same: fallacy—appellants’ refusal to ‘recognize that |

Congress vested the detefmination as to the issue “of pub- .

te ie ae

- Commission, not in the courts. “It is not true.. a ee

- ‘the courts must, in a litigated case, be the arbiters of the

paramount: public interest’. ‘This is rather the. business of |

the Commission, made such by. the very terms of the stat-—

. ute. The function of ‘the reviewing court is much more

restricted.” United States v. Pierce Auto Freight Lines,

Inc., 327-U. S. 515, 535-36. (1946). In essence,.the appellants.

. are simply seeking to retry de novo in this Court, as they —

: sought unsuccessfully to retry. in the District Court, the

issues’ of the proper accommodation of the competitive |

factors with the ultimate public interest standard which —

were vested. by law .in the: Commission to determine, and

which, after full participation by o— the Commis- .

sion did determine here. :

Appellants’ suggestion that it is important for this Court

. to settle the governing legal principles to’be applied by

‘the Commission‘in a railfoad merger comes rather late in ©

‘ the day. That. is what this Court did'in the McLean case;

. that is what it did again by reiterating those principles in

the: Minneapolis case ; ‘and that is what it did once again

last Term in this very case by unanimously and summarily

vacating the earlier decision of the District: Court which

_ had departed from those principles. It is diffictilt to see

_ what further elucidation-of the principles three times laid

down by this Court is required.

Likewise, the appellants’ insistence upon the intrinsic

_importance of this merger and the fact tht it was, when

_ decided by the Commission, the first of a number of then-

pending rail unification cases before the Commission, is_

irrelevant to the question whether this’Court should devote

_ its attention to a plenary review of the Commission’s —

decision. The importance of the merger was one: of ‘the

‘. yeasons why it had extraordinarily careful attention before .

16 doy oe oe

“1 a

the Commission; it j is hot a reason for. this Court’s review . 2

in the absence of a demonstration of some respect in-which —

- the Commission acted beyond its powers or failed to’ per-

form its platniary ¢ duties as taught by the decisions of this

Court.’ )

And, in point of fact, this easé is no Ninjas a great |

‘ extent, perhaps, due, to the delays attendant upon the ef- |

forts of appellants—the “first” of any group of important —

rail unification cases. In a-number of rail merger and con-—

trol cases, Commission approval has been granted and

-there is no remaining opposition ‘related to the issue: of —

the accommodation of the competitive fadtor and the public.

interest. See Norfolk & W. R. Co. and, New York, C. é.

? GLB. Co.—Merger, 324 LC.C. 1 (1 ) (merger*con-

| _ summated) ; Chesapeake & O. R. Co. .—Control—Baltimore.

O. R. Co., 317 .C.C. 261 (1962), order sustained sub nom.

votbeitoed of Maintenance of Way Employees ‘v. United — ‘

States, 221 F.Supp. 19 (ED. Mich. 1963), aff'd, 375 U.S..° -

216 (1963) (transaction consummated) ; Missouri Pac. R.

Co —Control—Chicago ¢ E. 1. R. Co., ICC Fin. Dkt. No. :

21755 (1963), order sustained sub‘ nom. Illinois Cent. R.

Co. v. United States, N.D. Ill., No: 65-C-1393, August 4, —

1966, appeals docketed, Nos. 687, 688, 689, O. 4 1966 (court

review not’ involving competitive factor) ; : Pennsylvania

ae Co.—Merger—New York Cent. R. Co., 327 I.0.C. 475

.. (1966), injunction denied sub nom. Erie-Lackawanna R..

‘Co. v. United States, S.D.N.Y., 35 U.S.L.W. 2203, October ‘

4, 1966, review granted, 35 U.S.L.W. 3149, October 18,

1966, Nos.. 642, 680, 691, O.T. 1966 (court review not in-

volving competitive factor). In other important merger |

and control cases, the. Commission has. disapproved the

proposed transaction. See Southern Pac. Co —Control—

Western Pac. R. Co., ICC Fin. Dkt. No. 21314 (1965) ; |

Great Northern Pac. & Burlington Lines, Ine. —Merger, —

16

oS tec: Fin. Dkt. No. 21478, gecided March 31, 1966. Each

case is adjudicated by the Commission on its own facts,

under’ the legal principles Teiterated, by this Court. Cer-

‘tainly,.then, while the importance ‘of this case as a Com- —

mission ease might have suggested to certain of the inter-

_ ests now complaining of the Commission’ s decision to have

‘heen more attentive to'-the Commission’s hearings than

they 1 were,” plenary review of it by this Court—particularly

in the light of the District Court’s exhaustive judicial re-

-view artd this Court’s prior reiteration of the governing

standard—is not now important or required.

i I. THE SPECIFIC ATTACKS ‘ON THE COMMISSION’S

‘FINDINGS ARE BASELESS. ‘

In those few places where the- appellants deign to -be

specific in their complaints as to the Commission’s action,

they essentially engage in literary criticism of the Com-

“mnission’s report. In form, their attacks are on the ade--..

quacy of the Commiagion’s findings. But, indeed, it would:

be @ rare case where appellate counsel could not conjure

up scores of. additional findings which the Commission

could have, made. The process is facilitated, of course, in

a case like the present where the appellartts do not recog-

nize that there is. any requirement that they request the

administrative. agency to make findings in specific areas

; before complaining in céurt that the agency failed'to make

such findings.” The short answer is that, as this Court

«3 * See n. 10; infra.

"1° 'The ‘appellants are stung by ve ae Court’s insistence

that issues be raised before the Commission before being submitted -

to the court on judicial review. (Southern 38-40) Perhaps this .

view of the judicial review proceedings as a trial de novo was

, What prompted the Antitrust Division, also, to attend the admtinis-

ee hearings only ont five days out of '35, and, after request-

& special session. of Commission ' hearings. in Washington,

D. c, for it. to produce its evpdenes, to fail to produee any evi-

t

« :

¥

™ a Se aaa etoile: te ete ae Seed

has observed, the Commission is not matin to tiske de-

tailed findings; it is required simply to make the basic

ones ““essential to the statutory validity of. an order”, and

to disclose “in its report” “the essential basis of its judg-

ment.” Alabama G.S.R. Co. v. United States, 340 US. °

216, 228 (1951).. Indeed, of course, here the Commission’s

. report in fact is detailed and éxhaustive and plainly points

out the essential’ basis fer its judgment.

The unspoken: major premise of most of the appellants’

claims of*the inadequacy of the Commission’s j

simply a thinly disguised harkening back to the

theory which they were able to induce the District Court

- to- accept in its first decision: That the Commission was

required to make findings of the sort which would be re-

quired in anantitrust case under §7 of the Clayton Act—

Indeed, fyom time to time the appellants expressly let slip

out theitpersistence in the approach which this Court last

Term unanimously rejected. Thus, Tampa declares: “The

- Commission did not fulfill its‘ obligation to make adequate

findings partly because the administrative hearing record

it compiled does not-contain the data ffom which it could

validly deduce all the relevant geographic and product

markets and‘ submarkets. . . :” (Tampa 16) —But this -

will-of-the-wid chase after oad. and every product and

geographic market and submatket is de very sppeeaeh

which this Court rejected last Term.

We will reply to the specific deficiencies. with which the |

appellants seek to oom the Commission’ 8 report.

, “ is<

roneous

dence. (FEC 39a): ile, to be sure, the essential statutory find-

ings must be ry ether or no’ any party requests them to bé.

made, it would -stultification of the administrative process to

. Say that the Co St uiee gaaeanl it a cee Ge

_ of diverse points whén never requested to. by the parties before

it, simply in the light of a retrospective argument in court. -

.

eR RN No RS Aa aS serra lr geR mI ms Sar Soerter menrte ye we loom 2 tem ee

=

18

&

+l. The Benefits to the Public—The appellants contend

‘ that the Commission overstated the benefits to be derived

from the merger; that it mistook private benefits to the

merger applicants for benefits to the public; and that it

concentrated solely on the savings to the Merged Carrier

to result from the merger, and that, on the basis of such

savings, any merger could be justified no matter what the .

effect on competition. On this basis, the appellants sug-

gest-that the Commission improperly weighted the scales

against competition." (FEC 10-14; Southern 10, 24.27)

But the fact of the matter is that the Commission ex-

préssly recognized tliat its decision was not predicated

“upon the financial gains that may accrue to the stock-

holders of the mergéd company” (320 L.C.C., at 161) but

“primarily on the beneficial effects this proposed merger

will have upon rail patrons and the’ public generally.”

(Ibid.)'" Despite the appellants’ claims, the Commission did '

not look simply to the savings resulting from the merger

for the ultimate public benefits to be obtained; it found |

them also in the rationalization and improvement of sery-

ice to be expected, i in the form of “increased efficiency of

operations, more flexible and regular schedules, faster

service, increased supply of boxcars, elimination - of

switching charges, and reduction of freight costs by reason

11 In connection with this argument, one of the appellants finds it

necessary te misquote the District Court. ‘It is stated that the Dis-

trict Court held that the factors specified in §5(2) (c) of the Act

were to be given weight over and above the competitive considera-

tions. (FEC 9) But what the District Court held, in the passage

cited by the FEC, was that the Justice Department’s argument, to ~

the effect that’ healthy competitors should never be allowed to merge,

was “equivalent to the scales in favor of but one factor”, .

the competitive factor. (FEC 37a) The District Court “properly

stated that: “This argument cannot; as a matter of law, be used

to rewrite the statute.” stare 86a)

19

of single-line rates... .” 320 1.0.C., at 159. Also found —

by the Commission was the reasonable expectation of im- _

proved service in the form of “better distribution of special —

freight cars”-; “broader transit privileges”; “improved and

expeditious freight schedules between the principal ter- _

minals”; “more flexible schedules and more dixect routes”;

“the elimination of interchanges and delays in transit”;

“the simplification of transit arrangements and greater

flexibility in arranging stop-off points”; “substitution of

single-line rates on certain commodities”; “elimination of

certain switching charges”; “more adequate car supply”;

“availability of more specialized equipment”; “more effi-

cient utilization of equipment” ; “‘convenience in the settle-

ment of clainis: and the tracing of cars”; and “promotion

of new industrial sites, improvements in port terminal fa-

cilities and in the stabilization of employment which will

. flow from the greater financial stability of the merged com-

pany.” 3201.C.C., at 160-61. And there were a host of other

benefits found in the Examiner’s Report, adopted by the

Commission. Ex. Rep. fol. 123-25; see App. B, p. 6a, infra.

Appellants understandaly o not mention these findings ;

"but they relate to the raw material out of which improved

transportation service and the fulfillment of the national

transportation policy must come; and they are voluminously

supported on the record. It was, indeed, cléar not only to

the Commission but to the overwhelming majority of the

shippers in the area served by Seaboard and Coast Line

' that the merger would be to the public’s advantage in terms

of service: As the Commission found: “The merger pro-

posal has the support of a substantial majority ‘of .

shippers .... From the standpoint of tonnage, shippers

representing approximately 90 percent of the total Sea-

20 ee

>

board-Coast Line tonnage endorsed the merger.” ” $20 L.C.C.,°

“at 162-63.

Moreover, the Commission’s imei as to the beneficial

effects of the economies of the merger, ard their relation-

ship to the public interest, are also articulated and amply

' suppotted.. The Commission, heavily discounting the ini- .

tial estimates of the applicants, concluded that the merged

operation could effect economies of at least $20,000,000 per

year. (3201.C.C., at 159,207) The Commission made it clear

that, as a regulatory agency, it would make these savings

* yedound to the benefit of the public. See 320 I.C.C., at 167,

- 207. It was not, as the Commissiofi made it clear, from

the stockholders’ point of view that it gave weight. to the

economies to be effected. (320 I.¢.0., at 166) As the Ex-

‘aminer’s Report—adopted by the Commission—pointed out,

the savings and the improved service to the public are in-

- extricably bound up. The economic savings to be yielded

by the proposed merger would produce a better transporta-

tion plant,” providing tnore efficient railroad service to the —

publies (Ex. Rep. fol. 134) —In short, the question of

savings is a fundamental element the Commission lodks

4%

a8 Even the shippers at Tampa, where the meretr, as the ale

mission - ized, would create certain special problems (see

“pp. 24-29, infra), indicated overwhelming support for theamerger.

Nineteen "Tampa shippers testified in support of the merger before

the Examiner invoked the cumulative evidence rule, -excluding

some 47 others who were awaiting the opportunity to testify in

‘ support. Only four shippers, infrequent rail users, testified to the

contrary. Tr. 1768-2090; 2243-66; 2044-45; 2118-22; 2266; 2315;

_. 2837; 2352. See 320 1.C.C., at 165. |

18 A related advantage to the public is the ending of the economic

waste that is inherent in the grass underutilization of the plant

of the merger. applicants.. The record indicated that Coast Line

today is operating at no more than 25% of its capacity on the

main line, and that traffic could be doubled or tripled _— no

difficulty wha “A in handling it. Tr. 1458-59.

NS

—-— — 9 ,

.*

to and examines in all rail merger proceedings. The Com- |

mission has always applied and examined the concept: of

- savings in the light of the goal of “adequacy of transporta-

tion service . .. economy and efficiency, and . . . appropri-

ate provision and best use of transportation facilities.”

Louisville & N. R. Co. Merger, 295 I.C.C. 457, 502-03

(1957). This Court has recognized the relevance of sav-

ings to the standard of §5(2). McLean Trucking Co. v.

United States, supra, 321 U. S:, at 87. Savings make com-

mon carriers stronger and better servants of the public.

The merger savings here, as the Commission found, will

greatly aid in developing new and modern railroad tech-

nology, adequate. car supply, specialized equipment, rate

_ reductions, industrial development services, and other ad- -

‘vantages to the shippers and “the public. See 320 I.C.C.,

at 160-61; Ex. Rep. fol. 136.

In this connection, the Commission, a aware that r angel |

returns do not assure reliable-carriers, noted the minimal

returns earned by Seaboard and Coast Line on their opera-”

tions.* In the two most regent years considered, Sea-

board’s rates of return were 3. 84% and 4.65%, and Coast

Line’s were 2.39% and 3.52%. The Commission made the

obvious finding that such rates of return do “not compare

favorably with returns on investments in other industries

_ or in other modes of transport.” (320 LC-C., at 149) The

Commission very properly took the low rate of return into

acéount, together with the extensive intermodal competi-

tion to which the railroads in general and these carriers

14 Of course, the Commission has “uniformly ruled, as here, that .

carriers need not ‘be on the brink of bankruptcy to merge. Penn-

sylvania R. Co.—Merger—New York Cent. R. Co., 327 1.C,C. 475,

494-99 (1966); Great Northern Pac. & Burlington TAnes, Ine.—

Merger, ICC Fin. Dkt. No. 31478, decided March 31, 1966, mim.

p. 90; Norfolk & W. R. Co. Merger, 307 1.C.C. 401, 407, 441 (1959)

Louisville & N. R. — 295 1G.C. 457, 464, 482 (1957). .

22

’

“ware subjected, as the Commission extensively found. (320

I.C.C., at 149-53, 210)

- Obviously, not every railroad merger could produce such

a showing, despite the suggestions of the appellants, Nor

is it &n adequate treatment to say,.as appellants do (FEC

-10), that savings are simply other side of the coin

the elimination of competitive | id hence duplicative facili- °

ties, and.to the elimination, with them, of competition. For

one thing, the amount of savings in the elimination of

duplicating service between two: carriers serving the same

Tegion will be the seme regardless ‘of whether there is a

third, re ng carrier serving the region; but here the

Commission relied extensively on the fact that. substantial

rail . competition would .remain. for the merged carrier

throughout its system, except within one problem area, to

which the’Commission gave special attention. Or, to take

another ‘example, in an end-to-end mérger between a

| “bridge” carrier, strategically located, and one of a number

of connecting onward carriers, there will be extensive

elimination of competition but little savings.. —Therefore,

it is patently erroneous to charge, as do appellants, that

_ the benefits which the Commission found were purely the

results of the. destruction of competition, and that ac-

cordingly the .Commission , Weighted the scales against

competition, and applied an “approach which inevitably led —

to approval. Where the Commission finds that the benefits .

of a merger do not outweigh the consequences to competi-

tion, it shows no hesitancy about denying its approval.

Great Northern Pac. & Burlington Lines, Inc.—Merger,

ICC Fin. Dkt. No. 21478, decided March 31, 1966. —The

Commission’s treatment of the public benefits to be ob-

tained from the merger here is exhaustive, is based on

éktensive evidence, and affords a solid basis for its ulti.

mate finding of the — interest. t

wets pray Pee is late take! .

23

' 9. The Effects of Reducing Rail Competition Among

Three Rail Carrier Systems to Two Rail Carrier Systems.

—The appellants charge that the Commission erred in

failing to realize that where there are three competing

_ ‘systems which are reduced to two through & merger, com-

_ petition is reduced. (Southern 28-29) But the Commission

was guilty of no such fallacy. The first sentence of its dis-

cussion of competitign showed its realization that the “pro-

- posed merger would result in the elimination of present

competition between Seaboard and Coast Line in a six-

state area.” (320 LC.C., at 163) And the Commission’

found that 30.9% of the Seaboard’s tonnage was competi-

tive with the Coast Line’s tonnageggnd that 33. £% of their

combined tonnage was competitive as between them. (320

L.C.C.,. at 163-64) What the Commission did, dowever—

which an administrative-agency administering a “public

interest” statute like §5 can and should do, unlike a court -

administering a prohibitory statute like §7 of the Clayton

Act—was to view in a.different light, and appraike differ-

eritly, those eliminations of competition between the merger

applicants where there would remain after the merger an--

other competitive rail carrier—generally the Southern—

and those where there would be none. See 320 LC. C., at

163-64. .

In the light of the effects of intermodal sdepdiiea, on

‘

‘the railroads (320 I.C.C., at 149-53, 166), the Commission

clearly identified and articulated its gaal; that goal was

the preservation of two healthy, “balanced competitive -

[rail] systems” in the Southeast. (320: L.C.C., at.188) “The

Commission thus realized—contrary.’ to the appellants’

- guggestion (Southern 23-24)—that competition could be -

used as a tool to further the National Transportation

Policy. The Commission recognized, as had its Examiner’s

wee

24

Report, which it adopted, that the nature of competition

in the rail industry is different from that in the manufac-

turing, mercantile and service industries. See Ex. Rep. fol. -

153. Cf. Pennsylvania R. Co.—Merger—New York Cent. |

R. Co., 327 1.C.C. 475, 510 (1966).

The basic competition in the railroad. mentee | is for the

high-revenue-producing long-hanl traffic. That competition

is not.between specific originating carriers at originating

_ points but is: “route competition” for the long~ haul.”

—The Commission recognized this fact of life in the rail-

road industry here, as it has in other rail merger cases. .

Cf. Pennsylvania-R. Co —Merger—New York Cent. R. Co.,

supra, 327 I.C.C., at 513. The Commission dwelt on fhe

interlacing nature of the separate systems of the Coast

Line and of the Seaboard, the distribution of their lines _

r and other competing lines in the territory served, and the |

fact that a large number of points in their common terri-

tory are served by. one, but not by both, of them."*—This is.

. the backdrop of the necessity to unify that system in order

to provide balanced competition throughout the Southern

ee Region with the Southern.”— While this sort of “balanced

vs.

_ “Generally, the important revenue ‘producing traffic is that .

whieh generates long hauls extending between two or more major ~

rate territories, or are otherwise in the nature of tra: continental i

‘movements. On such traffic, the through movement is dled

successively by many railroads, and the competition which exists

: is between available routes rather than between the railroads con-

— ... - More often than not, the primary aspect of competition

ving bearing’ on the movement of important long haul traffic

ae the: question of which railroad is able to convince the

persons ——— for the routing of the most desirable traffic,

to age specific routes most favorable to the soliciting

\ ieee ba ony Rep. fol. 153-54. q

“1 See $20 1.0.0., at 164-66.:

oa Thus, the Southern has always taken advantage in its adver- -

tising and promotional activities of its extensive single-carrier

ame The record contains — of Southern’ 8 ne

25.

competition” approach is not permissible in a Clayton Act

§ 7 case (see United States v. Philadelphia Nat'l Bank, 374

U.S. 321, 371 (1963) ); itis obviously permissible and essen-

tial in a §5 proceeding before fhe Commission; the appel-

lants’ attack on it simply illustrates that they are persist-

sing in qe approach which: this Court repudiated in its

decision last Term. - eas pee bs

3. The Stuation Within Central and Western Florida.

—The appellants claim a variety of errors with respect to |

the Commission’s treatment of the competitive situation —

within central and western Florida. Essentially, it is

claimed that the Commission’s findings, and its apprajsal ..

and estimate of the curtailment of competition within cen-

tral and western Florida, are inadequate.’ (Southern 30-38;

Tampa 9-12)—But the. Commission made an accurate esti-

mate of the situation to be created within central and west-

ern Florida: It correctly styled it what it obviously would

be, a “rail monopoly.” 320 L.C.C., at 165. While it would

have been possible for the Commission to have made fur- .

‘ther findings cumulative to this finding, the purpose of

such findings in reiteration of the obvious, which the ap- —

pellants contend for, is obscure.

What the Commission .proceeded to do wat to put the

intramodal monopoly within central and western Florida,

that, would unquestionably be caused by the merger, into

perspective; and then to take ameliorative steps. Thus, the ee,

“There’s only one . . . that serves them all!”,; pointing to major

South. Atlantic and Gulf ports and Southern Region gateways.

(Exs. H-224, H-225) As the Examiner pointed out, -Southern’s

“routes generally serve the same terminals, and are pafallel to and

cross the lines of Seaboard. and Coast Line, within extensive por-

tions of the states in which they operate. Exclusive of Florida

points, Southern serves practically every important point served by

the Seaboard, Coast Line, and L&N.” Ex. Rep. fol. 68.

4

ON

; oe -

Commission found: that the nature of the lines of Coast

Line and Seaboard was such, within central and western

. Florida, ee, of cities served by both of them

was not great cbmpared to the number served only by one.

(320 I.0.C.,.at 165) Accordingly, in many cases, the merger

- would not operate to deprive rail shippers of any exroting ©

choice as to the originating rail carrier, aft. as

. ee Commission also poizited out that it was essential

not to overestimate the effect of the origination point

-.. monopoly within this area, inasmuch as, there were a num-

ber of interchange points with: other. carriers in- Florida -

(320 LC.C.,.at 165), where, to the extent through routes —

existed, a shipper. i in the ceritral and western areas could

- specify an onward routing over a competitor of the Merged

Carrier. The Commission pointed out the fact that in

terms of the movement to the destinations at the industrial

: centers: the Merged Carrier would be subjected to compet}-

'-» tion for the long haul. (320 I.C.C., at 166)

‘Asa backdrop to its consideration of this situation, the”

| Comniission—which had /eartier in its opinion extensively ~

‘reviewed: the effects of intermodal competition generally

(820 I. C. C., at 149-53)—analyzed the effects of intermodal

competition on the merged carrier in the area. (320 I.C.C.,

at 166-67; see also 320 1.C.C., at 151-53) The Commission

‘analyzed the situation with respect: to the most important

_ -of the heavy, bulkloading “commodities shippestin this area,

| phosphate rock.”* om, the Commission ee that al-

pellants say that the Commission ‘should have portormets

‘siniles analysis with each of the first nine commodities

by Coast Line and Seaboard in terms of tonnagé, (Tam x, &°

87) But no showing has been made that phosphate rock,

important commodity, is not fairly representative of the —

Southern

‘the most

situation as to the other: bulk-loading commodities. .This “whole

Cine make Cayton ek fg, hii Over

ae

s

~

—————

a

‘

win! “phosphate rock was ‘“easentially a commodity : nor-.

maily handled by rail,” water *movemerits from Tampa ¥ were

competitive with rail, and because of it the rail revenues

on ‘phosphate rock were being driven downwards.*: (320.

1.C.C., at 152-53) The Examiner’s Report, adopted by the

_ Commission, recites the evidence as to the movement of ;

_ phosphates and other bulk-loading commodities by water

from Florida points. (Ex. Rep. fol. 38). The Commission ob-

served that: “The competition faced by the railroads from

-other modes of transport-in the Tampa area is most ap-.

parent with respect to the movement of phosphate rock.”

(320 I. C. C., at 153)"

‘ rejected last Term. Moreover; it is s somewhat mysterious why the

- Commission would be safe, under the appellants’ view, if it stopped

‘at analyzing only nine commodities. “Undoubtedly if. the Com-

mission had , expressly analyzed nine, y would now cry...

‘for nineteen.

- | 28; ‘Tampa itself admits’ that phsephata rok is “by far ‘the single

most important commodity té6 the maintenance, development and .

‘growth of Tampa’s port.” ‘(Tampa.11) Obviously, considerable

‘intermédal competition to the railroads on this commodity is pre-

sented by rail-water movements or truck-water movements through

Tampa. Indeed, in - light of this expressed interest in, its port,

one may legitimate y wonder whether Tampa is interested in at-

tempting to block the

Coast Line, or whether because it fears that the Merged Carrier

will be able more effectively to compete for the long-haul move-

4 =, with water carriage movements passing through the port of

*. Tampa:

20 The appellants assert that the Commission’ 8 fading | that when.

‘phate rock: is normally carried by rail, and its finding that the -

railroads face severe competition from other mhodes in carrying it,

are inconsistent. (Southern 37; Tampa 16) It is hard to grasp

_ the kind of thinking that finds these two propbdsitions inconsistent.

- What the Commission is saying, ‘ds even a eursory reading of the

context of ity remarks would indicate, is that even on the heavy,

bulk-loading commodities, like phosphate rock, normally carried

by: rail, there is increasing intermodal competition. The findings

simply and vividly demonstrate the plight of the ae in the

face of this wa eae intermodal —

merger because ‘of its stated: concern over

the elimination of rail competition between,the Seaboard and the .

, g ft dD ’ °

ss | oS al oa

\ y \ a - - 2

Rate. Wn

tate 2 ie = - oy-

Putting the rail monopoly ‘to be created by the merger

‘ within central and western Florida in this perspective, the

Commission determined to apply a set of’ conditions 4hat

- would, notwithstanding the situation created within Florida,

permit it to find that the merger was consistent with,the

public interest. As the Commisgjon stated: “Absent suit-

able protective conditions and consideration of these [public

‘ advantage] factors, there is a distinct possibility that the

_ proposed transaction would tend to lessen competition to

an extent which, ould contrayene the policy underlying

the antitrust laws. Here, however, it is clear that the bene-

fits of this merger, when viewed in-the light of the condi-

tions hereinafter imposed, will greatly outweigh the poten-

tial injuries and hence the policy undeflying thq antitrust -

laws doeg not: represent a barrier to its. seprora ” 320

1.C.C., at 167. -

The appellants understandably do not well ‘upon the

conditions: ordered by. the Commission, but even a brief

study of-those conditions—whigh we set forth in Appendix

. A—dernonstrate that they were imposed for the purpose,

and would have the effect, of dealing with the competitive

problems 1 ‘in the various problem areas which’ he Commis-

sion recognizt

In the context of the diteation in central and western

Florida, the centtal condition is Condition 8, which requires’

the Merged Carrier to open and maintain through routes

- and joizit rates with the Southern through the Jacksonville .

. gateway. (App. A, pp. 2a-3a; App. C, p. 12a, infra) —In

-the absence’ of such a condition, neither the Seaboard or

.. the Coast Line uimerged, ‘nor the Merged Carrier, would

_ have been required to open aify through routes or estab-

lish any joint rates at Jacksonville—the principal rail gate-

way into Florida—which would have had the effect: of

age ee

e

“s 2

e , Py o* :

“short-hauling” them on traffic which they originated.” .

But with this condition, the Southern will be able to com--

pete for the long haul of the traffic from Jacksonville tots

ultimate destination. —The Commission and its Exafffiner

‘both realized that the essential competition in the rail in-

dustry ‘was route competition, for the long haul. (See pp.

5-6, 23-24, supra) Thus, as the Commission pointed out,

through the imposition of Condition 8, opening the Jack-

sonville gateway, it was able to counterbalance the effects

of the rail mono within central and western Florida ~

created by the merger. (320 L.C.C., at 181, 182, 184) Ac-

cordirigly, by giving the. Southern access to the profitable

long haul on shipments originating in central agd western

Florida, the Commission, through Condition 8, made com-

petitive rail service by the Southern aygilable for the first

time to shippers in central and weste#i Florida, and thus

fulfilled its design of developing two strong, balanced

cempetitive systems in the Southern Region. (320 L.C.C., —

at 188) ED eee 3

Indeed, the ‘Commission’s imposition of this condition

. is a vivid example of the difference between an anti

.” ™ Because of this, the Coast. Line and the Seaboard have npt

generally established through routes with the Southern at

Jacksonville gateway. with respect to traffic originated by th

in Florida. Absent an event such as the proposed merger, wh

- the Commission’s powers are more extensive through the condi-

tioning power (Atlantic Coast Line R. Co. v. United States, 284

U.S.° 288° (1932)), the power of the Commission to require the

opening of through routes hy dn. originating carrier, where the

effect would be to require the originating carrier to “short haul” ©

itself, is expressly limited by the statute. §-15(4), 49 U.S.C.

§ 15(4). The power may only be exercised upon the making of

a special finding to the effect that either the short-hauling is

necessary to prevent an “unreasonably long” route, or that the

_ short-haul route “is needed in order. to provide adequate, and

more. efficient or more economic transportation.” (Ibid.)

rust. -

suit—to which the appellants.insist on analogiting this pro-

ceeding—and a flexible administrative proceeding. Through |

x

the conditioning power—a power not shared ™ the courts

in an antitrust matter—the Commission, which clearly per-

ceived, as the. District Court found, the specific problem

areas in the merger, was able to devise a solation, drawn

fyom its experience in rail transportation, that was ade-

quate to the competitive problem.

4. The’ Track TransfeF Contention —Southern urges

that the Commission erred in not conditioning the merger-

upon the grant of the particplar self-interest project which

it has pursued throughout these proceedings, that is, the

transfer to Southern by the Merged Carrier of a line of.

its road between Jacksonville and Tampa and points south.

(Southern 9, 40-43) —In essence, of course, this contention

‘simply goes to the question of which conditions are ap-

propriate to preserve competition for the long-haul with

_ respect to traffic originating. in central and western Florida

—the trackage sale condition requested by Southern, or the ..

Jacksonville gateway condition, and the other conditions,

imposed by the Commission. Clearly, this is a question

which is entrusted solely to the Commission’s judgment. .

| Southern shows no basis for the courts to second-guess the

Commission’s solution as to the proper remedy.

Southern contends that, inasmuch as the Commission

characterized its request as “an invasion of territory” now

adequately served by the applicants (320 I-C.C., at 187),

_ the Corhmission’s action amounted to ‘an erroneous favor-

ing of the private interest of the applicants over the public

| interest., —But the principle of noninvasion of another

carrier's territory absent a positive showing of public need

is one which the Act itself recognizes (See $1(18), 49

U.S.C. §1(18));* and while the Commission recognized

:s “© § 1(18) came into the statute at .the same time as the first

. — ate a. for siesta Transportation Act of 1920, 4}

ta .

-

Se A tag REP Em IER ey Monee »

31

its power to impose such a condition upon a merger, despite

§1(18) (cf. Atlantic Coast Line R. Co. v. United States,

284 U.S. 288, 294-95 (1932)), the Commission. determined

not to do so since Southern’s loss of traffic and revenue

from the merger (subject to the gateway condition at Jack-

sonville) would be insignificant, and since there was no

“public need for additional service” with respect to the

short haul between Jacksonville and Tampa and points

south. (320 1.C.C;, at 187, 209) The Commission also

found that the proposal, which would require the continued

duplication of facilities, would “frustrate the over-all ob-

jectives of the merger.” The Commission found the con-

dition unacceptable not because of its private effect, but

because it would amount to a “detriment of the public

interest.” “(320 1.C.C., at- 187) Certainly on this basis

Southern has not dimensizeted that the Commission ex-

ceeded its powers in its choice between. the two means of

ensuring that Southern would serve to offer balanced com-

petition to the Merged Carrier on shipments originating ©

-in centr ral. and western Florida.

_ In an effort to generate an issue of law, Southern claims

that. the Commission applied an improper standard in

passing on the proposed condition. It claims that the Com-

‘mission should not have judged the ‘proposed condition in’

. terms of whether there was a “public ‘need” for it, but

sitnply in terms of whether it was “just and reasonables’

(Southern 42-43) This is a bizarre reading of the statute.

The relevant language is that: “If the Commission finds

that, subject to such terms and conditions and such modi-

fications as it shall find to be just and reasonable, the

proposed [merger]. transaction . . . will be consistent with

the public interest, it shall enter an order approving [the

transaction] ... .” §5(2). While under this language, the

Commission must find a condition to be “just and reason-

z >

t

f'%

ES LN PNR RENEE INT TOE: POLST ES IN PN ST

a “®%

32 :

able” before it can impose it,” it obviously is not under.a

'. duty to impose every condition that every intervenor pro-

pounds which might happen to be “just and reasonable.”

Railroad mergers are required to be, after all, voluntary

proposals, See St. Joe Paper Co. v. Atlantic Coast Line

R. Co., 347 U.S. 298 (1954). The statute plainly says that

the Commission is required to impose conditions on merger

proposals only to the extent necessary to ensure that the.

proposal “will be consistent with the public interest.”

While only those conditions which are “just and reason-

able” may be imposed, it does not follow that every con-

dition which is tendered must be imposed unless it is

affirmatively found not to be “fust and reasonable”; the

Commission is required only to apply conditions to the

point necessary to make the proposed transaction con-

sistent with the public interest.* See 320 I.C.C., at 127.

Southern’s contention as to the. application of an erroneous

standard by the Commission is accordingly without founda-

tion. s oe © ie ;

**The passage quoted by Southern from the Great Northern —

case (Southern 43) simply says that, ‘where the Commission deter-

mines to impose a condition, the test under § 5(2) is whether the

condition is “just or reasonable,” even though, absent a. merger,

_ the imposition of the same remedy might require a special. find-

ing of a sort difficult to make. Cf. Atlantic Coast Line R, Co. v.

United States, 284 U.S. 288 (1932). This simply tells us when the

Commission may impose a condition, not when it must. '

24 Even if the standard were whether the condition was “just

and reasonable,” Southern has shown no prejudice from the Com-

mission’s failure to use.the words “unjust and unreasonable.”

After all, the Commission found that the proposal “would, to a -

- large extent, require the dismemberment of the merged company’s

‘lines, interfere with the merged company’s planned economies, and

in general frustrate the overall objectives of the merger, all to the

» detriment of the public interest.” It also found that the transfer

_ would be “primarily for the benefit of [Southern],” and “would

deprive the merged company of substantial revenues.” (320 I.C.C.,

at 187, 209-10) Clearly, this is tantamount to a finding that the _

proposed. condition was not “just and reasonable.”

spiictenplajelbetinnasemnonpattinhanncentmnisnienetns

“"5. The Divestiture of the L€N. —Finally, Southern

contends that the Commission erred in not imposing a com

dition that the Merged Carrier .divest itself of control

“over the Louisville and Nashville Railroad. Control of the

_L&N is now held by Coast Line through ownership of .

33.697%- of its stock; this stock interest would of course

pass to the Merged Carrier.

The Commission considered this contention. at, length

and considered detailed analyses of the position of the L&N

in terms of the dynamics of route coripetition between

railroads. The Southern’s contention (Southern 45) that

the Commission failed to analyze the degree of favoritism

- that would be practiced by the Merged Carrier and the L&N

is baseless. First, the Commission analyzed the Coast

Line’s present control, and the extent—fairly minimal—

to which it had historically used it to dictate routings. (320

L.C.C., at 188) The Commission extensively analyzed the

restraints upon such an exercise of that control, particularly

the powers of the MHinois Central and the Gulf, Mobile and

Ohio, area competitors of the , to effect reprisals —

against diversions from them to the L&N by the Merged |

Carrier. (320 I.C.C.; at-189)

The Commission, through its administrative condition-

ing power, took the situation in hand. It developed ‘this

reprisal power of the Illinois Central and the Gulf, Mobile

and Ohio by strengthening the position of the Sonthern

through the Jacksonville gateway condition (Condition 8)

discussed above, pp. 28-30, supra, and through Condition 12

requiring the merged carrie: to grant the Central of Georgia

(a Southern subsidiary) trackage rights between Albany

and Tifton, Georgia. That would permit the Illinois Central ~

and the Gulf, Mobile and Ohio to give the Southern the long-

a

34

&

haul straight through to Jacksonville* on southbound traf- :

fic, in reprisal against any diversionary attempts by the

Merged Carrier against them, through the use of the L&N.

__. (820 LC.C., at 208)

The Commission, after its analysis and appraisal, con-

cluded that, giving effect to the conditions it had imposed,

the favoritism which the Merged Carrier would show the

L&N would not be extensive, and that divestiture was not

required. —Once again, here, the Commission used its ad-

ministrative powers to ensure competitive balance. See

320 L.C.C., at 184. Southern suggests that the Commission

did. not reslise the antitrust implications of the control

of one corporation over another (Southern 45-46); on the

contrary, not only did the Commission , recognize this

obvious fact, but it administratively provided a method

whereby this relationship could be effectively kept in

check.” Southern’s contention here, too, is simplythat the

Commission should have imposed ~ ‘one condition rather

ae another.

In short, as the District Court observed, the Commis-

sion here properly used the policies and tools of the anti-

trust laws, “to help pinpoint the danger areas” with respect

to the foreclosure of competition. {FEC 14a) The Commis-

sion “estimated -the scope and appraised the effects of the .

curtailment of competition which will result” from the pro-

: posal. Minneapolis é St. L. R. Co. v. United States’, supra,

361 U.S., at 186; McLean Trucking Co. v. United States, -

. supra, 321 U.S., at 87; Seaboard Air Line R. Co: v. United

The Southern already has an excellent line. between Tifton,

Georgia, and Jacksonville. (320 I.C.C., at 183) |

* The Southern also contends that the Commission applied -the

wrong standard in rejecting the divestiture condition. (Southern ~

45) For the reasons developed above, this ——— is without

; . merit. See pp. 31-32, supra, ;

+

States, supra, 382 U.S., at 155. It perceived the danger

areas after making this estimate and appraisal; it used its

administrative tools to minimize the harms to competition |

in these areas; and it, on the basis of substantial evidence,

drew the ultimate conclusion’ that, balancing the benefits

and: the harms of the merger, the merger met the test

of the public interest set forth in 4 5(2) of the Act. In

short, the Commission did precisely what this Court’s de-

cisions in McLean and Minneapolis said it had to do, and

which this Court’s decision last Term in this very. case con-

firmed. |

CONCLUSION

This merger application has already been pending before

the Commission and the courts for over six years. It has

been pending before the, courts, at this writing, for 32

months, and already has twice had the attention of the

District.Court and once the attention of this Court. The

_ contentions asserted by appellants on the issues of com-

petition.and the. public interest amount essentially to an

effort to try de novo in this Court issues which are com-

mitted to the Commission’s discretion.—But the function of

a court reviewing a Commission order is “limited to ascer-

taining whether there is warrant in the law and the. facts

for what the Commission has done. Unless in some specific

respect there has been prejudicial departure from require-

ments of the law or abise. of the Commission’s discretion,

the reviewing court is without authority to intervene. It,

cannot substitute its own view concerning what. should be

done, whether with reference to competitive considerations

' or others, for the Commission’s judgment upon matters

committed to its determination, if that has support in the

record and the applicable law.” United States v. Pierce

Auto Freight Lines, Inc., 327 U. S. 515, 536 (1946),

In the light of these considerations, ‘we submit that thé

proceeding phould at last be brought to an end and that the

judgment “of the District Court should be summarily

affirmed. This Motion to. Affirm anentnaly should: be

granted. |

Respectfully submitted, —

Paut A. Porter’

Dengis G. Lyons |

1229 Nineteenth Street, N: W.

~ Washington, D. C. 20036

Attorneys for Appellees Seaboard

_. Air Line Railroad Company, At-

. laniic Coast Line Railroad Com-

° pany, The Atlantic Coast Line

Company, and Mercantile-Safe De- "a

en posit and Trust Company

Of Counsel:

Harotp J. GALLAGHER

Watrer H. Browy, Jr.

Wrwxre Farr GALLAGHER Watrow’ & Frrz Grsson

New York, New York °

Ricuarp A, HoLtaNDER

Richmond, Virginia

| Jouy W. W 4

Pam C. Pica '

J acksonville, Florida

_ Epwin H. Burcess |

_. Baltimore, Maryland

Apwoup & Porter

Washington, D. C.

November, 1966

SEE eR REE I CR

ee

eA or iit taal)

io

ee

. APPENDIX A

The Routing and Gateway Conditions yor te

‘[Appenprx XI ro THE Commission’ s Report]

- LC. C., at 267-69]

1. Upon conmemnniiniion of the merger, the Seaboard ; .

Coast Line Railroad Company shall maintain and keep

open ‘all routes and channels of trade via existing junctions.

and gateways, unless and until otherwise authorized by | “es

the Interstate Commerce Commission, | | ie

2. The present neutrality of handling traffic inbound and i

outbound by the applicants shall be continued so as to ~ —

_permit equal opportunity for service to and from all lines

_’ reaching the rails of these carriers without discrimination

_ as to routing or movement of traffic and without discrimina-

tion in the arrangement of schedules or otherwise.

3. The ‘present traffic and operating ition in- -

cluding, among other things, interchange arrangemetits and

‘switching practices, between the applicants, on the one

hand, and all lines connecting with their tracks, on.the ~

other, shall be contirfued insofar as such matters are within

the control of the Seaboard Coast Line Railroad Company.*

4, Seaboard Coast, Line Railroad Company shall accept,

| handle, and deliver all cars inbound and outbound, loaded

or empty, without discrimination in, promptness or fre- -

‘quency of service as between. cars, destined to or-received

from competing carriéfs, “and. irrespective of destination

or route of. movement. -

* The proposed name of the Merged Carrier. =»

~

; 2a

® , °* r

5. Seaboard Coast Line Railro ‘Company shall aot do

anything to restrain or curtail the right of industries now .

located on lines of the applicants to royte traffic over any

. or all existing routes and gateways. .

“

6. Seaboard Coast Line Railroad Company shall pre-

serve and maintain the same schedules on the present

. freight trains of Seaboard and Coast Line which the merged —

company would continue after consummation of the merger;

unless such schedules, after revision, would provide later

departure times and/or earlier arrival times at junctions

and gateways in such a manner that the existing cutoff

times for connecting trains of other railroads would not

be changed, or, would not cause or permit such connec-

tions to be delayed or broken.

7. Seaboard. Coast Lint Railroad and its connections’

shall open new routes, and maintain thereover competitive

joint rates and just and equitable divisions thereof in con-

nection with Norfolk Southern Railway Company via Wil-_:

son, N. C., via Fayetteyille, N. C., and via Raleigh, N. C., én

all traffic moving betweén (i) all stations on-the Seabee’ ‘

Coast Line Railroad Company and its connections south of

. Norfolk Southern’s line, on the one hand, and (ii) Norfolk,

Va. and poisfs in official territory located in’ the Buffalo-*

"Pittsburgh, eastern trunk line, and New England terri-

\ torfes, including, Canada, on the other; provided, that this

\ condition*sHall be ineffect.only_a as long as Norfolk Southern

remains an n indepéndent railroad. ,

‘

s quired-to mamtain, in ‘connection with the Southern and its

- aflliajes s to and from the

5

2 Seaboard “Coast Line Railroad ‘Company shall,’ as to.

~ * all traffic (except traffic restricted by the terms of the exist-

ee Hardeeville-J acksonville, trackage agreements), be re-

onville gateway, joint rates.

. no higher than the rates applicable over the lines of the

merged eompany through that, or any other, gateway:

Provided, however, that Southern and its affiliates will ex-

tend similar reciprocity to the merged company with re-

spect to all traffic interchanged by Southern or its affiliates

at the J acksonville gateway.

! At the. request of Southern a Company, pre-

_senéed in writing not more than 12 months after the date

_ of consummation of the merger authorized herein, or -not

‘more than 12 months after the effective date, of any ¢er- .

tificate of the Commission permitting abandonment by Sea-

board Coast Line Railroad Company of any line of railroad

directly affecting the lines described in this condition, Sea-

board Coast Line Railroad Company shall cancel the exist-'

ing’ trackage agreements under which Southern Railway

- Operates over lines of the~Atlantic Coast Line. Railroad

Company, between Hardeeville, S. €., and Jacksonville, .

Fla., and shall refrain from oppdsing or in any manner —

protesting any request by Southern Railway for permission -

under section 1(18)-(20) to abandon operations pursuant

to the aforesaid trackage agreements. “4

"40. At the Tequest of Southern Railway Company, pre-

sented in writing not more than 6 months after the date of

consummation of the merger authorized herein, or, not

moye than 6 months after the effective date of “any :cer-

tificate of the Commission permitting abandonment by Sea-

board Coast Line Railroad Company of any line of railroad

directly affecting the lines described in this condition, Sea-

board Coast Line Railroad Company shall cancel the exist-

ing trackage agreements under which Southern Railway

operates over lines of the Atlantic Coast Line Railroad

Company between Selma, N. C., and Pinners Point, ‘Va. ;.

‘

4a

a

_and shall refrain from opposing or in any 1 manner protest-

ing any request by Southern Railway for permission under

section 1(18)-(20), to abandon operations pursuant to the —

aforesaid trackage agreements. —

11.: Seaboard Coast Line Railroad Company shall be

required to transfer to the Southern Railway Company, by

sale or loag-term lease, or the grant of trackage rights, or

a combination thereof, a line of railroad from a connection

with the Southern Seliueg in Jacksonville to the mill of

_ St. Regis Paper Company at Quinlan, Fla., upon such terms

as the carriers may agree or, in the event of their disagree-

‘ . ment, upon such terms as the Commission may, after sub-

sequent hearing, find to be just and réasonable, all subject ‘

to the approval of the Commission upon the filing of an

appropriate ‘application.

‘s Seaboard Coast Line Railroad Company pay

quired to grant trackage rights to the Central of Georgia

Railway Company over the track of the merged company

_ between Albany and Tifton,.Ga., upon such terms as the

éarriers may agree, or, in the event of their disagreement,

upon such terms as the Commission may, after subsequent

hearing, find to be just and reasonable, all subject to the

approval of the Commission upon the filing of an appro-

priate application: Provided; however, that this condition

shall be null ard void unless the Central of Georgia Railway

Company requests such trackage rights within 1. year from

Ge date of aa of the ae herein authorized.

13, Any — or person having an interest in the sub-

ject matter herein, at any future time, may make applica-

. tion for such modification of the ‘conditions prescribed as

part of the authorization herein, or any of them, as may be

AO tee ers a 8 ht Be “i

5a

_.required in the public interest and jurisdiction will be re-

tained by the Commission to reopen the proceeding herein

on its own motion for the same purpose. °

x

- 14. The Commission will retain jurisdiction for a period .

of five years following the. date of consummation of the

merger to permit the filing of petitions by the carriers by

railroad specified in the report herein, for inclusion in the

transaction. The Seaboard Coast Line Railroad Company

will be requiréd Py negotiate in good faith with rgspect to

the proposals fdr inclusion presented to it by such peti-

tioning railroads and to céoperate to the fullest extent in

the compilation of an adequate record to provide a basis

for the required determination by this Commission as to

whether such transaction would be consistent with the pub-

lic interest. In the event the parties are unable to agree, .

‘ and the Commission after hearing concludes that the trans-

action would be consistent with the public interest, it will

issue an order directing the Seaboard Coast Line Railroad

Company # include the petitioning railroad upon such

terms and conditions as the Commission finds to be just and

reasonable. — |

~"

6a

e* ; s

APPENDIX B

The Commission’s Order of Secular 2, 1963

"At a Session of the

INTERSTATE COMMERCE COMMISSION

held -at its office in Washington, D. C.,

on the 2nd day of December A.D. 1963.

Finance Docket No. 21215

SEABOARD AIR LINE RAILROAD COMPANY—

: MERGER—ATLANTIC COAST LINE RAILROAD

COMPANY

Finance Docket No. 21254 °

ATLANTIC COAST LINE RAILROAD COMPANY

BONDS |

Investigation of the matters and things involved in these.

proceedings having been made, a hearing having been held,

oral argument having been heard, and the Commission, on

the date hereof, having made ond filed a report containing

its findings of fact and conclusions thereon, which report

and the report of the hearing examiner is hereby referred - 4

to and made a part hereof:

ee ee ee ~

It is ordered, That the motions of several intervenors that

the application be dismissed, be, and they are hereby,

denied ; | ears i

It is fuether ordered, That the petition of Florida East

Coast Railway Vompany for further pening be, and it is

-hereby, denied ;

\ ‘

a . , ‘ ‘

s

7a

It is further ordered, That subject to the terms, conditions -

and modifications referred to in the aforesaid report, (a) the

merger of the properties and franchises of the Atlantic

Coast Line Railroad Company into the Seaboard Air Line ~

Railroad Company (name to be changed to Seaboard Ovast

Line Railroad Company) for ownership, management and

operation; (b) the acquisition by the latter of sole or joint

control of carriers subsidiary to or affiliated with the At-

lantie Coast Line Railroad Company through ownership

of stock or lease; (c) the acquisition by the Seaboard Air

Line Railroad Company, as successor in interest, of track-

age rights and joint use of certain lines of railroad now

used by the Atlantic Coast Line Railroad Company; (d)

the transfer of the outstanding motor carrier operating

‘rights of: Atlantic Coast Line Railroad Company to the.

Seaboard Air Line Railroad Company pursuant to the ap-

proved plan of merger; and (e) by virtue of. such merger,

the acquisition of control of Seaboard Air Line Railroad

‘’ Company, the surviving corporation, by Atlantic Coast Line

Company and, in turn, the acquisition of indirect control

‘of Seaboard Air Line Railroad Company by Mercantile-

Safe Deposit and ‘Trust Company, be, and they are hereby, °

approved and authorized. :

It is further ordered, That (a) ‘the issuance by. Seaboard _

Air Line Railroad Company of 3,839,345 shares of $20 per

share par value common stock and scrip certificates repre-

senting fractional shares in conversion of outstanding capi- .

tal stock of the Atlantic Coast Line Railroad Company pur-

suant to the aforesaid plan of merger, and (b) the assump-

tion by the said Seaboard Air Line Railroad Company of

the obligations and liabilities of the Atlantic Coast Line

Railroad Company existing on the date of the merger, in-

cluding obligations of companies subsidiary to or affiliated

with the latter, which. are’ contingently guaranteed either

solely by Atlantic Coast Line Railroad Company, or jointly

with other guarantors, upon the terms and for the purposes

described, be, and they are hereby, authorized;

It is further ordered, That (a) the proposed Modification

Indenture of the Atlantic Coast Line Railroad Company

to the First, Second, Third and Fifth Supplemental Inden-

tures, dated March'1,-1950, June 30, 1952, July 1, 1952, and

March 1, 1955, sespectively, to its General Mortgage dated

. March 1, 1950, modifying: the sinking fund requirements _ 7

_ “with respect to its Bonds of Series A, B, C and’D, in the

manner and form set forth in the application filed’ in Fi-

nance Docket No. 21254 and in the proposed Moflification —

Indenture, all as described in the aforesaid report, be, and

it is hereby, authorized, contingent upon and concurrent

- with the consummation of the merger herein authorized, and

(b) the Commission’s Orders of May 26, 1950, in Finance

Docket No. 16961; April 10, 1952, in Finance Docket No.

17667; June 23, 1952; in Finance Docket No. 1779%; and .

March 25, 1955, in-Finance Docket No. 18874 be, and ey.

are hereby, modified accordingly ;

It ts further ordered, That, except 1 as herein authorized,

the aforesaid securities shall not be sold, ‘pledged, re-

pledged, or otherwise disposed of by Seaboard Air Line

Railroad Company, or by the Atlantic Coast Line Railroad —

Company, or by the merged company; unless or until so

erdered or-approved by the Commission ;

It is further ordered, That nothing herein shall be con- _

strued to imply any guaranty or-obligation as to said se-

curities or dividends thereon on the part of the United

States; ‘ '

It-is further ordered, That the merged company shall re-

port concerning the matters involved herein in conformity

senda hs NN EN RO de Ds RC ren nie kvm

nw aeciews Lebweet

PBR NS 8 It DN ORT BIAS ee

9a

_ with the orders of the Commission, Division 4, dated Au-:

gust 9, 1946, as amended, respecting applications filed un-

- der section 20a of the Interstate Commies Act - CFR a

56.4 and 56.6) ; °

- It ts further ordered, That the ov" eompany; when

establishing changes in tariffs, rates and charges as may

be required in effectuation of transactions approved herein

may do so upon notice to this Commission and to the gen-

eral public by not less than 10 days’ filing and posting in

the manner prescribed in section 6 of the Interstate Com-

merce Act, and shall in schedules making such changes

refer to this order by date and docket number; :

It is further, ordered, That if the authority herein granted ,

is exercised, the merged company shall submit for the con-

sideration and approval of the Commission three copies of

the journal entries required to ‘Tecord the eanee a

authorized herein;

| It is further didered, That this cortificate and order shall

become effective from and after 30 days from the date of

service ; ;

And it is further. ordered, That, if the entetity granted

in the certificate herein is not exercised within one year

from the effective date of this order, it shall be of no fur-

ther force and effect. ,

By the fommission.

Harold D. McUoy

‘Secretary

(SEAL) vilie oe

10a

_APPENDIX C

The Commission’s Order of March 4, 1964,

e on Petitions for Reconsideration

ORDER

At a General Session of tae INTERSTATE COMMERCE

COMMISSION, held at its office in Washington, D. C.,

on the 4th day of March A. D. 1964.

Finance Docket No. 21215

SEABOARD AIR LINE RAILROAD COMPANY—.

MERGER—

ATLANTIC COAST LINE RAILROAD COMPANY |

Finance Docket No. 21254

"ATLANTIC ‘COAST LINE RAILROAD COMPANY.

BONDS

4

- Upon consideration of the record in the above-entitled

: proceeding, of the petitions, filed January 13, 1964, on be-

half of (a) Union Bag-Camp Paper Corporation, (b) Flor-

ida East Coast Railway Company, (c) Gulf, Mobile and

Ohio Railroad Company, (d) Illinois Central Rafiroad

_ Company (including request for oral argument), (e) Cen-

tral of Georgia Railway Company and Savannah & Atlanta

. Railway Company, (f) Southern Railway Company et al.,

and 4 g) Railway Labor Executives’ Association, for re-

consideration. of the report and order of December 2, 1963;

and of the reply of applicants, filed February 3, 1964; and. ©

ee appearing, That the employee-protective conditions

set forth in Southern Ry. Co.—Control—Central of Georgia

hit ti ntrincine wthr arte me that tase st atafelies. 3

ea

lla

mt Co., 317 I.C.C. 557, as 5 supplemented ' in 317 LC. C. 729, |

‘were imposed herein; that on February 27, 1964, the said

conditions were clarified and that such conditions as clari-

fied are, and continue to be, applicable to this Proceeding ;

It further appearing, That,. subject to certain restric-

tious, the Southern Railway Company operates over a line ~

of the Atlantic Coast Line Railroad Company between

Hardeeville, 8. C., and J acksonville, Fla., via Savannah,

Ga., dider trackage agreements. with the said Atlantic

Cunt Line Railroad Company; that the said trackage -

agreements, as interpreted by the parties thereto, may pre-

clude the Southern Railway Company from interchanging

freight traffic at Gevenseh with either Central of Georgia

Railway Company or the Savannah & Atlanta Railway -

Company in connection with movements to, from, or

through the J acksonville gateway;

It further appearing, That Condition 8, relating to the

opening. of the Jacksonville gateway by the merged com-

pany should be clarified and. modified to require the Sea-

"board-Coast Line Railroad Company to provide the Central _

vof Georgia Railway Company, the Savannah & Atlanta —

Railway Company and other affiliates and subsidiaries of

the Southern Railway Company with the right to inter-

change freight traffic with the Southern Railway Company

-at Savannah in connection with movements to, from or

through’ the Jacksonville gateway via the. Hardeeville-

” Jacksonville segment;

And it further appearing, That, except as the petitions

are granted for the purpose of the modification herein ap-

proved, the material matters set forth in the petitions have

been considered by the Commission and discussed in its

‘ report, that the decision is based on adequate findings sup-

ported ‘by the record, that there has” been presented no

error of fact or law with respect to the matters complained

. oe

*

of by petitioners, that.no showing has been made warrant-

_ ing reconsideration of the said decision, and that further

oral argument is unnecessary :

iIt is ordered, That the procéeding be, and it is heiebe,

- Yeopened for reconsideration solely for the purpose. of |

modifying Condition No. 8 of the. routing and gateway

conditions; and that the ‘said condition be, and it is hereby,:

modified as follows :

Condition No. 8, after the word “gateway” at the end of.

Condition No. 8, delete’ period, insert comma in lieu of

period, and add the following:

and, Provided further that the Seaboard Const Line

Railroad Company shall take such further action as

‘may be necessary: to permit the intérchange of freight

traffic between Southern Railway Company and Central

_ of Georgia Railway Company, Savannah & Atlanta.

.. Railway Company and other affiliates and: subsidiaries

of the Southern at Savannah in connection with move-

ments to, from, or through the Jacksonville gateway

by the Southern Railway Company under existing

trackage arrangements permitting operations by that

rail carrier-between Hardeeville and Jacksonville over

line 6f-the Seaboard Coast Line Railroad Company.

It is 8 further ordered, That in all other peepecte the said

' petitions be, ‘and they are hereby, denied.

And it is further ordered, That the order of December

2, 1963, as herein modified, shall become effective from and

after 35 days from the date of service. :

By the Commission. ,

| HAROLD D. McCOY

| > Secretary

(SEAL)

. .

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