Appendix — Sea-Land Service, Inc. v. United States

ae

Otlice-Supreme Court, U.S,

FILED

80-2093 JUN 1 0 1981

ALEXA iUuik &

IN THE

SUPREME COURT OF THE UNITED STATES

OCTOBER TERM, 1980

Sea-LAND SERVICE, INC,

Petitioner,

UNITED STATES OF AMERICA,

Respondent.

APPENDIX TO

PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE DISTRICT OF COLUMBIA CIRCUIT

EDWARD M. SHEA FRANCIS W. FRASER

RAGAN & MASON RAGAN & MASON

900 - 17th Street, N.W. 900 - 17th Street, N.W.

Washington, D.C. 20006 Washington, D.C. 20006

(202) 296-4750 (202) 296-4750

Counsel of Record Attorneys for Petitioner

Sea-Land Service, Inc.

Washington, 0.C. + THIEL PRESS + (202) 638-4521

(#)

TABLE OF CONTENTS

APP’ NDIX A — Opinion of the Court of Appeals in

Buss. Clr. No. TO-288D occ ccc ccccc ccc cescdseccece la

APPENDIX B — Federal Maritime Commission Order

of Approval of Agreement No. 10140-8. .........545- 82a

APPENDIX C — Order Denying Rehearing; Order Deny-

ing Rehearing En Banc... 1. cee eee eee eee eeees 9la

APPENDIX D — Statutory References... .... 6.66.0 e eos 94a

APPENDIX E — Opinion of the Court of Appeals in D.C.

PE ink sv Vee ehSe Ur seed ere ek sees 98a

'This Appendix is submitted by Sea-Land Service, Inc.

(Parents: Sea-Land Industries, Inc., which in turn is wholly owned

by RJ. Reynolds Industries, Inc.) (Affiliates: Sea-Land Indus-

tries (USA) Inc. and Sea-Land Industries, Ltd.)

la

APPENDIX A

Notice: This opinion is subject to formal revision before publication in the

Federal Reporter or U.S.App.D.C. Reports. Users are requested to notify

the Clerk of any formal errors in order that corrections may be made before

the bound volumes go to press.

United States Cot of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

No. 79-1299

UNITED STATES OF AMERICA, PETITIONER

Vv.

FEDERAL MARITIME COMMISSION, RESPONDENT

GULF-UNITED KINGDOM RATE AGREEMENT

SEA-LAND SERVICE, INC.

JAPAN/KOREA-ATLANTIC AND GULF FREIGHT, et al

PACIFIC WESTBOUND CONFERENCE, et al

SEATRAIN INTERNATIONAL, S.A.

PACIFIC COAST EUROPEAN CONFERENCE, et al.,

ATLANTIC AND GULF/ PANAMA CANAL ZONE, et al.,

INTERVENORS

Petition for Review of an Order of the

Federal Maritime Commission

Argued March 13, 1980

Decided December 19, 1980

Robert J. Wiggers, Attorney, Department of Justice

with whom John J. Powers, III, Attorney, Department of

Justice was on the brief, for petitioner. Barry Grossman,

Bills of costs must be filed within 14 days after entry of judgment. The court

looks with disfavor upon motions to file bills of per hr ian.

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Attorney, Department of Justice also entered an appear-

ance for petitioner.

Edward M. Shea with whom Donald J. Brunner and

Francis W. Fraser were on the brief, for Intervenor,

Sea-Land Service, Inc.

Howard A. Levy with whom Patricia E. Byrne was on

the brief, for intervenor, Gulf/United Kingdom Confer-

ence.

Anne E. Mickey, Attorney, Federal Maritime Commis-

sion with whom Edward G. Gruis, Deputy General Coun-

sel was on the brief, for respondent.

Charles F. Warren and George A. Quadrino were on the

brief, for intervenor, Japan Korea-Atlantic and Gulf

Freight Conference, et al.

R. Frederic Fisher was on the brief, for intervenor,

Pacific Westbound Conference and Far East Conference.

David C. Nolan was on the brief, for intervenor, Pacific

Coast European Conference and the North Europe-U.S.

Pacific Freight Conference.

Seymour H. Kligler was on the brief, for intervenor,

Atlantic and Gulf/Panama Canal Zone, et al.

Before: MACKINNON, ROBB and WALD, Circuit Judges

Opinion for the Court filed by Circuit Judge

MACKINNON

Opinion filed by Circuit Judge WALD, concurring in part

and dissenting in part.

MACKINNON, Circuit Judge.

The Antitrust Division of the Department of Justice

(hereafter also referred to as the Department, or Justice)

petitions under the Hobbs Act?! for review of an order en-

tered by the Federal Maritime Commission (hereafter re-

ferred to as the Commission or Maritime). The order ap-

proved a shipping rate agreement among six ocean car-

128 U.S.C. § 2342(3).

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riers that, for two of the carriers, covers intermodal

routes which involve movement by rail or motor vehicle as

well as by sea. The Department contends that the Com-

mission has no jurisdiction to approve rates pertaining in

part to land carriage and that in any event it failed to hold

an adequate hearing. Joining the Commission in resisting

these contentions are intervenors who dispute that the

Department has standing to challenge the Maritime

order.2 We conclude the Department does have standing,

but also conclude that the Commission had statutory au-

thority to pass upon the rate agreement. Because the

Commission failed to secure sufficient information on |

which to base an informed judgment, however, we remand

the order for further consideration by the Commission.

I. BACKGROUND

Under section 15 of the Shipping Act of 1916, 46 U.S.C.

§ 814, a broad variety of anticompetitive agreements be-

tween persons who are subject to the Act must be filed

with Maritime.* Section 15 directs the Commission to ap-

2 Two intervenor briefs were filed, one by Sea-Land Service,

Inc. in conjunction with the Gulf/United Kingdom Conference,

and one by a group of several other ocean carrier conferences

(hereafter referred to as intervening conferences).

3 The agreements required to be filed are those

fixing or regulating transportation rates or fares; giving or

receiving special rates, accommodations, or other special

privileges or advantages; controlling, regulating, prevent-

ing, or destroying competition; pooling or apportioning

earnings, losses, or traffic; allotting ports or restricting or

otherwise regulating the number and character of sailings

between ports; limiting or regulating in any way the vol-

ume or character of freight or passenger traffic to be car-

ried; or in any manner providing for an exclusive, prefer-

ential, or cooperative working arrangement.

46 U.S.C. § 814. Persons subject to the Act include common

carriers by water and persons carrying on the business of for-

warding or furnishing terminal facilities in connection with such

a carrier. Shipping Act § 1, 46 U.S.C. § 801.

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prove such an agreement, “after notice and hearing,” if

the Commission concludes the agreement is neither “un-

justly discriminatory or unfair” as between specified

classes, “detriment[al] [to] the commerce of the United

States,” in violation of some other provision of the Act,

nor “contrary to the public interest.” The agreement is

unlawful if implemented prior to approval, but, once ap-

proved, it is “excepted from the provisions of [the antit-

rust laws].” 46 U.S.C. § 814; FMC v. Pacific Maritime

Association, 485 U.S. 40, 45 (1978); Volkswagenwerk v.

FMC, 390 U.S. 261, 271 (1968). The Shipping Act further

provides that no part of it shall be construed “to confer

upon the [Commission] concurrent power or jurisdiction

over any matter within the power or jurisdiction of [the]

Interstate Commerce Commission [ICC]... .” Shipping

Act § 33, 46 U.S.C. § 832.

This proceeding arose out of Commission Agreement

No. 10140, which was filed with the Commission and re-

ceived its approval on May 1, 1975.4 The Agreement was

entered into by six of the thirteen ocean carriers that reg-

ularly transport goods from the United States Gulf Coast

to the United Kingdom.5 Under the Agreement carriers

may “confer” and “agree” upon “any subject of common

interest,” including “rates, charges,. . .and related tariff

matters.”® Four of the six carriers are members of the

*The Commission has approved amendments renewing the

term of the Agreement several times since. See note 12 infra.

5 Adherents to the Agreement carry about 65% of the tradi-

tional liner cargo in the Gulf/United Kingdom trade, but an ap-

preciably lesser portion of the total cargo. Approval of FMC

Agreement 10148-8 (August 30, 1978) (unpublished) at 4, re-

printed in Joint Appendix (App.) at 151.

® Agreement Between the Gulf/United Kingdom Conference

(FMC-161) and Seatrain International, S.A. art. 1, reprinted in

App. at 184.

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Gulf/U.K. Conference’? and operate exclusively on all-

water routes. Each of the other two carriers—Seatrain

International, S.A. (Seatrain) and United States Lines

(USL)—provides a competing service that carries con-

tainers of goods overland by rail or motor vehicle from

Gulf Coast ports to Atlantic Coast ports and thence by

ocean vessel to United Kingdom ports.® This rail or motor

vehicle and water carriage is known as “intermodal” serv-

ice.® For each of their respective intermodal minibridge

routes Seatrain and USL each publish one overall rate,

known as a “joint ‘ rough rate,” which is published by the

ocean carrier and concurred in by connecting inland car-

riers, with each participating carrier retaining a “division”

of the overall rate.'°

7 A conference is a voluntary organization of ocean carriers

servicing a particular trade who agree, under Commission ap-

proval, to limit competition among themselves. The members of

the Gulf/United Kingdom Conference are Combi Line, Harrison

Line, Lykes Bros. Steamship Co., and Sea-Land Service, Inc.

These lines cooperate pursuant to FMC Agreement No. 161. See

App. at 148 n.1.

® Pending disposition of this petition for review, Seatrain in-

augurated all-water service and became a member of the Gulf/

United Kingdom Conference in May 1979. Approval of Commis-

sion Agreement No. 10140-12 (February 29, 1980) (unpublished)

at 3.

® Intermodal routes are of two kinds: “minibridge” and

“interior intermodal” (or “microbridge”). The inland leg of a

minibridge route connects two ocean ports whereas the inland

leg of an interior intermodal route connects a port with an in-

land shipping point. See Agreement No. 57-96, Pacific

Westbound Conference Extension of Authority for Intermodal

Services, 19 F.M.C. 291, 303 n.15, 304 n.16 (1976). The inter-

modal routes involved here are minibridge, but the issues raised

by interior intermodal routes would seem to be no different. See

id. at 304 n.16.

1° Various forms af common carrier rates are discussed more

fully in Pennsylvania v. ICC, 561 F.2d 278, 281-83 (D.C. Cir.

1978) and infra at pp. 34-36.

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The basic object of Agreement 10140 is to reduce or

eliminate rate competition for Gulf/U.K. traffic between

intermodal carriers Seatrain and USL, on the one hand,

and the four members of the all-water Gulf/U.K. confer-

ence, on the other. The Agreement concomitantly reduces

rate competition between Seatrain and USL. Each inter-

modal carrier, however, retains the right to deviate from

any agreed-upon rate by giving 48 hours’ notice.'!

Thus, to give an example of how the Agreement works,

consider the carriage of raw cotton from Houston, Texas

to Northern Europe. The conference carriers transpor

the cotton by water from Houston to Northern Europe.

However, each of the intermodal ocean carriers secures

the services of an inland carrier to transport containers of

the shipper’s cotton by rail or motor vehicle from Houston

to some Atlantic Coast port, say Charleston, South

Carolina, where the goods are placed on a container ship

and carried to Europe. The all-water carriers’ price is set

under their own conference agreement, see note 7 supra,

and the intermodal carriers may agree to charge the same

price under Agreement 10140. The intermodal carrier may

deal directly with the shipper, treating the inland carrier’s

“division” as an expense.

“ye instant proceeding began in January 1978, when the

» to the Agreement petitioned the Commission for

11 Approval of Agreement 10140-8, supra note 5, at 6, re-

printed in App. at 153. Provision for independent action is in

accordance with Shipping Act § 15:

No [anticompetitive agreement between persons subject to

the Act] be approved, nor shall continued approval be

permitted for any agreement (1) between carriers not

members of the same conference or conferences of carriers

serving different trades that would otherwise be naturally

competitive, unless in the case of agreement between car-

riers, each carrier, or in the case of agreements between

conferences, each conference, retains the right of inde-

pendent action... .

46 U.S.C. § 814.

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approval of an amendment that would extend the Agree-

ment from April 1, 1978 for an indefinite period or until a

dat» fixed by the Commission. Three prior requests for

exte 1sion had been approved without protest from any

affected party.!? In this instance, however, the Antitrust

Division of the Justice Department filed a protest in re-

sponse to the notice in the Federal Register of the peti-

tion’s filing and of the opportunity for filing comments and

requesting a hearing. See App. at 83.'*

12 After initial approval for an 18 month period in 1975, the

Agreement was renewed for another 4 months in 1976 and for

yet another 14 months in 1977. Short-term renewals were ap-

proved pending disposition of the protest by the Justice De-

partment. Approval of Commission Agreement 10140-8, supra

note 5, at 2 n.4, reprinted in App. at 149 n.4. Pending this peti-

tion for review the Commission approved a further renewal

until March 1, 1981. Conditional Approval of Commission

Agreement 10140-12 (February 29, 1980) (unpublished) at 2.

Intervenors suggested at oral argument that the Depart-

ment’s latest approval of renewal has mooted this case. We dis-

agree. Even an expiration of the Agreement would not have

mooted the case, for it raises questions “likely to arise re-

peatedly,” and “‘their consideration ought not to be, as they

might be, defeated, by short term orders, capable of repetition,

yet evading review.’” Seatrain Int'l, S.A. v. FMC, 598 F.2d

289, 292 (D.C. Cir. 1979). Accord, United States v. CAB, 511

F.2d 1315, 1319 (D.C. Cir. 1973). The Commission’s renewal of

the Agreement makes this an a fortiori case for justiciability,

for renewal assures the issues raised here relate to a live con-

troversy.

13 The notice read in part:

Interested parties may submit comments on each agree-

ment, including requests for hearing. ... Comments

should include facts and arguments concerning the ap-

proval, modification, or disapproval of the proposed

agreement. Comments shall discuss with particularity alle-

gations that the agreement [should be disapproved, can-

celled, or modified on the ground that it] is unjustly dis-

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The protest of the Anti-Trust Division advanced three

major contentions: first, the Commission’s section 15 au-

thority covers only agreements that pertain exclusively to

ocean carriage; second, and alternatively, the Agreement

warrants summary disapproval as unduly violative of the

antitrust principles inhering in section 15’s “public inter-

est” standard; last, in any event, the Agreement cannot be

approved with a full evidentiary hearing. '*

The Commission rejected these contentions in an Order

of Approval dated August 30, 1978.15 As tu its jurisdic-

tion, the Commission noted that the Agreement authorizes

price-fixing and that its members are common carriers by

water subject to Shipping Act regulation.'® The Commis-

sion further noted that although the Agreement sets rates

for through intermodal transportation, which includes car-

riage by inland carriers regulated by the ICC, the Agree-

ment does not control the rates those inland carriers are to

receive: those rates are determined by negotiation be-

tween individual inland and intermodal ocean carriers, and

the lawfulness of the inland rate division is to be deter-

mined by the ICC, not the Federal Maritime Commission.

On this basis the Commission concluded that asserting

jurisdiction over the Agreement would not impermissibly

encroach upon ICC jurisdiction. '7

criminatory or unfair . . ., or operates to the detriment of

the commerce of the United States, or is contrary to the

public interest, or is in violation of the Act.”

43 Fed. Reg. 4111 (1978), reprinted in App. at 7.

14 App. at 85-105.

1S Approval of Agreement 10140-8, supra note 5, reprinted

in App. at 146-56.

16 Jd, at 6, reprinted in App. at 152. Shipping Act § 15 re-

quires filing of anticompetitive agreements among “common

carrier{s] by water, [and] other person(s] subject to [the Ship-

ping Act).” 46 U.S.C. § 814.

17 Approval of Agreement 10140-8, supra note 5, at 3-4, re-

printed in App. at 148-49.

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The Commission then rebuffed Anti-Trust’s alternative

argument that the Agreement was infirm under section

15’s “public interest” standard. The Commission balanced

the Agreement’s anticompetitive consequences against its

benefits and concluded that it “is not more restrictive of

competition than is reasonably necessary to accomplish

[its] legitimate objectives.”"* Observing that no private

party had ever objected to the Agreement over its three

years of existence, and concluding that the DOJ “protest

raise[d] no issues of law or fact that require further

examination in an evidentiary hearing,” the Commission

held the Agreement met all the section 15 standards and

approved it through February 29, 1980.'® This petition for

review followed.

II. JUSTICIABILITY OF THE PETITION FOR REVIEW BY

THE DEPARTMENT OF JUSTICE

In the typical case a petition to review a Maritime

Commission order is brought by a private party, usually a

shipper or ocean carrier whose economic interests are af-

fected. Here, however, the petitioner is the Department of

Justice, in its role as enforcer of the antitrust laws. Before

addressing the substantive issues we therefore must ad-

dress the claim of intervenors®® that we lack appellate

jurisdiction under these unusual circumstances. The De-

partment submits it may seek review under the Adminis-

trative Orders Review (Hobbs) Act, 28 U.S.C. §§ 2341-

18 Jd, at 6, reprinted in App. at 153. An agreement unduly

violative of antitrust policies would be deemed contrary to the

public interest. FMC v. Atkiebolaget Svenska Amerika Linien,

390 U.S. 238, 243-46 (1968). Anti-Trust’s nonjurisdictional ob-

jections to approval, both before the Commission and here,

focus exclusively on the Agreement’s anticompetitive effects.

19 Jd, at 8, 9, reprinted in App. at 155, 156. Further approv-

als have extended the Agreement to March 1, 1981. See note 12

supra.

2° See note 2 supra.

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2351, but intervenors dispute that contention. They argue

the Hobbs Act does not authorize this petition for review

and further contend that, notwithstanding statutory au-

thorization, the Department’s petition does not present

the “case or controversy” that the Constitution makes a

prerequisite to federal jurisdiction. This requires a brief

review of the relevant statutory provisions.

A. Scope of the Hobbs Act

Section 4 of the Hobbs Act provides that “[a)]ny party

aggrieved by [“a final order reviewable under [the Act]”]

may .. . file a petition to review the order in the court of

appeals wherein venue lies.” /d. § 2344. The section also

contains some of the provisions that for convenience we

shall collectively refer to as the “Attorney General provi-

sions” of the Act. These are that “[(t)he action shall be

against the United States,” and that a copy of the petition

is to be served both on the agency and on the Attorney

General. /d. The remainder of the Attorney General pro-

visions are in section 8:

The Attorney General is responsible for and has con-

trol of the interests of the Government in all court

proceedings under this [Act]. The agency, and any

party in interest in the proceeding before the agency

whose interests will be affected if an order of the

agency is or is not enjoined, set aside, or susp<« nded,

mey appear as parties thereto of their own motion and

as of right... . The Attorney General may not dis-

pose of or discontinue the proceeding to review over

the objection of any party or intervenor, but any in-

tervenor may prosecute, defend, or continue the pro-

ceeding unaffected by the action or inaction of the At-

torney General.

Id. § 2348. There is no dispute but that the Commission’s

approval of Agreement 10140 was a final order reviewable

under the Act, see id. § 2342(3), and that the Department

has complied with the requirements of timely notice, ete.

The only statutory question going to justiciability is

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whether the Act affords the Department of Justice the

status of a “party aggrieved” entitled to seek review

under the Act.

On several occasions this court has passed on agency or-

ders that were challenged in petitions for review brought

by the Justice Department.?! On none of those occasions,

however, was there raised the issue now before us—

whether a judicial review provision authorizes the Justice

Department, acting in its law enforcement capacity, to

bring such a petition.2* The question therefore appears to

be one of first impression.

21 B.g., United States v. FCC, No. 77-1249, slip op. at 6 &

n.10 (D.C. Cir. March 7, 1980en banc)\Justice Department and

three private parties appealed FCC order; court had jursidiction

under 47 U.S.C. § 402(b)(6), permitting appeal by “any other

person who is aggrieved or whose interests are adversely af-

fected by” FCC order of the kind in question); United States v.

CAB, 589 F.2d 748 (D.C. Cir. 1976) (decided with Northwest

Airlines v. CAB) (Justice Department and two private parties

petitioned for review of CAB order; court took jurisdiction, pre-

sumably under 49 U.S.C. § 1486(a), subjecting CAB order to

judicial review at behest of “any person disclosing a substantial

interest in such order”); United States v. CAB, 611 F.2d 1815

(D.C. Cir. 1975) (Justice Department as sole petitioner chal-

lenged CAB order as being unduly anticompetitive; jurisdiction

a rested on 49 U.S.C. § 1486(a), supra); United

tates v. FMC, 508 F.2d 157 (D.C. Cir.), cert. denied, 419 U.S.

1070 (1974) (decided with American Mail Line Ltd. v. FMC)

(Justice Department and four private parties petitioned for re-

view of FMC order under the Hobbs Act).

All of these cases, except United States v. FMC, may be dis-

tinguished from the present case in that only the Hobbs Act

makes the Attorney General a party respondent and gives him

responsibility for and control over the “interests of the Govern-

ment.” And United States v. FMC is itself arguably distin-

guishable on the basis that there the United States was not the

only petitioner. See note 22 infra and accompanying text.

2 In every case but one, the United States was but one of

several petitioners. In that exceptional case, United States v.

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Beginning our analysis with the language of the Hobbs

Act, we consider whether, but for the Department’s

statutory involvement in the defense of agency orders, it

would qualify in this instance as a “party aggrieved.” Con-

cluding that it would, we then determine whether Con-

gress in providing for that involvement meant to preclude

the Department from challenging agency orders.

1. Is the Department of Justice a party aggrieved?

If the Department were challenging the Commission

order on behalf of the United States’ interests as a shipper

adversely affected by the operation of Agreement 10140,

its qualification as a party aggrieved under the Hobbs Act

would not be in doubt.?* But does the Act authorize the

Department to seek review when the Department is

seeking to vindicate, not the nation’s proprietary interest,

but the nation’s sovereign interest in law enforcement?

The Department argues that it is so authorized for the

reason that it is a “party aggrieved by the [Commission’s]

final order,” 28 U.S.C. § 2344, in the ordinary meaning of

those words. The Department participated and was thus a

party in the instant proceeding before the Commission 24

and the Department was aggrieved by the final order in-

CAB, 5611 F.2d 743 (D.C. Cir. 1976), it appears that the De-

partment’s authority to seek review was not challenged, and the

issue of the Department’s standing was not discussed.

** Unless barred by statute, the Government is not less enti-

tled than any other shipper to invoke administrative and

judicial protection.

United States v. ICC, 337 U.S. 426, 431 (1948). And the Hobbs

Act clearly entitles aggrieved shippers to judicial review of

Maritime Commission approvals of rate agreements. The Justice

Department in such a case would assume the role of the Gov-

ernment’s representative under provisions that generally give

the Department control over litigation to which United States is

a party, or in which the United States is interested. See 28

U.S.C. $§ 516, 518(b), 519.

% See Associated Industries v. Ickes, 134 F.2d 694, 699 (2d

Cir.), vacated on other grounds, 320 U.S. 707 (1943): agency

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asmuch as “the agency action urged by the [Department]

on behalf of the public’s interest in competition was not

adopted.” Petitioner’s Reply Brief (Pet. Rep. Br.) at 3.

Intervenors ignore the “party aggrieved” language and

concentrate on other aspects of the Hobbs Act. We find

neither approach satisfactory.25 Rather, we think analysis

must begin with application of what still seem to be the

leading cases on standing to seek judicial review of agency

action: Association of Data Processing Service Organiza-

tions v. Camp, 397 U.S. 150 (1970) and Barlow v. Collins,

397 U.S. 159 (1970).

Under Data Processing and Barlow, a person may in-

voke judicial review under a statute as one “aggrieved by

agency action within the meaning of a relevant statute” if

he alleges (1) “injury in fact, economic or otherwise,” and

(2) an “interest arguably within the zone of interests to be

protected or regulated by the statute or constitutional

guarantee in question.” 397 U.S. at 152-54; id. at 164-65.

We conclude the Department can meet those requirements

here: it can claim injury in fact in the sense that Commis-

sion approval of Agreement 10140 directly interferes with

the Department’s responsibility to enforce the antitrust

could not deny that petitioner who participated in proceedings

below was a “party.”

2® The Department’s position, however superficially appeal-

ing, amounts to a statement that any party to an administrative

proceeding may gain judicial review under a “party aggrieved”

provision if he is displeased with the proceeding’s outcome. That

is not the law. Although participation in the proceeding below

may be an inflexible prerequisite to be a “party aggrieved”

under the Hobbs Act, see, e.g., Gage v. AEC, 479 F.2d 1214,

1218 & n.14 (D.C. Cir. 1973), it does not follow tha* participa-

tion in and of itself provides a springboard for judicial review,

for the party still must meet judicial standing requirements.

See,-e.g., Independent Investor Protective League v. SEC, 495

F.2d 311, 312-13 (2d Cir. 1974); Chemeheuvi Tribe of Indians v.

FPC, 489 F.2d 1207, 1212 n.12 (D.C. Cir.), vacated on other

grounds, 420 U.S. 395 (1975) and authorities cited therein.

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laws; and it can claim to assert interests protected by the

Shipping Act in the sense that the Department, as public

enforcer of the antitrust laws, represents the consumer

and shipping interests which are protected by the statu-

tory constraints placed on the Commission’s ability to

shield anticompetitive schemes from antitrust attack.

a. Injury in fact

An injury in fact need not be economic; it may be an

injury to one’s interest in health, safety, recreation, or

aesthetics. See, e.g., Sierra Club v. Morton, 405 U.S. 727,

738 (1975). But the injury alleged must be one that “fairly

can be traced to the challenged action of the [respon-

dent],” Simon v. Eastern Kentucky Welfare Rights Or-

ganization, 426 U.S. 26, 38 (1976), and thus “likely to be

redressed by the relief requested,” id. at 43; accord, Duke

Power Co. v. Carolina Environmental Study Group, Inc.,

438 U.S. 59, 74 (1978). The purpose of the injury in fact

requirement is to “give[ ] specificity and concreteness to

the controversy and [to] assure [ ] its presentation with

adversial vigor.” Washington Utilities & Transportation

Commission v. FCC, 513 F.2d 1142, 1149 (9th Cir.), cert.

denied, 423 U.S. 836 (1975). Although Data Processing,

Barlow and other leading Supreme Court cases on stand-

ing involved individuals and private organizations, nothing

in their analysis precludes its application to public agen-

cies. The purpose of the injury in fact requirement is

achieved when agency action interferes directly and spe-

cifically with the governmental responsibilities of the pub-

lic agency. Washington Utilities, supra, 513 F.2d at

1149-51.26 As the Supreme Court noted long ago in Cole-

26 The Washington Utilities court held that a state utilities

commission had standing under the Hobbs Act to challenge an

FCC order; the commission was statutorily obligated to advo-

cate consumer interests that were affected by the FCC order.

At least two other cases suggest a similar analysis with respect

to federal agencies. In United States ex rel. Chapman v. FPC,

345 U.S. 135 (1953), the Supreme Court held the Secretary of

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man v. Miller, 307 U.S. 433, 441-42 (1939): “there has

been recognition of the legitimate interest of public offi-

cials and administrative commissions, federal and state, to

resist the endeavor to prevent enforcement of statutes in

relation to which they have official duties.” We therefore

consider in what manner, if any, Commission approval of

Agreement 10140 interferes with the Department’s statut-

ory responsibilities.

Interior had standing to challenge a Federal Power Commission

grant of a construction license to a private power company in an

area assertedly reserved for construction of a public power

plant. The relevant review provision was 16 U.S.C. § 825/(b),

which provided judicial review to “|ajny party . . . aggrieved by

an [|FPC order].” The Court did not make express the basis for

its holding, but noted without comment the Secretary’s argu-

ment that the private licensee’s plan would adversely affect a

“specific interest” of the Secretary inasmuch as he had the

statutory duty to market public power so as to “encourage the

most widespread use thereof at the lowest possible rates to con-

sumers consistent with sound business principles.” Jd. at

155-56.

A second case suggesting that a particular arm of the federal

government suffers injury in fact by virtue of agency action in-

fringing upon its interpretation of its specific regulatory inter-

ests is Koniag, Inc. v. Andrus, 580 F.2d 601 (D.C. Cir.), cert.

denied, 439 U.S. 1052 (1978). In Koniag we held that the U.S.

Fish and Wildlife Service and the Forest Service could appeal as

“parties aggrieved” from a BIA decision that certain Indian vil-

lages could take unrestricted federal land. These agencies, we

noted, “have broad mandates to protect our forests and wildlife

. .. [and are] those most likely in fact to have a legitimate con-

cern about these lands and to come forward to protect the public

interest.” /d. at 605. The agencies had standing because un-

qualified taking from unrestricted land might compel other vil-

lages to choose refuge or forest \and. /d. at 607. Although

Koniag involved an intra-agency appeal and there thus was no

occasion to apply “strict judicial standing requirements,” id. at

606, its logic extends to a case of judicial review.

l6a

16

The Department is charged with the responsibility for

enforcing the antitrust laws,?7 which, but for Commission

approval, would proscribe agreements such as Agreement

10140.2® In contending that Agreement 10140 is beyond

Commission jurisdiction insofar as it affects land carriage,

and that the Agreement should have been disapproved in

any event, the Department submits that shippers who deal

with the intermodal ocean carriers subject to Agreement

10140 are being deprived of the competition the antitrust

laws are designed to effect: such shippers cannot bargain

for the best inland carrier rate from a Gulf Coast port to

an Atlantic port, but must accept a price that includes the

price of inland transport. Unhindered by the obstacle of

Shipping Act immunity, the Department would attack the

Agreement and prevent the ocean carriers from collec-

tively establishing a single overall rate for intermodal

traffic. This action, the Department believes, would in-

crease competition among inland carriers for Gulf/U.K.

traffic and thus promote a goal of the antitrust laws the

Department is charged to enforce. Under these circum-

stances, we conclude there is a sufficiently direct line of

causation between the allegedly invalid Commission order

and an interference with the Department’s discharge of its

statutory duties, cf., e.g., United States v. S.C.R.A.P.,

412 U.S. 669, 688-89 & n.14 (1973), and that such interfer-

ence is “likely to be redressed by a favorable decision.”

Simon v. Kentucky Welfare Rights Organization, 426

U.S. 26, 38 (1970).

_b. Zone of interests

A party alleging injury in fact and requesting relief that

would redress it must also show that the interest asserted

27 See 15 U.S.C. $§ 4, 9, 15a.

28 See the description of the Agreement, TAN 6, and the

Commission’s own discussion: “As a price fixing agreement,

Agreement No. 10140 is per se violative of the Sherman Act and

the burden is therefore on the Proponents to justify its con-

17a

17

is arguably within the zone of interests protected by the

relevant statute. Association of Data Processing Service

Organizations v. Camp, supra, 397 U.S. at 152-53.2 The

relevant statute in this case is the Shipping Act, which not

only confers but also limits the power of the Commission

to legalize anticompetitive agreements between persons

subject to the Act, who are defined in Shipping Act § 1, 46

U.S.C. § 801. Section 33, 46 U.S.C. § 832, provides the

Act shall not be construed to affect the power of the ICC,

and section 15, 46 U.S.C. § 814, forbids the Commission to

approve agreements without properly considering princi-

ples of antitrust that inhere in the section’s “public inter-

est” standard, see FMC v. Aktiebolaget Svenska Amerika

Linien, 390 U.S. 238, 243 (1968). These provisions protect

siippers both from the approval by the Commissioner of

agreements beyond its jurisdiction and from its improper

approval of agreements within its jurisdiction.

The Justice Department is entitled, once injured by in-

terference with its own interest in fulfilling its mandate to

promote the policies of the antitrust laws, to assert the

shipping public’s interest in the proper administration of

the Shipping Act. “[T)he fact of . . . injury is what gives a

person standing to seek judicial review under the statute,

but once review is properly invoked, that person may

argue the public interest in support of his claim that the

agency has failed to comply with its statutory mandate.”

Sierra Club v. Morton. 405 U.S. 727, 737 (1972). Absent

clear indication of a contrary congressional intent, we will

tinuance for another term.” Approval of Agreement 10140-8,

supra note 5, at 2, reprinted in App. at 149.

29 But see Duke Power Cu. v. Carolina Environmental Study

Group, Inc., 488 U.S. 59, 72-81 (1978) (summarizing standing

requirements without mentioning the “zone of interests” re-

quirement); K. Davis, Administrative Law Treatise (Supp.

1980) § 22.19-1 at 185-86 (Duke Power “contribut[es] to the

view ... that the ‘zone’ test has been allowed to die,” leaving

the injury-in-fact inquiry the only test for standing); id. at

22.02-11.

18a

18

not hold that the Attorney General, whose title is used to

describe the broad standing rights of injured private litig-

ants invoking the public interest,®° cannot rely-on that

doctrine himself.

2. Did Congress intend to bar Justice Department re-

view?

Having concluded that the Department as required by

the Hobbs Act otherwise has the essential attributes of a

party aggrieved, we now consider intervenors’ contention

that the “Attorney General provisions” in sections 4 and 8

of the Act mean that Congress intended to preclude the

Department from assuming the role of a petitioner for re-

view. These provisions (quoted at p. 10 supra) provide

(1) that the United States is a party respondent, (2) that

notice of a petition for review shall be served upon the

Attorney General, and (3) that the Attorney General has

responsibility for and control of the Government’s inter-

ests in any court proceedings under the Act.

Examining the language and structure of the Act, we

note that it neither requires the Attorney General to de-

fend agency orders nor precludes an independent agency

defense. Section 8 provides that the agency may “appear

as a party. . . of its own motion and of right,” and that the

Attorney General may not “dispose of the proceeding for

3© The landmark case was Associated Industries v. Ickes,

supra note 24, which held that non-official persons can be au-

thorized by Congress to challenge unlawful agency action; they

“are, so to speak, private Attorney Generals.” 134 F.2d at 704.

Holdings that the Attorney General generally lacks standing

to enforce civil rights statutes on behalf of private citizens, e.9.,

United States v. Philadelphia, 482 F. Supp. 1248 (E.D. Pa.

1979), are distinguishable on the ground that in such cases the

Justice Department does not qualify as a party expressly au-

thorized to sue, see id. at 1258, and on the further ground that

the relevant legislative history indicates a congressional intent

to preclude Justice Department suit, compare id. at 1260-61

with Part II.A.2. infra.

19a

19

review over the objection of any party.” 28 U.S.C. § 2348.

We interpret this language to contemplate that the De-

partment may chouse to (1) defend the order, solely or in

conjunction with the agency,*! (2) remain completely pas-

sive, or (3) confess error, and attack the order, even

though a statutory co-respondent.** In no instance is the

agency left defenseless; the agency can always defend it-

self, as the Commission has done here. Thus, whatever

theoretical difficulty may attend a petition brought by the

Justice Department against the United States as a statu-

tory respondent, we note no practical problem with an in-

terpretation that the Hobbs Act in some circumstances en-

titles the Justice Department to seek review.

It is in fact the intervenors’ view of the Hobbs Act that

presents practical difficulty. If intervenors are correct,

only parties with proprietary interests can seek review of

a Maritime Commission order: the Attorney General could

not challenge a Commission approval order that exceeded

its statutory authority absent the fortuity that a propri-

etary party, with sufficient resources and a sufficient indi-

vidual stake in the controversy, filed a petition for re-

view.*3 We find no evidence of such an intent in the lan-

guage or structure of the Act and will not impute to Con-

gress the intent to achieve such result.

Intervenors, however, would take us beyond the Act’s

language to the legislative history of the Hobbs Act,

$1 See, ¢.9., Marine Space Enclosures, Inc. v. FMC, 420 F.2d

577, 580 (D.C. Cir. 1969).

32 See, e.g., Volkswagenwerk v. FMC, 390 U.S. 261, 268

(1968), Seatrain Int'l, S.A. v. FMC, 584 F.2d 546, 549 n.11

(D.C. Cir. 1978), United States Lines v. FMC, 584 F.2d 519,

527 n.23 (D.C. Cir. 1978).

33 A subsequent attack by the Attorney General on a private

_ arrangement approved by the Maritime Commission could be

hampered by section 15’s provision that “[e]very agreement. . .

under this section ... shall be excepted from the [antitrust]

provisions of sections 1 to 11 and 15 of Title 15, and amendments

and Acts supplementary thereto.” 46 U.S.C. § 814.

20a

20

which, they argue, “makes clear that Congress was un-

swerving in its conviction that on petitions for review the

role of the Department on behalf of the United States, was

to defend the actions of the agencies.” Brief of Intervenors

Sea-Land Service, Inc. and Gulf/U.K. Conference at 4.

Our reading of the legislative history compels the contrary

conclusion: Congress was aware that the Justice Depart-

ment on occasion had been and would be an adversary of

the agency—both as a co-respondent and as a

petitioner—and yet evinced no intent to preclude the De-

partment from assuming that role.

The Hobbs Act is the third in a line of statutes to pro-

vide for judicial review of certain agency orders.* Its first

progenitor, the Commerce Court (Mann-Elkins) Act of

1910, 36 Stat. 539, codified the right to seek judicial re-

view of ICC orders. The Act placed the petition for review

within the exclusive jurisdiction of a single tribunal, the

Commerce Court, from whose judgment the aggrieved

party could appeal directly to the Supreme Court. /d.

§§ 1, 2, 36 Stat. 540, 542. The Commerce Court was

abolished in 1913 under the Urgent Deficiencies Act, 38

Stat. 219, which transferred the Commerce Court’s sub-

ject matter jurisdiction to three-judge district courts from

which the aggrieved party could, as before, appeal directly

to the Supreme Court. Jd. at 220. The Hobbs Act, 64 Stat.

1129 (1950), made two basic changes in this scheme: it

placed the petition for review within the exclusive juris-

diction of the courts of appeals; and it reduced the Su-

preme Court’s appellate caseload by replacing appeals as

of right in some instances with review upon writ of cer-

tiorari.*5

* The agencies covered by the Hobbs Act are the Maritime

Commission, the ICC, the Federal Communications Commission

(which also has a judicial review provision of its own), and the

Department of Agriculture.

35 See H.R. Rep. No. 1619, 80th Cong., 2d Sess. 3-4 (1948)

(explanation of provisions same as those eventually enacted in

the Hobbs Act).

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21

Important as these provisions are to an understanding

of the background of the Hobbs Act, our focus here is on

another set of provisions, whose substance has remained

essentially the same since 1910. Those provisions concern

the role of the Justice Department in the defense of

agency orders. Prior to the Commerce Act, the ICC de-

fended its own orders solely with its own counsel.** The

Act modified this practice by providing that petitions for

relief from ICC orders would be brought against the

United States instead of the ICC, Commerce Act §§ 3, 4,

36 Stat. 542, 543, and that a copy of the petition would be

served upon not only the ICC but also the Department of

Justice, id. § 1, 36 Stat. 542. In connection with this

change it was also provided that “the Attorney General

shall have charge and control of the interests of the Gov-

ernment in all cases and proceedings in the commerce

court, and in the Supreme Court... . upon appeal from-the-

commerce court... .” Jd. § 5, 36 Stat. 540. The Urgent

Deficiencies Act, although abolishing the Commerce

Court, continued these provisions relating to the Attorney

General in effect by providing that the “procedures in the

district courts ... shall be the same as that heretofore

prevailing in the commerce court.” 38 Stat. 220. The At-

torney General provisions then reappeared in substantially

their original form in sections 4 and 8 of the Hobbs Act, 64

Stat. 1129 (1950) (quoted at pp. 10 supra), which were in-

tended to “retain the present law.” H.R. Rep. No. 1619,

80th Cong., 2d Sess. 2 (1948).

In light of this historical development, intervenors con-

tend that the rationales offered for the Attorney General

provisions in 1910 are relevant to an interpretation of the

corresponding provisions in the Hobbs Act, and that these

rationales demonstrate Congress did not intend to permit

the Department to attack an agency order in exercise of

its law enforcement role. Those rationales were (1) an

agency defending its own orders appears to create a con-

36S. Rep. No. 355, 61st Cong., 2d Sess. 5-6 (1910).

22a

22

flict of interest between its role as an adjudicatory body

and its role as a prosecutorial body, see S. Rep. No. 355,

61st Cong., 2d Sess. 6 (1910); and (2) the defense of ICC

orders is a matter affecting “the whole country, and the

conduct of such matters should be vested where the con-

duct of all the legal affairs of Government is vested,

namely, in the Department of Justice.” Jd. Accord, 45

Cong. Rec. 4574 (1910) (remarks of Congressman Mann).37

According to intervenors, these rationales demonstrate

that the Attorney General provisions of the Hobbs Act

were meant merely to substitute the Justice Department

for the ICC, and gave the Department no more rights than

the agency into whose shoes it was placed. We have con-

cluded, however, that the Department under the instant

circumstances has the attributes of a “party aggrieved”

under the Act.*® In light of that conclusion, the question

here is not whether Congress specifically intended to enti-

tle the Department to seek review; as a party aggrieved

the Department is presumptively so entitled. The question

instead is whether Congress by enacting the Attorney

General provisions intended to preclude the Department

from seeking review. We have concluded that neither the

language nor the structure of the statute supports an in-

terpretation that challenging an agency order as a

petitioner is irreconcilable with the Justice Department’s

role under the Hobbs Act and we find no persuasive evi-

dence for a contrary interpretation in the legislative his-

tory.

37 Congress has not always found these rationales persuasive,

for several agencies handle their own cases free of Justice De-

partment supervision. Executive Order 12146, 44 Fed. Reg.

42657 (1979), however, establishes a Federal Legal Council con-

sisting of the Attorney General and the representatives of up to

15 agencies. The Order creates a Litigation Notification System

under which agencies with authority to litigate in court must

notify the Attorney General about cases falling into certain

designated categories.

*® See Part II.A.1. supra.

23a

23

Much of intervenors’ purported support for their theory

of the Hobbs Act consists of congressional colloquies be-

tween sponsors of the Commerce Court legislation and cri-

tics who wished to maintain the ICC’s traditional right to

defend its own orders. The former sought to assure the

latter that placing the defense of agency orders under the

control of the Justice Department would not compromise

the integrity of such orders. One such colloquy ran as fol-

lows:

Mr. BRISTOW. Suppose that the commission

should make an order and the railroad should attack

it, do I understand that the Attorney-General would

have the discretion as to whether or not he should

defend that order? Suppose he believed that the order

of the commission was not justified?

Mr. ROOT. Mr. President. I will answer that with-

out any hestitation or doubt. The Attorney-General

would be bound upon all and the highest consid-

erations of his professional honor and his official duty

to defend the order of the Interstate Commerce

a cama in all courts having jurisdiction to review

t.

Mr. BRISTOW. Then, he would not have any

supervisory authority as to whether or not it should

be defended?

Mr. ROOT. Certainly not. It is his business to de-

fend. He is no judge; he is no legislator; he is no re-

viewing authority.

45 Cong. Rec. 4104 (1910) (remarks of Senators Bristow

and Root). Intervenors’ reliance on this and similar ex-

changes is not persuasive inasmuch as the proposed

statutory language to which those colloquies refer then

read:

the Attorney-General shall have charge and control of

the interests of the Government in all cases and pro-

ceedings in the court of commerce and in the Supreme

Court of the United States upon appeal from the court

of commerce. Th: Interstate Commerce Commission

and its attorneys shall take no part in the conduct of

any such litigation.

24a

24

45 Cong. Rec. 7275 (1910) (emphasis added). Had this lan-

guage been enacted, intervenors’ point that the Justice

Department cannot be “on both sides of the same case”

would be well taken, for this language makes the: Depart-

ment the sole defender of an agency’s order. But such is

not the language of the statute. The bill was amended be-

fore passage to provide that the ICC shall receive notice of

any commerce court action and may appear as a party of

its own motion and as of right. See id. at 7276; Commerce

Court Act § 5, 36 Stat. 543. As amended and enacted, the

bill—and the corresponding language in the present

Hobbs Act—is consistent with an interpretation that per-

mits the Justice Department and an agency to take incon-

sistent and even hostile positions on review of an agency

order, for the agency has the right to take independent

action in its own interest.

Intervenors also rely on the testimony of Judge Orie L.

Phillips in the congressional hearings on bills incorporat-

ing the language that eventually became the Hobbs Act.

Judge Phillips represented the members of the Judicial

Conference who prepared the Act’s original draft. He tes-

tified that its chief controversy concerned whether the law

should be changed to make the agency the party re-

spondent (with the Department intervening as of right) or

whether the law should retain the practice of making the

United States the party respondent (with the agency in-

tervening as of right). The testimony from which inter-

venors cull extracts is as follows:*®

MR. WALTER [doubting whether the Attorney Gen-

eral should have the power to control the agency’s

defense).

.. Have you thought of the possibility that the

Maritime Commission, for example, would insist on

an appeal where the Attorney General might be

fearful that, if the case is decided in accordance with

3° The portion of Judge Phillips’ testimony that we have

placed in brackets was omitted from intervenors’ extract.

25a

25

what he believes the law will be, it might very seri-

ously affect another case involving the Communica-

tions Commission that the Attorney General is about

to take to the Supreme Court [7].

JUDGE PHILLIPS. Mr. Walter, these cases under

these acts are not cases brought by the United

States. They are petitions to review.

MR. WALTER. I understand.

MR. PHILLIPS. An order which has adversely af-

fected a private litigant. The private litigant files the

petition for review. Then the question comes in, shall

we defend the agency's order. [In the vast majority of

cases, in substantially all the cases, I would say, the

Department of Justice and counsel for the agency will

be together. There are rare instances, and that is the

history of the litigation, where the agency took one

view, the Attorney General took another view, It ul-

timately had to be determined by the Supreme Court.

In a number of those instances, four or five, the views

of the agency were sustained, and the views of the

Attorney General did not prevail. I think the agency

should have that protection. ]

The Attorney General has not asked for anything

further than to preserve the existing law in his

amendment. I understand that satisfied him, and I

think it should.

Providing for the Review of Orders of Certain Agencies:

Hearings on H.R. 2915, 2916 Before Subcomm. No. 2 of

the House Comm. on the Judiciary, 81st Cong., 1st Sess.

118 (1949) (emphasis added),.*°

_-

“0 H.R. 2915 (relating to orders of the Federal Communica-

tions Commission and the Department of Agriculture) and H.R.

2916 (relating to orders of the ICC and the Maritime Commis-

sion, which was the predecessor to the FMC) were consolidated

in H.R. 5487, which became the Hobbs Act. The House Report

on H.R. 5487 refers to the House Judiciary Committee hearings

on the previous bills as part of its legislative history. H.R. Rep.

No. 2122, 81st Cong., 2d Sess. 3 (1950).

26a

26

Intervenors would have us construe this passage to

mean that, as far as the Judicial Conference was con-

cerned, the Department’s role was solely to defend agency

orders and there was no intent to permit the Attorney

General himself to petition for review of an agency order.

Viewed in context, the testimony indicates otherwise. The

question put to Judge Phillips concerned the situation

where there was disagreement between the Department

and the agency as to whether to seek certiorari from the

Supreme Court. The question thus assumed the Depart-

ment and the agency were already on the same side of the

case. Judge Phillips’ comment that “these cases ... are

not cases brought by the United States” naturally follows.

Judge Phillips was not saying that the Department and the

agency would never be antagonists on appeal from an

agency order. Indeed, as indicated by the testimony we

have placed in brackets above, Judge Phillips expressly

contemplated that the Department and an agency, al-

though nominal co-respondents, may take differing view-

points, and each may present its own viewpoint to the

court.

Judge Phillips made his understanding of the Depart-

ment’s role under the Hobbs Act even more clear in other

testimony that intervenors also ignore. Judge Phillips

spoke of the situation in which the Department thought

the agency’s position was wrong:

JUDGE PHILLIPS... . I do not think that it is in-

cumbent upon the Attorney General to remain silent.

He may say to the court of appeals—he may say to

the Supreme Court—I think the law is this way; I

think the position taken by the Commission is wrong.

But, likewise, the Commission through its counsel

may say we think the Attorney General is wrong; we

think the law is this way; we think the case should be

decided this way for these reasons.

MR. WALTER. Do you think it is wise to find our-

selves in a position where two agencies of the Gov-

ernment are taking an opposite position in the court

of last resort?

27a

27

JUDGE PHILLIPS. I do. And I think history demon-

strates it is wise. In a number of instances the De-

partment of Justice and the Interstate Commerce

Commission have differed as to their views, and the

views of the Interstate Commerce Commission have

prevailed in the Supreme Court of the United States.

MR. KEATING. Is it riot a fact that the interest of

the Commission in sustaining its own order, and the

interests of the Attorney General in representing, as

he sees it, the United States of America, are some-

times in conflict?

JUDGE PHILLIPS. Yes.

MR. KEATING. In other words, it is essential—is it

not—that the two points of view be presented?

JUDGE PHILLIPS. I think it is, and there are in-

stances where the United States with one hand is sup-

porting the order of the Commission, and in behalf of

another agency of the Government is contesting the

action of the Commission. I think that unavoidably

will arise from time to time, not often but it will.

MR. KEATING. That would arise in almost any in-

stance where the Interstate Commerce Commission

decided their case against the Government.

JUDGE PHILLIPS. Well, for example, we had a

case here in the District last year or so where that

very situation arose with respect to some charges

that were made during the war.

Id. at 115 (emphasis added).

The “number of instances” in which the Department and

the ICC “differed as to their views” was detailed in a re-

port on one of the bills incorporating the language that be-

came the Hobbs Act, H.R. Rep. No. 1619, 80th Cong., 2d

Sess. 9-12 (1948) (Additional Views).*4 An example of the

“1 Report 1619 was on H.R. 1468, which preceded H.R. 2915

and the final bill, H.R. 5487. See note 40 supra. Report 1619

was alluded to in the House Report on H.R. 5487, H.R. Rep.

No. 2122, 81st Cong., 2d Sess. 3 (1950).

>

28a

28

seven cases cited in the report is McLean Trucking Co. v.

United States, 321 U.S. 67 (1944), an appeal from a

three-judge court which upheld an ICC order that au-

thorized the consolidation of seven large motor carriers.

There, as here, the Antitrust Division of the Justice De-

partment presented arguments to the agency which the

agency rejected. Then:

A suit was brought by a protesting motor carrier to

enjoin the order, and the United States was named as

defendant. The United States answered, and confes-

sed error in the Commission’s decision, and prayed

for a decree setting aside the Commission’s order.

The same counsel who had appeared before the Com-

mission for the Antitrust Division of the Department

of Justice appeared in the Supreme Court on behalf of

the [intervening] Secretary of Agriculture in an at-

tempt to invalidate and enjoin the Commission’s

order.

H.R. Rep. No. 1619, supra, at 10.

Nor did McLean represent the clearest case of

Department-agency conflict prior to enactment of the

Hobbs Act. In the testimony we have quoted Judge

Phillips also referred to a case in which the ICC and the

United States were adversaries in respect to “some

charges that were made during the war.” Report 1619 de-

scribed the case more fully:

This was a complaint to the Commission by the

United States, filed to secure an award of money

H.R. 1468 originally would have changed prior law by pro-

viding that the ICC or the Maritime Commission (a predecessor

to the present Commission) would be the party respondent, with

the Department of Justice having right of intervention.

Amendments suggested in Report 1619 would have perserved

prior law by reversing these roles. The statement of “Additional

Views” dissented from those amendments, reasoning that in

light of significant and recurring disagreements between the

Department and the Commission the better practice would be to

make the Commission the party respondent.

29a

29

damages on account of numerous shipments made by

the War Department. The issue was whether the re-

fusal by the defendant railroad companies for an al-

lowance to the United States as a shipper for wharf-

age [costs, etc.] ... was unjust and unreasonable.

... [The Commission held for the railroads.] The

United States then sued itself and the Commission, to

enjoin the Commission’s order. .. . [T]he Commis-

sion, as defendant in the case answered the petition of

the United States. Shortly thereafter, the United

States, as the other defendant in the case, by the De-

partment of Justice, filed an answer to its own peti-

_tion. ... The answer alleges in substance that, as

provided by the law, the United States “is a defend-

ant” in the proceeding, that the Commisston is a de-

fendant, and is authorized by law to appear by its own

attorneys and to defend its order without regard to

the position which the United States, as a statutory

defendant, may take in the case [.]” . ... The Depart-

ment evidently looks to the Commission to develop

what is to be said for the order attacked..

Id. at 11-12.

This case came to final fruition in United States v. ICC,

337 U.S. 426 (1949), decided the year before the Hobbs

Act was passed. In their argument before the Supreme

Court the Commission and the intervening railroads took

the position that the Urgent Deficiencies Act, under which

the petition for review was brought, neither contemplated

nor permitted the bringing of such petitions by the United

States, because the Act made the United States an indis-

pensable defendant. See 93 L. Ed. 2d at 1454, 1455. The

Court unanimously rejected that proposition,** finding no

congressional purpose to amend the Attorney General’s

“statutory duty ... to seek judicial redress for the Gov-

ernment”:

Although the formal appearance of the Attorney Gen-

eral for the Government as statutory defendant does

42 Three Justices dissented from the Court’s further holding

that courts had jurisdiction to review ICC orders that denied

reparation.

30a

30

create a surface anomaly, his representation of the

Government as a shipper does not in any way prevent

a full defense of the Commission’s order. ... For,

whether the Attorney General defends or not, the

Commission and the railroads are authorized to inter-

pose all defenses to the Government’s charges... .

oJd7 U.S. at 431, 432

In light of the cases featuring Department-agency con-

flicts and of the committee hearing and committee report

references to such cases, we presume Congress was aware

of interpretations thet recognized the Department’s inde-

pendent role—both as a co-respondent and as a petitioner

—under the scheme of review created by the Urgent De-

ficiencies Act. We further conclude that Congress adopted

those interpretations by carrying forward relevant prior

law into the Hobbs Act.**

Intervenors would distinguish JCC on the basis that

Justice Department standing there was mandated by the

need to give the United States access to the courts on a

basis equal to that of private shippers. Although that need

was undoubtedly a consideration, the Court’s rationale

was broader: Congress did not intend, by making the

United States a statutory respondent, to modify the Jus-

tice Department’s prior “statutory duty” to vindicate gov-

ernment interests. The Court did not distinguish, as in-

43 See, e.g., Cannon v. University of Chicago, 441 U.S. 677,

696-98 (1979) (Congress enacting sex discrimination statute

(Title IX) patterned after race discrimination statute (Title VI)

presumed to be aware of and to adopt lower court holdings in-

ferring a private cause of action under Title VI); Lorillard v.

Pons, 434 U.S. 575, 580-81 (1978) (Congress adopting new law

that incorporates sections of prior law is presumed to be familiar

with and to adopt judicial interpretations given to the incorpo-

rated sections); Georgia v. United States, 411 U.S. 526, 532-33

(1978) (re-enacting Congress presumed to adopt Supreme Court

interpretation of statute where interpretation was discussed in

committee hearings). See generally 2A C. Sands, Sutherland on

Statutory Construction § 49.09 and cases cited (4th ed. 1973).

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tervenors would wish, between proprietary interests and

other governmental interests which are equally the duty of

the Justice Department to pursue.

B. Case or Controversy

Intervenors’ final contention with respect to the De-

partment’s ability to sue is that, notwithstanding the De-

partment’s statutory authorization to petition for review,

the case or controversy that art. III. § 2 of the Constitu-

tion makes a prerequisite to federal jurisdiction is absent

here because “the United States is suing itself.” Brief of

Intervenors Sea-Land and Gulf/United Kingdom Confer-

ence at 23. We believe, however, that the structure of the

government of the United States permits cases and con-

troversies to arise between separate agencies. This is

another issue the Supreme Court addressed in United

States v. ICC. In ICC the Court, noting that the United

States was both the party bringing the action and a named

defendant thereto, acknowledged that

a suit filed by John Smith against John Smith might

present no case or controversy which courts can de-

termine. But one person named John Smith might

have a justiciable controversy with another John

Smith.

337 U.S. at 430. The Court looked behind the names of the

nominal parties to determine the real parties in interest,

and discovered there was a justiciable controversy over

“who is legally entitled to sums of money, the Government

or the railroads.” /d.

Intervenors would distinguish JCC on the ground that

the actual dispute in ICC was between the United States

as shipper and certain railroads, whereas the actual dis-

pute here is between the United States as sovereign and

an agency of the United States. See United States v.

Easement and Right of Way Over Certain Land in Bed-

ford County, Tennessee, 204 F. Supp. 837 (E.D. Tenn.

1962) (no justiciable controversy between Tennessee Val-

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32

ley Authority, a governmental agency bringing land con-

demnation suit, and Farmers Home Administration, a

governmental agency holding security interest in the sub-

ject land). The Department responds that United States v.

ICC is on point because the actual dispute is between itself

and the ocean carriers whose agreement, absent valid

Commission approval, violates the antitrust laws. The De-

partment contends in the alternative that there is suffi-

cient adversity between it and the Commission, an inde-

pendent agency with an interest in upholding its own or-

ders.

Assuming arguendo that the real parties in interest are

the Department and the Commission, as intervenors con-

tend, we hold that United States v. Nixon, 418 U.S. 683

(1974) disposes of this issue in favor of the Department.

The Nixon Court held justiciable a controversy between

(1) a Special Prosecutor, who was empowered by regula-

tion to contest the invocation of executive privilege and

who sought material he deemed to be admissible in a

pending criminal case, and (2) the President, who resisted

a subpoena for the material on the ground of his duty to

preserve confidential presidential communications. The

Court ruled that although the dispute was between offi-

cials of the same branch of government, the issues pre-

sented were “of a type which are traditionally justiciable,”

418 U.S. at 697 (quoting United States v. ICC, supra, 337

U.S. at 430), and were raised in a setting that assured

“concrete adverseness” of the parties. Jd. The Court con-

cluded that a justiciable controversy was presented for de-

cision. Much the same can be said of the issues presented

here. The Department of Justice is the authorized and tra-

ditional advocate of antitrust policies in agency litigation,

see, e.g., McLean Trucking Co. v. United States, supra,

321 U.S. 67, which policies are implicated by the “public

interest” standard of section 15 of the Shipping Act, and

the Commission obviously has a role before this court as

an advocate of its own perception of the public interest.

See 28 U.S.C. § 2348 (agency’s right to appear as party).

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This dispute over the validity of a Commission order raises

issues that courts traditionally resolve and the setting as-

sures the concrete adverseness on which sharpened pre-

sentation of the issues is thought to depend. The parties’

controversy is justiciable.

III. JURISDICTION OF THE FEDERAL MARITIME

COMMISSION

The Shipping Act of 1916 permits ocean carriers to

agree among themselves to moderate the competition that

Congress thought was destructive. As we explained in

United States Lines v. FMC, 584 F.2d 519 (D.C. Cir.

1978):

the Shipping Act of 1916 represents a compromise be-

tween the established national antitrust policy and

the potential public benefits to be derived from al-

lowing ocean carriers to restrict or eliminate competi-

tion among themselves. An extensive congressional

study of the practices of carrier conferences and their

advantages and disadvantages was made in 1914,

culminating in what has come to be known as the

Alexander Report. H.R.Doc. No. 805, 63d Cong., 2d

Sess. (1914). While the report found that there were

substantial advantages to conference arrangements,

it also identified various abuses in which conferences

had engaged. Consequently, it was the recommenda-

tion of the report, adopted by Congress, that shipping

conferences be allowed to continue only under gov-

ernment regulation.

id. at 527.44 To that end section 15, “the heart of the Ship-

“4 For more detailed discussion of the Act’s historical back-

ground and rationale, see, e.g., FMC v. Seatrain Lines, Inc.,

411 U.S. 726, 736-39 (1973); Trans-Pacific Freight Conf. of

Japan/Korea v. FMC, No. 78-2172, slip op. at 5-7 (D.C. Cir.

Sept. 11, 1980); Latin America/ Pacific Coast Steamship Conf.

v. FMC, 465 F.2d 542, 548-49 (D.C. Cir.), cert. denied, 409

U.S. 967 (1972).

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ping Act,”45 makes the Commission “the public arbiter of

competition in the shipping industry,” *® generally requir-

ing ocean carriers to file for FMC approval or disapproval

any agreement that limits competition between them. 46

U.S.C. § 814.47 Any such agreemenc not approved is un-

lawful to implement. /d.

The issue at this point in the analysis is whether section

15 extends to Agreement 10140, which contemplates that

intermodal ocean carriers and all-water competitors of

these carriers may fix rates to be charged shippers for

using their services, which in the case of intermodal car-

riers would include inland transportation. The law con-

trolling that issue is best understood if we first examine

the operation of Agreement 10140 against the background

of related shipping practices.

Carriage of goods by sea is, and always has been, inter-

modal in nature. Cargo rarely originates at, or has a final

destination alongside, an ocean carrier’s pier. Hence, con-

necting carriage by rail, by motor, or, in earlier days, by

horse drawn inland transport has always been necessary.

Similarly, rates to cover the constituent transportation

elements of this through movement have always been re-

quired. These rates appear in many forms. Although only

one form—the joint through rate—is directly at issue

here, two others are relevant—the local through rate and

the proportional through rate. Relying on the discussion in

Pennsylvania v. ICC, 561 F.2d 278, 281-83 (D.C. Cir.

1977), we note the similiarities and differences among

those rates as follows.

A through rate is the total rate charged by a carrier or

group of carriers for providing transportation from a point

“5 H.R. Rep. No. 1419, 87th Cong., 2d Sess., 2, 15 (1962),

quoted in FMC v. Pacific Maritime Ass’n, 435 U.S. 40, 54

(1978).

“6 FMC v. Pacific Maritime Ass’n, 435 U.S. 40, 53 (1978).

7 The list of agreements subject to section 15 appears in note

3 supra.

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35

of origin to a point of destination. When only one carrier is

involved, the rate charged the shipper is a local through

rate. When transport requires a series of two or more con-

necting carriers, the total rate may be the sums of the car-

rier’s local rates, the sums of their proportional rates, or a

single joint rate. A proportional rate is the rate that a

carrier charges for shipping goods that have a subsequent

or prior movement over the line of another carrier. This

charge is almost always lower than the carrier’s purely

local rate between the same two points on its line. The

shipper relying on multi-carrier transportation, then, will

often sum up proportional rates in arriving at his total

rate. The shipper may also look for a joint through rate, a

single rate expressing the total through carriage cost. This

rate is published by one of the participating carriers,

which negotiates with the other carriers the divisions of

the total rate that they are to receive. These divisions

closely resemble proportional rates, i.e., a joint through

rate is “similar in purpose and effect” to a combination of

proportional rates. Jd. at 283. Because the joint rate is

expressed in a single tariff, however, it simplifies routing,

documentation, and tilling, and often makes possible a

rate lower than the corresponding combination of propor-

tional rates.

The use of joint and proportional rates is more compli-

cated in the intermodal context, where an inland carrier

connects with an ocean carrier. Rail-ocean joint through

rates were filled with the ICC until 1908, when the ICC

decided it had no jurisdiction to accept such fillings.**

‘“® Although the Supreme Court had upheld joint and propor-

tional rates as lawful under the Interstate Commerce Act,

Texas & P. Ry. v. ICC, 162 U.S. 197, 216, 217, 220, 221, 244

(1896), the ICC held in its 1908 decision that it would not permit

the filing of ocean/rail joint rates because the ocean carriers

were unregulated and their rates fluctuated rapidly. Cos-

mopolitan Shipping Co. v. Hamburg-American Packet Co., 18

I.C.C. 266 (1908).

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36

After passage of the Shipping Act of 1916 and thereafter

until 1969, through rail/motor vehicle-ocean rates were in

the form of combinations of proportional rates filed sepa-

rately by inland carriers with the ICC and by ocean car-

riers with the Commission.*® In 1969, the ICC reversed

itself and decided to accept the filing of joint through in-

termodal rates, a decision we affirmed in Pennsylvania v.

ICC, supra, 561 F.2d at 278.5°

The Federal Maritime Commission asserted jurisdiction

over joint through rates at about the same time,5! and has

since issued a rule expressly providing for the filing of

such rates, 46 C.F.R. § 538.6 (1979), which implicitly con-

49 Pennsylvania v. ICC, supra note 10, 561 F.2d at 283.

50 The ICC reversed its policy because (1) the Shipping Act of

1916 placed ocean carriers under a regulatory scheme, and (2)

the rapid growth of containerization since its inception in 1957

had increased the efficiency and benefits of intermodal through

transportation. /d. at 283.

51 In Disposition of Container Marine Lines Through Inter-

modal Container Freight Tariffs, 11 F.M.C. 476 (1968), the

Commission ruled that existing ocean carrier conference agree-

ments did not authorize the adoption of joint through rates with

inland carriers. The Commission intimated it would exercise

jurisdiction to accept such rates, though, even though they in-

volved, in the inland carriers, persons not subject to the Com-

mission’s jurisdiction. Id. at 490 n.13. Soon thereafter, in At-

lantic & Gulf/West Coast of South America Conf. Agreement

No. 2744-30, 18 F.M.C. 121 (1969), the Commission stated:

At present we believe that the Federal Maritime Commis-

sion has the authority and regulatory responsibility to ac-

cept such [joint through] rates for filing; but to avoid any

uncertainty or confusion and to establish coordination of

regulation, we instituted our rulemaking proceeding. Con-

sequently, the determination of this issue must await the

outcome of that proceeding.

Id. at 131. The proceeding referred to produced 46 C.F.R.

§ 536.8 (see note 52 infra), which expressly asserts Commission

jurisdiction over the filing of joint through rates.

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37

templates both rail/motor vehicle-ocean tariffs and section

15 agreements concerning same.5* This assertion of juris-

diction is consistent with section 18(b)(1) of the Shipping

Act, which provides that conferences or individual carriers

52 § 536.8 Tariffs containing through rates and through

routes.

(a) Definitions. The following definitions shall apply for

purposes of this section.

(1) Through route. An arrangement for the continuous

carriage of goods between sso of origin and destination,

either or both of which lie beyond port terminal areas;

(2) Through rate. A rate expressed as a single number

representing the charge to the shipper by a carrier or car-

riers holding out to provide transportation over a through

route;

(3) Joint rate. A through rate in which two or more car-

riers participate by agreement for the offering of through

transportation service over a through route.

(4) Participating carrier. Any carrier holding out to

perform a transportation service over a through route.

(b) Filing requirements. Every carrier or conference

shall file tariffs stating all through rates, charges, rules,

and regulations governing the through transportation of

freight between ports or points in the United States and

ports or points in a foreign country in which such carrier or

conference participates. Such tariffs shall include the

names of all participating common carriers, the established

through route, a description of th service to be performed

by each patricipating common carrier, and clearly indicate

the division, rate or c e to be collected by the water

carrier subject to the Act for its port-to-port portion of the

through service, which division, rate or charge shall be

treated as 4 proportional rate subject to the provisions of

the Act. Such tariffs will be filed and maintained in the

manner provided in section 18(b) of the Act, and the rules

of this part. A memorandum of every arrangement to

which a carrier subject to the Act, or conference of such

carriers, is or becomes a part. party. for transportation between

a port or point in the United States and a port or point in a

foreign country, establishing any joint rate which is offered

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in foreign commerce shall file tariffs “for transportation to

and from United States ports and foreign ports between

all points on its own route and on any through route which

has been established.” 46 U.S.C. § 817(b)(1) (emphasis

added). Joint through rate tariffs and ocean/inland bills of

lading were developed in 1972, when Seatrain filed the

first intermodal tariff with the Commission.5* Since that

time, the Commission has approved a number of inter-

modal rate-making agreements under section 15.54

As it now stands, insofar as the FMC is concerned, an

individual carrier is free to operate a through intermodal

service by filing an overall tariff that sets out separately

the ocean carrier’s division. And, under section 15 and

46 C.F.R. § 536.8, groups of carriers can apply for Commis-

sion approval of their intermodal rate-making, as the

members of Agreement 10140 did here. See Seatrain, In-

ternational, S.A. v. FMC, 584 F.2d 546, 548 (D.C. Cir.

1978) (noting Commission practice of approving intermodal

in connection with any common carrier, shall be filed con-

currently with the filing of the through rate tariffs.'

1 Arrangements subject to section 15 of the Act must also

be filed and approved in accordance with the requirements

of General Order 24 (Part 522 of the Commission’s rules).

(Emphasis added.)

53 In re Agreement Nos. 150 DR-7 and 3130 DR-7, FMC

Docket No. 76-11, slip op. at 10 n.8 (December 31, 1979).

54 At least 24 agreements extending an ocean carrier confer-

ence’s ratemaking authority to intermodal traffic had been ap-

proved as of mid-1975. Agreement No. 57-96, Pacific West-

bound Conference Extension of authority for Intermodal Serv-

ices, 19 F.M.C. 291, 301 n.14 (1975). And over 50 section 15

agreements pertaining to through intermodal transportation had

been approved through 1979. In re Agreement Nos. 150 DR-7

and 3103 DR-7, FMC Docket No. 76-11, slip op. at 14 n.12 (De-

cember 31, 1979).

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39

rate-making by conferences).5> Although agency jurisdic-

tion is ultimately a matter of statutory construction by the

courts, FMC v. Seatrain Lines, Inc., 411 U.S. 726, 745-46

(1973), Commission’s consistent and longstanding asser-

tion of its statutory authority in this context is entitled to

great deference, see United States v. National Associa-

tion of Securities Dealers, 422 U.S. 694, 719 (1975); Saxbe

v. Bustos, 419 U.S. 65, 74 (1974), and the validity of sec-

tion 536.8, considered by the Commission a “regulation [ |]

. . . Necessary to carry out the provisions of the [Shipping

Act],” 46 U.S.C. § 841a, should be sustained if reasonably

related to the purposes of the Act. Mourning v. Family

Publications Service, Inc., 411 U.S. 356, 369 (1973).

In challenging the FMC decision to take jurisdiction

over Agreement 10140, the Department of Justice raises

two major objections. The first, and broadest, is that sec-

tion 15 simply does not reach “agreements among ocean

carriers regarding rates which are themselves beyond its

authority to regulate.” Pet. Br. at 24. The second objec-

tion is that the Commission in approving the fixing of in-

termodal rates is approving the fixing of inland rates and

thus violating the Shipping Act’s limitation provision in

favor of ICC jurisdiction. We shall examine these conten-

tions in turn.

A. Scope of Section 15

The Justice Department does not object to

individually-filed intermodal tariffs or to the agreements

between ocean and inland carriers that occur in connection

with those tariffs. Pet. Br. at 12 n.9. Nor does the De-

55 While the FMC accepts joint through rates for filing, it re-

quires only that the ocean carrier’s division be set forth clearly,

and limits its substantive regulation (exercised through its dis-

approval power) to that division. See 46 C.F.R. § 536.8 (1979),

note 52 supra; Pennsylvania v. ICC, supra note 10, 561 F.2d at

291-92.

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partment quarrel with cases ®* upholding the FMC’s sec-

tion 15 authority to approve a conference's fixing of the

proportional ocean rates that will apply on, intermodal

routes. Jd. What the Department does object to is asser-

tion of Commission jurisdiction over an agreement among

competing ocean carriers “regarding the rates to be

charged shippers using . . . intermodal services,” id., i.e.,

an agreement permitting the collective fixing of joint in-

termodal through rates. The Commission and the inter-

vening conferences respond that combinations of ocean/

inland proportional rates are identical in purpose and ef-

fect to joint through rates which state separate ocean and

inland divisions. To treat the two forms of rates differ-

ently for section 15 jurisdictional purposes, they contend,

elevates form over substance, Commission Brief at 24-27;

Intervening Conferences Brief at 12-14, 25, and creates a

substantial loophole in section 15 that unjustifiably ham-

pers the Commission's ability to promote a workable con-

ference system, id. at 14.

With the issue thus framed, we turn to an examination

of the principal cases that bear on the scope of the Com-

mission’s jurisdiction under section 15. Most of these

cases 57 involve ocean carrier agreements that are related

to collective bargaining contracts. Although arising in a

different context than that before us here, these maritime

labor cases offer persuasive guidance on the scope of the

Commission’s authority over rate agreements generally.

The Supreme Court first addressed the maritime labor

issue in Volkwagenwerk Aktiengesellschaft v. FMC, 390

U.S. 261 (1968). At issue in Volkswagenwerk was whether

an agreement among employers subject to the Shipping

56 F.g., Investigation of Overland and OCP Rates and

Absorptions, 12 F.M.C. 184 (1969), aff'd sub nom. Port of New

York Auth. v. FMC, 429 F.2d 663 (5th Cir. 1970), cert. denied,

401 U.S. 909 (1971).

57 See cases cited pp. 45-46 infra.

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Act had to be filed and approved under section 15 before it

could be implemented. The agreement allocated among the

employers the costs of creating a fund used to mitigate the

impact upon employees of technological unemployment.

The fund was the price of union acquiescence in the elimi-

nation of certain restrictive work practices. A shipper ag-

grieved by the operation of the allocation formula con-

tended the agreement was unlawful because it was not

first filed with the Commission. The Commission, although

conceding the agreement was subject to section 15's literal

terms, concluded the section covered only agreements that

“affect competition” in the maritime trade and that the al-

location agreement did not so affect competition because

there was no agreement to pass on the costs of the agree-

ment to the members’ customers. The court of appeals af-

firmed, but the Supreme Court reversed, criticizing this

“extremely narrow view of a statute that uses expansive

language.” 390 U.S. at 273. The Court noted in effect that

the agreement did “affect competition” in any realistic

sense of that phrase because the agreement “necessarily

affected the cost structures of, and the charges levied by,

individual . . . members.” /d.

The Court again applied section 15 to a maritime labor

agreement in FMC v. Pacific Maritime Association, 435

U.S. 40 (1978). The agreement in this case was a collective

bargaining agreement authorizing the members of a mul-

tiemployer bargaining unit—employers who were subject

to the Shipping Act —to impose certain labor practices and

costs on nonmember employers with whom the members

dealt. Although the Commission held the agreement sub-

ject to filing because it aimed to “control or affect competi-

tion between members and nonmembers” by eliminating

the members’ competitive disadvantage in terms of labor

cost, and thus had “potentially severe and adverse effect

upon competition,” see 435 U.S. at 52, the court of appeals

held the agreement beyond the Commission's section 15

jurisdiction on the ground that national labor policy would

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be frustrated by requiring pre-implementation filing of a

collective bargaining agreement.

The Supreme Court reversed, holding that neither labor

policy nor antitrust policy warranted a departure from

“the plain terms of the § 15.” /d. at 56. Rejecting the ar-

gument that anticompetitive collective bargaining agree-

ments should be left to the courts and the antitrust laws,

the Court stated

Congress has made the Commission the arbiter of

competition in the shipping industry; and if there are

labor agreements so anticompetitive that they are

vulnerable under the antitrust laws, it is difficult to

explain why the Commission should not deal with

thern in the first instance and either peg or dis-

approve them under the standards specified in § 15.

Id. at 68.

The Commission relied on the maritime labor analogy in

finding certain absorption and bargaining practices subject

to section 15 in /nvestigation of Overland and OCP Rates

and Absorptions, 12 F.M.C. 184 (1969), aff'd sub nom.

Port of New York Authority v. FMC, 429 F.2d 663 (5th

Cir. 1971), cert. denied, 401 U.S. 909 (1971). The re-

spondents in Overland & OCP Rates were Pacific Coast

ocean carrier conferences who were competing with Atlan-

tic and Gulf carriers for Midwest traffic by, inter alia, of-

fering special ocean rates (proportional rates) for cargo

destined for or originating in the Midwest. Atlantic and

Gulf port interests protested to the Commission that cer-

tain Pacific conference practices were unauthorized by the

Commission and were thus unlawful. Necessary to this ar-

gument, of course, was a preliminary finding that the

practices were subject to section 15.

The Commission made this finding with respect to two

of the challenged practices.5* The first involved agree-

5® Also involved in the case was the question whether the

Pacific conferences’ previously approved rate-making agree-

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ments between each conference and the transcontinental

railroads, which allocated between them the absorption of

the shipper’s Pacific port terminal costs on traffic to and

from the Midwest. /d. at 215. The second practice involved

transactions among representatives of the respondent

conferences and of the transcontinental railroads

which might conceivably be considered understand-

ings concerning the setting of rail or overland ocean

rates; and since the two [rates] are interdependent in

setting [the overall rate], any understanding con-

cerning one might affect the other. There were no

binding agreements... yet the purpose was quite

clearly to bring about action necessary to achieve an

effective aggregate of rail and ocean rates.

Id. at 216. The Commission found both the absorption

practice and the negotiation concerning the ocean and rail

portions of the overall rate to be subject to section 15, rea-

soning as follows:

Since the agreement affects ocean rates, they [sic]

may be subject to section 15. The agreement is some-

what analogous to a multiemployer agreement with a

labor union concerning wages. “The signatories to a

collective bargaining agreement are frequently, by

the very act of signing, agreeing with their own com-

petitors on matters such as labor costs, certain non-

labor costs, service to be provided to the public, and

(indirectly) price increases.” Volkswagenwerk v.

FMC, 390 U.S. 261, 284 (1968) (concurring opinion of

Mr. Justice Harlan). So the respondent conferences,

in collectively agreeing with the railroads on the allo-

cation of terminal costs absorptions, or reaching an

understanding as to the proportion of a through

overland charge which it is desirable to have covered

ments authorized the conferences to offer proportional rates for

Midwest traffic that were lower than the local rates offered for

Pacific Coast traffic. The Commission ruled that its predecessor

had expressly authorized the making of such proportional rates.

12 F.M.C, at 215.

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44

by the rail or ocean rate,7 are, by the act of entering

intu such agreement or understanding, agreeing with

each other as conference members on matters more or

less directly related to their own rates and charges.®

‘This is putting it as strongly as possible; essen-

tially the relevant transactions between conferences

and railroads involved only the exchange of informa-

tion. Any direct requests for railroad rate action were

made only by individual ocean carriers, in the same

way that shippers and individual rail carriers made

such requests.

®There is no need tu consider any agreement among

the ocean carriers to enter into a joint agreement

with third parties, as an agreement separate from the

joint agreement itself, any more than it is appropriate

to consider the arrival at an agreement to enter into

an agreement among themselves; in either case the

ultimate agreement is normally the one requiring sec.

15 consideration. The existence of parties thereto not

subject to the Act does not affect Commission juris-

diction of the agreement as one among parties who

are subject to the Act.

Id. at 216 (emphasis added). The Commission went on to

rule that the absorption agreement and “any joint action of

record among conferences and railroads toward the estab-

lishment of rail or ocean rates which would produce a com-

petitive ocean-rail combination” were incidental to the

ratemaking the Commission had previously approved. The

Fifth Circuit affirmed on this point. 429 F.2d at 667-68.

We think that the maritime labor cases and the Commis-

sion’s decision in Overland & OCP Rates control the ques-

tion of section 15’s application here. The gravamen of the

Department’s complaint is that “FMC jurisdiction to ap-

prove agreements among water carriers regarding

through intermodal rates in their totality gives those car-

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riers substantial concerted control over the inland as well

as the water portions of those rates.” Pet. Rep. Br. at

14-15. Assuming, without deciding, that such is the case,

we find Agreement 10140 analogous to a multi-ocean car-

rier labor agreement, with the divisions of inland carriers

representing an expense to the intermodal carriers

analogous to labor costs. Section 15 applicability to

Agreement 10140 also follows from Overland & OCP

Rates, for there ocean carriers collectively bargained with

railroads as to matters affecting rates, including the inland

portion of the overall rate, whereas the corresponding

bargaining here is only between individual carriers. The

Department would distinguish Overland & OCP Rates by

emphasizing that the ocean carrier-railroad contacts were

“actually mere exchanges of information, not agreements.

See 12 F.M.C. at 216 n.7.” Pet. Rep. Br. at 20 n.16. Yet

this distinction cuts only in favor of Commission jurisdic-

tion. If the FMC can take section 15 jurisdiction over

“mere exchanges of information” (so long as they “affect[]

ocean rates,” as the Commission found), section 15 juris-

diction over agreements follows a fortiori. If the purpose

of the agreement is to affect competition among persons

subject to the Act in connection with ocean transportation,

then it is subject to section 15’s filing requirement and

thus to the Commission’s approval or disapproval. See

FMC v. Pacifi¢ Maritime Association, supra, 435 U.S. at

53, 53-63 (1978) (“any contract between carriers ‘control-

ling, regulating, preventing, or destroying competi-

tion’. . . is within the reach of § 15”); Volkswagenwerk v.

FMC, supra, 390 U.S. at 273-77; New York Shipping

Association v. FMC, 495 F.2d 1215, 1221 (2d Cir.), cert.

denied, 419 U.S. 964 (1974) (section 15 triggered by

“agreement [that] would necessarily affect persons subject

to the Shipping Act and ultimately would alter relations

among shippers of various types of cargo”’).5®

5® For the Commission it was sufficient that Agreement 10140

was an anticompetitive agreement between persons subject to

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46

We are also persuaded that an adoption of the Depart-

ment’s position would eviscerate a basic policy of the

Shipping Act—to promote the effectiveness of the ocean

carrier conference system. All here agree that individual

ocean carriers may post and charge joint intermodal

through rates. The only question is whether carriers

should be permitted to set such rates collectively. The

only way this rate-setting can occur, without inviting the

antitrust liability that fastens upon price fixing, is by get-

ting Commission approval of a ratemaking agreement

under section 15. If the Department is correct, however,

such an agreement is beyond the commission’s power even

the Shipping Act. Approval of Agreement 10140-8, supra note

5, at 3-4, reprinted in App. at 150-51. In its only arguable de-

parture from that principle, the Supreme Court held in FMC v.

Seatrain Lines, Inc., 411 U.S. 726 (1973) that section 15 did not

apply to a one-time merger agreement that required no con-

tinuing Commission supervision, effectively destroyed one of

the two parties to the agreement, and did not clearly fall within

any of the seven categories of anticompetitive agreements listed

in section 15, quoted in note 3 supra. The Department comp-

lains that “{iJf the Commission approach to section 15 were

adopted, it would have jurisdiction to approve and immunize a

price-fixing dgreement for automobile manufacturing enter-

prises operated by ocean carriers. Such a result would be ab-

surd.” Pet. Br. at 15. At the risk of tarrying on what is no more

than a law school hypothetical, we note that, should such a situ-

ation arise, the scope of section 15 might appropriately be con-

fined, through a reading of its legislative history, to matters

concerning competition in ocean transportation. See generally

FMC v. Seatrain Lines, Inc., supra. In any event the propon-

ents of such an agreement would have a nearly impossible bur-

den under section 15’s “public interest” standard as elaborated

in FMC v. Atkiebolaget Svenska Amerika Linien, 390 U.S. 238,

243 (1968). Here as elsewhere, the Department’s antitrust ar-

guments are misdirected; they are relevant to propriety of

Commission approval, not assumption of Commission jurisdirc-

tion.

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47

to consider, much less approve. We find the Department’s

desired result anomalous: it would create a large loophole

in section 15 that would destroy the effectiveness of con-

ference ratemaking by permitting conference members

routinely to shed their conference obligations as to any

particular cargo movement simply by filing an individual

* rate in a joint rate form. That such a development might

be desirable solely from an antitrust viewpoint we do not

doubt. But antitrust considerations are essentially irrelev-

ant to any outline of section 15’s jurisdictional scope. They

are considered in the decision whether to approve, a step

that occurs only after jurisdiction is assumed. See FMC v.

Pacific Maritime Association, supra, 435 U.S. at 63.

B. Effect of the ICC Limitation Provision

It is not enough, however, to conclude that Agreement

10140 falls within the literal language and implicates the

central policies of section 15; we must also be satisfied that

our interpretation of section 15 does not violate Section 33

of the Shipping Act, which provides:

This [Act] shall not be construed to affect the power

or jurisdiction of the [ICC], nor to confer upon the

[FMC] concurrent power or jurisdiction over any

matter within the power or jurisdiction of such [ICC].

46 U.S.C. § 832. The question, therefore, is whether FMC

authority to approve ocean carrier agreements that con-

template the fixing of joint through intermodal rates will

interfere with the exercise of ICC jurisdiction in violation

of section 33.®°

The Department’s argument here parallels its argument

that section 15 simply does not reach the approval of joint

6° The stated purpose of § 33 was “to obviate a conflict of

jurisdiction if in some unforeseen manner any substantive

provision of . . . [the Shipping Act] inadvertently overlaps

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48

intermodal through rates, see Part III.A. supra. It is in

one respect an improvement, however, for the present ar-

gument has the virtue of relying on a statutory

provision—section 33—that under certain factual consid-

erations can operate to limit the Commission’s jurisdic-

tion.*! On the facts before us, however, we find no indica-

tion that the Commission has transgressed that limit. To

explain that conclusion we must briefly review ICC and

Commissien regulatory practice with respect to joint

through intermodal ratemaking.

Both the ICC and the Commission accept the filing of

joint intermodal through rates by carriers subject to their

respective jurisdictions, with the requirement that the

filing carrier set forth the division of the total rate it is to

receive.®? Neither agency, however, claims the authority

a corresponding provision of the interstate commerce act.”

H.R.Rep. No.659, 64th Cong., Ist Sess. 14 (1916).

Trailer Marine Transport Corp. v. FMC, 602 F.2d 379, 393 n.61

(D.C. Cir. 1979).

61 F.g., Trailer Marine Transport Corp. v. FMC, supra note

60, 602 F.2d at 393 (IC Act conferral on ICC of jurisdiction over

both land and sea portions of interstate shipping trade could set-

tle matter against Maritime jurisdiction over such trade by vir-

tue of § 33). |

62The ICC has provided by regulation, at 49 C.F.R. § 1300.67

(1979) and again in nearly identical language at 49 C.F.R.

§ 1307.49 (1979) as follows:

§ 1300.67 Export and import traffic—ocean carriers.

(a) Ocean’carriers not subject to Act. Common carriers

by water, or conferences of such carriers, engaged in the

foreign commerce of the United States, as defined in the

Shipping Act, 1916, that operate between ports of the

United States and foreign countries are not subject to the

terms of the Interstate Commerce Act or to the jurisdic-

tion of the Interstate Commerce Commission.

(b) Through routes and joint rates.

(1) A common carrier by railroad, pipeline, or water, ora

common carrier by railroad jointly with a common carrier

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49

to disapprove or suspend the rates charged by carriers

subject to the jurisdiction of the other. In Pennsylvania

v. ICC, supra, we specifically upheld the ICC’s decision to

require that the inland portion of the joint rate be set out

separately and to limit its substantive regulation to the

inland rate. 561 F.2d at 291. We noted that any attempt by

the ICC to regulate the foreign segment of the joint rate

would “plainly usurp[{] the FMC’s jurisdiction under the

Shipping Act.” Jd.

Because the ICC specifically allows inland carriers to

participate with individual ocean carriers and conferences

by motor vehicle, subject to the Interstate Commerce Act

(hereinafter referred to in this section as the domestic car-

rier), may establish a through route and joint rate with a

vessel-operating common carrier by water engaged in the

foreign commerce of the United States (hereinafter re-

ferred to in this section as the ocean carrier), as defined in

the Shipping Act, 1916, for the transportation of property

between any place in the United States and any place in a

foreign country. Every tariff naming such a through route

and joint rate shall be filed with this Commission. The

tariff may be filed in the name of the ocean carrier, a con-

ference of ocean carriers, the domestic carrier or the duly

appointed tariff publishing agent of such carriers.

(2) The tariff shall be constructed, filed, and posted in

conformity with the Interstate Commerce Act, and, except

as otherwise specifically authorized, with the regulations

in Parts 1300 and 1305 (regulations in both parts included

in Tariff Circular No. 20) of this chapter. The tariff shall be

printed in the English language, include the names of all

participating carriers, a description of the services to be

performed by each participating carrier, a statement of the

joint rate, and a clear and definite statement of the divi-

sion, rate or charge to be receive? by the domestic carrier

for its share of the revenue covering a through shipment or

aggregate of shipments under the tariff.

(Emphasis added.) For the language of the corresponding FMC

regulation, 46 C.F.R. § 536.8 (1979), see note 52 supra.

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50

of such carriers,** and because the ICC asserts substan-

tive regulatory jurisdiction over only the inland portion of

an overall intermodal through rate, we are not convinced

that Commission approval of joint through rates invades

ICC jurisdiction or otherwise interferes with the exercise

of ICC power. The Department, however, suggests that

the power to approve agreements fixing both the

overall rate and the ocean carrier division necessarily

entails the power to approve fixing the inland division

as well.’ It further follows that the existence of such

a power conflicts with the ICC’s authority to regulate

the inland carriers, and cannot be reconciled with sec-

tion 33 of the Shipping Act.

UIfa+b=c, thence — a= b. Once “c”, the through

rate, and “a” the carrier division, are fixed, then “b”

the inland division is merely a remainder, and deter-

mined by the others.

Pet. Br. at 13. We would work the formula differently.

The object of Agreement 10140 is to reduce the differential

between intermodal and all-water rates for Gulf/U.K.

traffic. Common sense would suggest, and at oral argu-

ment counsel for the Justice Department agreed, that

ratemaking proceeds in this order: First, the all-water

conference carriers publish a tariff under their own con-

ference agreement, see note 7 supra, for a particular

cargo movement. Then, pursuant to Agreement 10140, the

intermodal carriers decide whether to adopt that rate. For

each carrier that decision will depend upon its ability to

obtain a favorable rate from an inland carrier. In the De-

partment’s symbols this process is best described by the

equation of c (total joint rate) minus 6 (inland division)

equals a (ocean division). Agreement 10140 does not fix

inland rates.

Even if it could be said that the ocean carriers somehow

do collectively determine inland rates, it remains that no

*3See note 62 supra.

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51

inland division of a joint rate can exist without ICC ap-

proval. “Divisions of joint rates by carriers subject to ICC

jurisdiction. . .must be reasonable,” 49 U.S.C. § 10701(a),

and the ICC has power to “prescribe. . .the division of

joint rates, and the conditions under which those routes

must be operated,” 49 U.S.C. § 10705.

Unable to point to any specific ICC regulatory function

that FMC approval of joint through intermodal rates

would impede, the Department argues that such approval

frustrates the ICC’s ability to “protect the interests of the

public.” Pet. Br. at 21. The fixing of through intermodal

rates, the argument runs, deprives Gulf/U.K. shippers of

price competition between inland carriers, whereas if the

Commission were limited to approval of proportional ocean

rates, shippers could negotiate their own inland rate and

get a better overall price. We agree with the Commission

and intervenors that this contention exalts form over sub-

stance. The Department acknowledges that the Commis-

sion could take jurisdiction over an agreement that elimi-

nated intermodal transit’s price advantage over all-water

transit if such an agreement were limited to the fixing of

the intermodal carriers’ proportional ocean rates. See Pet.

Br. at 20, Pet. Rep. Br. at 19-20. Assuming the Depart-

ment is right in saying this arrangement would permit

Gulf/U.K. shippers to drive a better bargain with inland

carriers, we fail to see how the shipper’s lot would be im-

proved with respect to the overall rate, for the intermodal

ocean carriers can then agree to charge a correspondingly

higher ocean rate to advance the goal of reducing price

competition between intermodal and all-water carriers.

See generally Overland & OCP Rates, supra, 12 F.M.C. at

216.

In light of the above we conclude that Agreement 10140

was an agreement subject to section 15 filing and approval

or disapproval by the Commission. Moreover, nothing in

section 33 would counsel a different interpretation, for

there is no practical conflict between ICC and Commission

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52

jurisdiction over the filing of the joint intermodal through

rates; the Commission’s approval of the Agreement leaves

the ICC’s jurisdiction over inland carriers and inland rates

unimpaired.

IV. ADEQUACY OF HEARING

Two issues remain: whether the Commission’s decision

not to hold an evidentiary hearing was an abuse of discre-

tion and, given the absence of such a hearing, whether

under the applicable standard of judicial review its ap-

proval of Agreement 10140 was justified.

We consider these issues against the background of sec-

tion 15’s directive that the Commission “disapprove, can-

cel, or modify any agreement. . .contrary to the public

interest.”®4 This langauge requires that the Commission

consider the antitrust implications of all agreements sub-

mitted to it for approval.®* Once it appears that an agree-

ment entails an antitrust violation, “this alone will nor-

mally constitute substantial evidence that the agreement

is ‘contrary to the public interest,’ unless other evidence in

*4Section 15 provides:

The Commission shall by order, after notice and hearing,

disapprove, cancel or modify any agreement, or any mod-

ification or cancellation thereof, whether or not previously

approved by it, that it finds to be unjustly discriminatory

or unfair as between carriers, shippers, exporters, import-

ers, or ports, or between exporters from the United States

and their foreign competitors, or to operate to the detri-

ment of the commerce of the United States, or to be con-

trary to the public interest, or to be in violation of this Act,

and shall approve all other agreements, modifications, or

cancellations.

46 U.S.C. § 814 (emphasis added).

®5Some agreements may be so “routine” or “de minimis” that

they do not require filing, hearing and approval under section

15. Volkswagenwerk v. FMC, 390 U.S. 261, 276 (1968). Agree-

ment 10140, however, clearly is neither routine nor de minimis.

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53

the record fairly detracts from the weight of this factor.”

FMC v. Aktiebolaget Svenksa Amerika Linien, supra, 390

U.S. at 246. The proponents of an anticompetitive agree-

ment must therefore show it is “required by a serious

transportation need, necessary to secure important public

benefits, or in furtherance of a valid regulatory purpose of

the Shipping Act,” id. at 243, and the Commission must

“‘scrutinize the agreement to make sure that the con-

duct. . .legalized [through section 15 approval] does not

invade the prohibitions of the antitrust laws any more than

is necessary to serve the purposes of the regulatory stat-

ute.’” United States Lines v. FMC, supra, 584 F.2d at 528

(quoting Volkswagenwerk v. FMC, supra, 390 U.S. at 274

n.21).

A. Procedural Adequacy

In the administrative proceeding, the proponents of

Agreement No. 10140 submitted affidavits and

memoranda in support of an extension of the Agreement.

The Department’s protest was filed in response to these

submissions and in response to the Commission’s notice in

the Federal Register. The notice directed persons submit-

ting comments and requests for hearing to set forth “with

particularity” facts and arguments concerning approval,

modification, or disapproval of the Agreement. See note 13

supra .®6

The Department did not deny or otherwise respond to

the factual showing made by the proponents of the

Agreement. The Department’s request for hearing pro-

ceeded not on the claim that proponents’ factual assertions

were in any respect inaccurate, then, but on the theory

that any agreement amounting to a “serious, per se viola-

®6Shortly thereafter, Seatrain and other proponents of

Agreement 10140 filed their reply to the Department’s com-

ments. See App. at 107, 117. It was on the basis of these written

submissions and proponents’ affidavits that the Commission

reached its decision.

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54

tion” of the antitrust laws requires a pre-approval eviden-

tiary hearing, and that price-fixing, clearly an object of

Agreement 10140, was of that serious nature. App., at

102-03.

The Commission acted well within its discretion in de-

ciding “(t]he [Department's] protest raises no issues of law

of fact that require further examination in an evidentiary

hearing.”®? Although section 15 indicates that approval of

an azreement can occur only “after notice and hearing”

(see note 64 supra), this requirement may be satisfied by

“something less time-consuming than courtroom drama.”

Marine Space Enclosures, Inc. v. FMC, 420 F.2d 577, 589

(D.C. Cir. 1969). The formal evidentiary hearings that the

Administrative Procedure Act requires in instances where

the agency must have “a hearing on the record” are not

required in Commission hearings inasmuch as Shipping

Act § 15 lacks that stipulation. United States Lines v.

FMC, 584 F.2d 519, 586 (D.C. Cir. 1978) (citing United

States v. Florida East Coast R. Co., 410 U.S, 224, 234-38

(1973)). The Commission thus enjoys “flexibility in struc-

turing Section 15 hearings in light of the circumstances of

the case and the nature of the issues involved.” /d. at

536-37. It need only “conduct whatever proceedings are

necessary to secure sufficient information so that its final

decision will’ reflect ‘a consideration of the relevant fac-

tors.’” Seatrain International, S.A. v. FMC, 584 F.2d

546, 550 (D.C. Cir. 1978) (quoting Citizens to Preserve

Overton Park, Inc. v. Volpe, 401 U.S, 402, 416 (1971)).

The Justice Department's comments, while placing the

Commission on notice of some of the antitrust questions

raised by the Agreement, gave no promise that the De-

partment would make any contribution toward the case’s

factual development. Moreover, no shipper affected by the

Agreement in its nearly three years of operation had ob-

jected to it, even though the Agreement was placed under

67 Approval of Agreement 10140-8, supra note 5, at 8, re-

printed in App. at 155.

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Commission review on several prior occasions. See note 12

supra, And the Agreement was extended only temporar-

ily, for the relatively short term of 18 months, see United

States Lines v. FMC, supra, 584 F.2d at 529-30. We do

not doubt that a full-blown evidentiary hearing conceiva-

bly might have sharpened the issues or otherwise have

contributed to reasoned decisionmaking. But the costs of

any adversary hearing loom large in contrast to these

speculative benefits. In view of these circumstances, we

cannot say the Commission abused its discretion in decid-

ing to dispose summarily of the Department's legal and

policy arguments.®*

B. Substantive Adequacy

The final question is whether, given the absence of an

evidentiary hearing, the Commission was justified in con-

cluding on the record before it that the proponents of

Agreement 10140 had shown that their anticompetitive

agreement was required by a serious transportation need,

**The Department's arguments below were, at most, the

“legal and economic conclusions concerning market structure,

competitive effect, and public interest” that we found insuffi-

cient to require an evidentiary hearing under analogous circum-

stances in United States v. FCC, No. 77-1249, slip op. at 35

(D.C. Cir. March 7, 1980) (en bane). The Department's proposal

that the Commission routinely hold a hearing before approving

price-fixing agreements would result in an evidentiary hearing

in virtually every section 15 case, compare United States v.

Socony-Vacuum Oil Co., 310 U.S. 160, 228 (price-fixing entails

“raising, depressing, fixing, pegging, or stabilizing the price of

a commodity”) with Shipping Act § 15, quoted in note 3 supra,

and would thus, contrary to our holdings in Seatrain /nt'l, S.A.

v. FMC, supra, 584 F.2d at 550 and United States Lines v.

FMC, supra, 584 F.2d at 536-37, “unduly limit the discretion

the Commission must have in order to mold its procedures to

the exigencies of the particular case.” Gulf States Co. v. FPC,

411 U.S. 747, 762 (1973); see generally United States v. FCC,

supra, slip op. at 38-41.

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necessary to secure important public benefits, or in fur-

therance of a valid regulatory purpose of the Shipping Act.

FMC v, Aktiebolaget Svenska Amerika Linien, supra, 390

U.S. at 243. The agency's decision to treat the Depart-

ment’s antitrust objections summarily requires that we

“closely scrutinize” its conclusions, Gulf State Utilities

Co, v. FPC, 411 U.S. 747, 763 (1973), and “examine the

supporting findings and assumptions with especial care,”

United States v. FCC, supra, slip op. at 61-52. We thus

examine in some detail the links in the Commission's chain

of reasoning, recognizing, of course, that the agency's

findings and conclusions must be affirmed unless “arbi-

trary, capricious, an abuse of abuse of discretion, or

otherwise not in accordance with law,” 5 U.S.C.

$ 706(2)(A), i.e., we are not to supplant the agency's

judgment with our own, New York Shipping Association,

Inc. v. FMC, No, 78-1479, slip op. at 10 (D.C, Cir, July

80, 1980); United States Lines v. FMC, 584 F.2d 519, 526

(D.C. Cir. 1978).

1, Judgmental conclusions

The Commission has concluded that Agreeement 10140 |

merited an extension for another 18 months because it “is

not more restrictive of competition than is reasonably

necessary to accomplish proponents’ legitimate objec-

tives”:5®

“(wjithout the stabilizing influence of [Agreement

10140,) uncontrolled rate cutting is likely to develop

which would result in service disruptions and the

probable elimination of some carriers from the

trade—conditions which the Shipping Act was in-

tended to eliminate.””°

*° Approval of Agreement 10140, supra note 5, at 9, reprinted

in App. at 156

Jd. at 4, reprinted in App. at 151.

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The Commission saw no anticompetitive effect of “major

significance” to counteract this “stabilizing influence”:

The Agreement’s members faced competition from six in-

dependent all-water liner services and one independent

minibridge service as well as from a number of unregu-

lated “tramp operators.”’* Moreover, the Commission

noted that the intermodal carriers’ right to pursue inde-

pendent action on 48 hours’ notice (see TAN 11 supra)

permits some rate competition to exist between Pro-

ponents. Although Seatrain and USL have generally

maintained rate parity with the conference carriers,

they have and will

.. . adjust (their) rates as [they deem] necessary

to meet the demands of shippers, competition

from independent lines, or competition from

members of the Gulf/United Kingdom Confer-

ence.

The Department contends the Commission's reasoning is

arbitrary for failing to pay adequate heed to the Agree-

ment’s effect on prices and for treating the survival of

ocean carriers as a legitimate objective under the Shipping

Act. Pet. Br. at 35, 37-38a. Neither argument is persua-

sive. The Commission was aware that proponents carry

about 65% of the goods moving in the traditional liner

cargo market and that they quote prices 10-15% above

those of the independent carriers.7* We are not in position

to quarrel with the Commission’s judgment that Agree-

ment 10140’s prevention of “uncontrolled rate cutting” and

its consequences would justify the higher prices that cus-

tomers of Agreement members must pay. Nor can we say

"Id, at 5, reprinted in App. at 152.

Id. at 4, 5 n.10, reprinted in App. at 151, 152 n.10. Tramp

operators are exempt from FMC jurisdiction under Shipping

Act § 1, 46 U.S.C. § 801.

™3]d. at 6, reprinted in App. at 153 (footnote omitted).

41d. at 4, 5 n.10, reprinted in App. at 151, 152 n.10.

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the Commission was wrong in considering the importance

of preserving carrier capacity, which it could relate to

adequate service and, in turn, to the public interest fac-

tors of a serious transportation need, an important public

benefit, or a valid regulatory purpose of the Shipping Act.

The Commission has rationally related its judgmental con-

clusions to its factual finding that absent the Agreement

“uncontrolled rate cutting is likely to develop.” See Bur-

lington Truck Lines, Inc. v. United States, 371 U.S. 156,

168 (1962). In these instances we perceive the Commission

exercising an expert judgment to which we must defer.75

But we must also be satisfied, before we affirm the Com-

mission’s order, that the factual predicate of its conclusion

is also adequate. It is to that inquiry we now turn.

2. Factual conclusions

Although Commission orders are not subject to the pro-

vision of the Administrative Procedure Act requiring that

agency decisions be supported by substantial evidence on

the record considered as a whole, United States Lines,

supra, 584 F.2d at 526, courts have routinely assumed

that Commission orders are subject to some kind of sub-

stantial evidence standard,”® presumably on the theory

that an agency decision that is not based on substantial

evidence should be overturned as arbitrary and capricious

75 [TJhe [Commission] . . . is an expert in the field and...

this court should not put its view against [it]. The great

complexity of our economy induced Congress to place the

regulation of businesses like foreign shipments in spe-

cialized agencies with broad powers. The courts are slow to

interfere with the conclusions of such agencies when recon-

cilable with statutory directions.

New York Shipping Ass’n, Inc. v. FMC, No. 78-1479, slip op. at

11 (D.C. Cir. Sept. 11, 1980) (quoting Transamerican Trailer

Transport v. FMC, 492 F.2d 617, 624-25 (D.C. Cir. 1974)).

76See, e.g., Consolo v. FMC, 383 U.S. 607, 620 (1966);

Transamerica Trailer Transport, Inc. v. FMC, 492 F.2d 617,

625, 627 (D.C. Cir. 1974).

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or as 2n abuse of discretion. See Pacific Legal Foundation

v. DOT, 593 F.2d 1338, 1343 n.35 (D.C. Cir.), cert. denied,

444 U.S. 830 (1979).77 Substantial evidence generally has

meant “such relevant evidence as a reasonable mind might

accept as adequate to support a conclusion.” But this “does

not go so far as to justify orders without a basis in evi-

dence having rational probative force.” Consolidated

Edison Co. v. NLRB, 305 U.S. 197, 229, 230 (1938).

Another way of stating this standard is to ask whether the

record contains data sufficient to support an informed con-

clusion. We thus examine the record support for FMC’s

factual conclusions.

The central premise of the Commission’s ultimate find-

ing that Agreement 10140 is not contrary to the public

interest is that there is a need to alleviate “disruptive

pressures” in the Gulf/U.K. trade. That such pressures

exist was inferred from the practices of the Baltic Ship-

ping Company, “a Soviet flag controlled carrier with a

demonstrated policy of predatory pricing.” 7® There is rec-

ord evidence to support the Commission’s finding that Bal-

tic Shipping Company does indeed undercut its compet-

itors’ prices by as much as 25-30%.79 There is a dearth of

evidence, however, to support the Commission’s related

prediction that absent a rate agreement it would be

especially difficult for Seatrain and USL to resist

lowering their rates to meet the aggressive pricing

policies of Baltic Shipping Company on high value

container cargo in the absence of a rate agreement.

7™7For a discussion of how the substantial evidence and the

arbitrary-or-capricious tests have converged, see K. Davis,

Administrative Law Treatise § 29.00-.01 (Supp. 1976 and Supp.

1980).

78 Approval of Agreement 10140-8, supra note 5, at 5 n.10,

reprinted in App. at 152 n.10.

797d. at 5n.10, reprinted in App. at 152 (citing Affidavit of C.

J. Smith, reprinted in App. at 52).

60a

60

Such cargo is incremental to Seatrain and USL’s in-

termodal service, but it is the mainstay of the confer- -

ence carriers’ operation. If a rate war developed be-

tween intermodal carriers and the all-water carriers,

it is unlikely that the conference could survive.®®

“These recitations are ample in rhetoric, but ‘sparing in

detail.’”®! The supporting evidence consists solely of the

unsubstantiated opinion of the proponents’ affiant, the

Secretary of Agreement 10140.8? As we said in United

States v. CAB, supra, 511 F.2d at 1326:

807d. at 4n.9, reprinted in App. at 151 n.9.

81 Marine Space Enclosures, Inc. v. FMC, supra note 30, 420

F.2d at 588 (quoting United States Atlantic & Gulf Australia-

New Zealand Conf. v. FMC, 364 F.2d 696, 699 (D.C. Cir.

1966)).

82The statements in the Secretary’s affidavit were of the fol-

lowing nature:

it is my firm and continued opinion that without Agree-

ment 10140, the Gulf-United Kingdom Conference, the

members of which provide all-water service, will be hard

pressed to survive because the joint ocean/rail carrrier

parties to Agreement 10140 will find it difficult to resist

meeting BSC’s [Baltic Shipping Company’s] rates on high

value container cargo which, for them, is incremental traf-

fic, but which is, for the all-water conference lines, their

life’s blood. Agreement 10140 serves to counteract such

radical reaction to BSC rate practices by .. . afford[ing]

the opportunity for consideration of the drastic conse-

quences imprudent and reckless use of such action may

have on the all-water conference members and the long

term interests of the trade as a whole.

Succinctly stated, it is my opinion that the all water car-

riers wish to preserve and continue Agreement 10140 be-

cause it provides the only means at hand to deter the po-

tential for ruinous rate cutting, massive instability and

generally chaotic conditions in this tinder box trade.

Affidavit of C.J. Smith (Jan. 20, 1978) at 9-10, reprinted in

App. at 19-20.

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questions as to probable competitive behavior and its

probable effects are susceptible to determination in

the light of business and economist testimony and

exhibits, and cross-examinations concerning analyses

and underlying assumptions. Such matters are not to

be determined exclusively by reasoning in the

abstract, based upon logical speculation.

This is not to say that a full-scale evidentiary inquiry was

required in this case. We have already held that the Com-

mission did not err in failing to hold a formal hearing on

the Department’s written submissions. But it was incum-

bent upon the Commission to secure an adequate data base

for its predictions as to trade disruptions in the absence of

Agreement 10140. It was not entitled to accept at face

value the conclusory predictions of the Agreements’ pro-

ponents. “While we recognize that agency expertise is to

be accorded deference and that the Commission can cor-

rect present errors, neither of these principles can substi-

tute for the adequate evidentiary basis upon which the

Commission’s findings must rest.” 8%

We therefore remand the case to the Commission so that

it can reconsider, in light of sufficient data, its prediction

that the absence of Agreement 10140 would result in trade

disruption sufficiently serious to justify the Agreement’s

anticompetitive effects.24 The Commission should elicit

from proponents whatever specific evidence there may be

to support that prediction, and should permit the Depart-

ment an appropriate opportunity to evaluate that evi-

dence.®® We leave it to the judgment of the Commission to

83Memphis Light, Gas & Water Div. v. FPC, 504 F.2d 225,

234 (D.C. Cir. 1974).

84See generally D.C. Transit System, Inc. v. Washington

Metropolitan Area Transit Comm'n, 350 F.2d 753, 778-80 (D.C.

Cir. 1965).

85 Any reconsideration of the need for Agreement 10140

should also take into account the effect, if any, of the Ocean

Shipping Act of 1978, Pub. L. No. 95-483 §§ 2, 3, 92 Stat. 1607

62a

62

determine the form of the procedures to be employed on

remand. City of Huntingburg, Indiana v. FPC, 498 F.2d

778, 789 (D.C. Cir. 1974).

V. CONCLUSION

The Commission has jurisdiction under section 15 of the

Shipping Act to review a rate agreement between all-

water carriers and rail/ocean carriers who service the

same trade. This falls within the scope of section 15 as an

agreement between persons subject to the Act that affects

competition in connection with ocean transportation.

Commission jurisdiction over the agreement does not ¢on-

flict with ICC jurisdiction over land carriage, for the ICC

retains power over inland rates.

The Department of Justice, suing in its law enforcement

capacity, may challenge the order approving this agree-

ment by invoking the Hobbs Act’s judicial review provi-

sion in favor of a “party aggrieved.” The Department

qualifies as such a party because it participated below and

because the Commission approval of the rate agreement

directly interferes with the Department’s statutory duty

to enforce the antitrust laws. The Department’s sirmul-

taneous statutory involvement in the defense of Commis-

(amending Shipping Act §§ 1, 18, 46 U.S.C. §$§ 801, 817(c)(1)),

which was enacted after the Commission’s Order of Approval of

August 30, 1978. The Act provides in part that a government-

owned or controlled ocean carrier may not maintain rates that it

cannot demonstrate to be “just and reasonable.” The Commis-

sion recently disapproved rates of a Soviet-controlled carrier as

unjustly and unreasonably low in Specific Commodity Rates of

Far Eastern Shipping Company in the Phillippines/U.S.

Pacific Coast Trade, FMC Docket No. 79-104 (August 5, 1980).

The Ocean Shipping Act may be relevant to any reconsideration

here because the extent to which the Act deters Baltic Shipping

Company’s allegedly predatory practices will to that extent re-

duce the need the Commission has articulated for Agreement

10140.

63a

63

sion orders is at most a surface anomaly that does not ma-

terially interfere with an effective agency defense. Nor is

there otherwise any persuasive indication that Congress

meant to preclude the Department from seeking judicial

review of the orders of Hobbs Act agencies. And, tliis case

is constitutionally justiciable inasmuch as there is concrete

adverseness between the parties and the contreersy is of

the sort traditionally resolved by courts.

Although the Commission was not required to hold an

adversarial evidentiary hearing in this case, it was re-

quired to marshal sufficient data to support its factual,

predictive conclusions. Because the Commi;sion did not

base its expert judgment on a set of sufficient and specific

facts, but instead relied solely on the unsubstantiated con-

clusions of the Agreement’s proponents, we remand to the

Commission for elicitation of pertinent facts and reconsid-

eration of the factors relevant to the public interest.

Judgment accordingly.

64a

Wald, J., concurring in part and dissenting in part.

I concur in Judge MacKinnon’s exhaustive discussion

concluding that the Department of Justice (“the Depart-

ment” or “Justice”) has the statutory and constitutional

requisites to petition for the reversal of the Federal

Maritime Commission’s (“the Commission” or “the FMC”)

order approving Agreement No. 10140. I concur, too, in

his decision to remand the order to the Commission so that

it can reconsider and substantiate its conclusion that the

agreement is necessary to protect the members of the

Gulf-United Kingdom Conference from destructive com-

petitive influences.?

But I would go further than the majority opinion does

and require the Commission, on remand, to conduct a de-

tailed inquiry into the anticompetitive aspects of the

agreement so that it can make an informed judgment as to

1) whether it serves a valid transportation need and, more

fundamentally, 2) whether it is authorized by section 15.

My understanding of the law is that the Commission has a

clear statutory responsibility to make a detailed record of

the anticompetitive effects of a price fixing agreement

prior to deciding whether the agreement will be “in the

public interest.” This requirement exists even in the ab-

sence of a jurisdictional challenge, but becomes particu-

larly essential when the Commission’s basic authority to

approve an agreement is put in issue. See Federal

Maritime Board v. Isbrandtsen, 356 U.S. 481, 499 (1958)

(“precise findings by the Board as to a particular system’s

intent and effect . . . essential to a judicial determination

1Carriers have been accused of exaggerating the probable

effects of competition in their efforts to obtain governmental

protection from it. See Mansfield, “The Federal Maritime Com-

mission,” in The Politics of Regulation (J. Wilson ed. 1980) 70

(detailing attempt by American carriers to obtain favorable

legislation by overstating “Russian threat”).

1

65a

2

of the system’s validity under the statute”). The fact that

this agreement, with its far-reaching potential for ab-

rogating competition in transportation industries beyond

ocean carriers, straddles the outer boundary of section 15

jurisdiction accentuates the need for a complete record;

only a detailed record is capable of justifying the expan-

sion of inherently anticompetitive practices into new

transportation modes at a time when the legislative and

administrative trend is very much in the opposite direc-

tion.”

I cannot decide from this sparse record, consisting

primarily of self-serving affidavits by the Secretary of the

conference agreement in question, whether the “intent

and effect” of Agreement No. 10140 are such as to take it

outside the broad grant of antitrust immunity accorded by

section 15. The Department argues fervently that agree-

ments such as this one go far beyond the intended scope of

section 15 when they eliminate competition (1) between

conference and independent carriers, (2) between ocean

and intermodal routes, and (3) between intermodal

operators rather than ocean carrier operators. Its argu-

ment is persuasive, and deserved considerably more atten-

tion than it received from the Commission.

2The Railroad Revitalization and Regulatory Reform Act of

1976, 49 U.S.C. § 10706(a), restricts the antitrust immunity for

collective ratemaking by railroads formerly available under

§ 5(b) of the Interstate Commerce Act, 62 Stat. 491 (1948). It

directs the ICC to approve a collective ratemaking agreement

among railroads only if it affirmatively finds that the agree-

ment’s benefits outweigh its anticompetitive effects. The ICC

recently announced that a necessary component of such an af-

firmative funding is the demonstrated absence of more competi-

tive alternatives. Net positive benefits, if capable of being

achieved through less restrictive means, do not justify collective

ratemaking under this interpretation of the statute. See West-

ern Railroads— Agreement, 364 I.C.C. 31229, slip. op. at 12-13

(June 27, 1980).

66a

3

I. THE SCOPE OF SECTION 15

Whether such an agreement properly falls within the

scope of the antitrust immunity conferrable, by the Com-

mission pursuant to section 15 is a difficult and novel ques-

tion. Neither the statute on its face, the circumstances

surrounding its passage, nor subsequent interpretations of

it reveal any clear answers.

A. The Statutory Language

Section 15 applies to agreements between “[e]very

common carrier by water, or other person subject to this

chapter ....” 46 U.S.C. § 814. The statute defines the

term “common carrier by water” as “a common carrier by

water in interstate commerce on the high seas or the

Great Lakes on regular routes from port to port.” 46

U.S.C. § 801. “Other person subject to this chapter” re-

fers to any person not included in the definition of “com-

mon carrier by water” “carrying on the business of for-

warding or furnishing wharfage, dock, warehouse, or

other terminal facilities in connection with a common car-

rier by water.” /d.

United States Lines (“USL”) and Seatrain, the inter-

modal carriers, are clearly “common carrier[s] by water”

to the extent that their ships take goods from east coast

United States ports to the United Kingdom. In holding

that they are common carriers by water for the inland por-

tion of their transport as well, the FMC relies heavily on

the fact that both operations are carried out under the

same corporate umbrella; in its brief, it focuses on the fact

that the agreement is “among FMC-regulated ocean car-

riers.” Brief for Respondent FMC at 28 n.31.

However, the limitation in the Shipping Act’s definition

of a common carrier by water to one engaging in commerce

“on the high seas or the Great Lakes on regular routes

from port to port,” 46 U.S.C. § 801 (emphasis supplied),

casts doubt on whether the intermodals’ inland operations

are to be covered. It suggests that a type of activity

67a

4

rather than an entity is the basis of the FMC’s jurisdic-

tion.

The definition of “other carrier subject to this chapter”

as one engaged in “forwarding or furnishing wharfage,

dock, warehouse, or other terminal facilities,” id. (em-

phasis supplied), also seems to limit the application of sec-

tion 15. Since Congress specifically enumerated the

“others” it thought should be covered by the Act, it would

not be unreasonable to conclude that this list is exclusive,

and does not include the inland transport activities of the

ocean carriers from the FMC’s jurisdiction. The Depart-

ment’s contention that the FMC’s interpretation of section

15 would allow the FMC to bootstrap the authority to reg-

ulate the auto production activities of a conglomerate from

its ownership of an ocean transport firm may stretch the

argument too far, see Maj. Op. at n.59; however, it does

point out that the outer reach of the statutory language is

far from clear.

B. The Legislative History of Section 15

There are, to be sure, indications in the Alexander Re-

port? that the proposed legislation should encompass

water-rail through hauls.4 These recommendations, how-

3Report on Steamship Agreements and Affiliations by the

House Committee on Merchant Marine and Fisheries, H.R. Doc.

805, 63d Cong., 2d Sess. (1914) (“Alexander Report”). This re-

port laid the legislative groundwork for section 15.

4See Alexander Report, supra note 3, at 418 (steamship line

witnesses not opposed to government “approval of all agree-

ments or arrangements which steamship lines may have entered

into with other steamship lines, with shippers, or with other

carriers and transportation agencies”); 419-24 (recommenda-

tions that ICC approve “contracts entered into with other water

carriers, with shippers, or with American railroads and other

transportation agencies”; that the railroads be prohibited from

making the through rail-and-water route unprofitable as com-

pared to the all-rail route; that the ICC be empowered to compel

68a

5

ever, were made on the assumption that the ICC, which

already had regulatory jurisdiction over railroads, would

regulate ocean carriers as well. The bills ultimately passed

by Congress, and enacted as the Shipping Act, 1916, 46

U.S.C. §§ 801-842, however, did not give section 15 juris-

diction to the ICC but created a new Shipping Board to

supervise carrier agreements, with jurisdiction, discussed —

above, over “common carriers by water” only. Fur-

thermore, Congress specifically said in section 33 of the

same Act, 46 U.S.C. § 832, that such jurisdiction was “not

to be construed to affect the power or jurisdiction of the

Interstate Commerce Commission, nor to confer upon the

Board concurrent power or jurisdiction over any matter

within the power or jurisdiction of such Interstate Com-

merce Commission.” (Emphasis supplied).5 Thus the Alex-

ander Report recommendations are a dubious basis for

finding that Congress intended to include intermodal

agreements in section 15’s orbit.®

railroads to allow competitive water carriers to apply effective

differentials; and that the ICC have full supervisory power over

divisions between railroad and water carriers as regards

through rail-and-water rates).

5This section is discussed in greater detail infra at text at

notes 7-8.

®The Alexander Report seemed like a shaky foundation for

asserting regulatory authority over intermodal rates to previous

FMC chairmen; successive FMC chairmen testified in Congres-

sional hearings in 1968, 1972 and 1976 that new legislation giv-

ing the Commission authority to regulate intermodal agree-

ments was both necessary and desirable. See Hearings on H.R.

1080 Before the Subcomm. on Merchant Marine of the House

Comm. on Merchant Marine and Fisheries, 94th Cong., 2d

Sess. 5 (Sept. 15, 1976) (statement of Karl Bakke, Chairman,

FMC); Hearings on H.R. 15465 Before the Subcomm. on Mer-

chant Marine of the House Comm. on Merchant Marine and

Fisheries, 92d Cong., 2d Sess. 22 (Sept. 18, 1972) (statement of

Helen Bentley, Chairman, FMC); and Hearings on S. 3235 Be-

fore the Senate Comm. on Commerce, 90th Cong., 2d Sess. 30

69a

6

C. Judicial Interpretations of Section 15

I have been unable to find any judicial precedent which

clearly supports the proposition that conferences may le-

gally set intermodal through rates for their own members,

let alone any which says that conferences may set such

rates for the independent nongonference members that or-

dinarily do business in competition with conference mem-

bers. Even the FMC, which has asserted authority to ap-

prove intermodal rates in approximately 50 cases, admits

that “(t]he courts have [only] implicitly recognized FMC

jurisdiction over agreements concerning transportation by

both FMC and ICC carriers.” Jn re: Agreement Nos. 150

DR-7 and 3103 DR-7, 19 S.R.R. 1229, FMC Docket No.

76-11, slip op. at 14 n.12 (Dec. 31, 1979).

The case upon which the majority primarily relies, Port

of New York Authority v. FMC, 429 F.2d 663 (5th Cir.

1970), cert. denied, 401 U.S. 909 (1971), approved only the

absorption of port terminal charges by shipping confer-

ences and the proportional ocean portion of through inter-

modal routes. The appeal did not raise any questions going

to the FMC’s jurisdiction over through rates. Although

Seatrain International, S.A. v. FMC, 584 F.2d 546 €D.C.

Cir. 1978), appeal after remand, 598 F.2d 289 (D.C. Cir.

1979), dealt with intermodal rates set by a conference, the

court never decided the jurisdictional issue. The court re-

manded the case to the FMC on each occasion due to its

failure to adequately consider the antitrust implications of

the involved intermodal rate agreement.

The other cases cited by the majority in support of its

expansive reading of section 15, see Maj. Op. 39-47, are

equally inapposite; they deal with altogether different is-

(June 17, 1968) (statement of Rear Adm. John Harllee (ret.),

Chairman, FMC). Cf. American Trucking Ass’ns v. Atchison,

Topeka & Santa Fe Ry. Co., 387 U.S. 397, 418 n.9 (1967) (dis-

tinguishing present entitlement of motor carriers to use of rail-

road open tariffs for trailer-on-flatcar service from joint inter-

modal through rates permissible under proposed legislation.)

70a

7

sues such as labor agreements and brokerage commis-

sions. There is no question but that section 15 is a double

edged sword. It guarantees FMC scrutiny of maritime-

related conduct, but it also immunizes approved agree-

ments from antitrust strictures. Thus, reasons exist to

read section 15 expansively in some instances, i.e., to in-

sure FMC scrutiny of maritime-related activities and nar-

rowly in others, i.e., where its grant of antitrust immunity

means the carriers will be subjected to far less scrutiny

than if it did not apply in borderline situations. This case is

obviously in the latter category. But see Volkswagenwerk

Aktiengesellschaft v. FMC, 390 U.S. 261, 274-75 (1978)

(advocating broad reading of section 15).

D. Collateral Statutory Limitations on Section 15: Sec-

tion 33

I cannot dismiss as easily as the majority the argu-

ment that section 33 of the Shipping Act, 46 U.S.C. § 832,

which withholds from the FMC “concurrent power or

jurisdiction of [the] Interstate Commerce Commission,”7

may in fact be violated by the Commission’s approval of

Agreement No. 10140, but would have the hearing on re-

mand go into that issue more thoroughly. The FMC’s as-

sertion of jurisdiction over the through intermodal rates of

Agreement No. 10140 rests on the assumption, adopted by

the majority opinion, that there is no functional difference

between permitting the ocean carriers to agree on the

ocean division proportion of a joint through fare (the De-

749 U.S.C. § 10541 grants the ICC jurisdiction over transpor-

tation:

(3) by water carrier or by water carrier and rail carrier

or motor carrier between a place in the United States and a

place outside the United States, to the extent that—

(A) when the transportation is by rail carrier or motor

— the transportation is provided in the United

tates.

(Emphasis supplied).

7la

8

partment does not contest that power) and permitting

them to agree on joint intermodal through fares since in

each case each intermodal member has to make its own

arrangement with the land carrier as to the ICC-regulated

land division proportional rate. See Maj. Op. at 40. I agree

with the Department that agreements on joint intermodal

through fares (which include surface land rates) may have

a significantly different anticompetitive effect on shippers

and carriers than simple agreements on the proportion of

payments from an intermodal fare that go to the ocean di-

vision. That a difference may exist is all the more likely

now that ICC policy, exercised pursuant to new legisla-

tion, frowns heavily on collective setting of the landbased

rates and aggressively promotes competition as to such

rates.

While the record before us is too bare to support any

final conclusions, I can envision several repercussions from

allowing ocean carriers and intermodal carriers to agree

on joint through rates. If railroads cannot collectively set

the inland division in their negotiations with shippers,

shippers may gain price advantages through competition

on that portion of the route. If Agreement No. 10140 were

not in effect, those same shippers might obtain a lower

total rate by adding the agreed upon ocean rate to the in-

dividually negotiated land rate, or they might comparison

shop between the ocean-only rate and the intermodal rate.

But because Agreement No. 10140 sets the same total

through rates for all minibridge and water carriers who

are parties to the agreement affecting both all-water

routes and intermodal routes, it provides no incentive for

the shippers to shop for a bargain or for the railroads; who

are supposed to compete for the shippers’ business, to try

and reduce their costs. The only negotiable point would be

between the individual railroads and the individual ocean

carriers as to their proportional divisions of the uniform

through rate. I have no idea whether such competition

could or would develop; I do know one cannot judge

whether the ICC’s regulatory jurisdiction over the rail-

_ 72a

9

road leg of the trip is effectively undermined without

knowing ‘more about what would happen to existing pat-

terns of competition under such circumstances.®

Moreover, this limited potential for competition differs

significantly from the potential that exists when carriers

can agree only on the ocean division, leaving the shippers

free to partake of any benefits accruing from the railroads’

competition for their business.

In sum, I find the question of the scope of section 15 a

difficult one, one which no court has ever expressly con-

sidered. It is too important a question to be finally decided

in this case on the puny record provided by the Commis-

sion. Rather, the full implications of immunity for inter-

modal tariff agreements should be carefully reviewed in

light of the origins and purpose of that section and the Act

as a whole.

II. THE COMMISSION’S BURDEN UNDER THE

SvenskA DOCTRINE

Assuming arguendo that the Commission has jurisdic-

tion to approve intermodal conference agreements, it can-

not do so without engaging in a more extensive inquiry,

resulting in more detailed findings of facts, than it did in

this case. The Supreme Court, accepting the FMC’s own

interpretation of its statutory mandate to disapprove

agreements that it finds to be “contrary to the public

interest,” places on the proponents of an anticompetitive

agreement the burden of “‘bring[ing] forth such facts as

would demonstrate that the ... rule was required by a

serious transportation need, necessary to secure impor-

tant public benefits or in furtherance of a valid regulatory

purpose of the Shipping Act.’” FMC v. Aktiebolaget

®See Brief for the United States at 20-21 (“[I)f the water car-

riers agree on intermodal rates, . . . . the primary beneficiaries

of any ICC regulation of the inland divisions would be the ocean

carriers, and that agency’s ability to protect the iswrests of the

public would be frustrated.”).

73a

10

Svenska Amerika Linien, 390 U.S. 238, 243 (1968).

Moreover, “once an antitrust violation is established,” this

burden cannot be satisfied “unless other evidence in the

record detracts from the weight of this factor.” Jd. at 246.

In my view, this means that, once triggered by an ac-

knowledgedly anticompetitive agreement such as this one,

the Commission may not confine its inquiry to the justifi-

cation for the agreement, but must explicitly balance this

justification against the agreement's anticompetitive

costs. Such balancing cannot take place without an initial

exploration of the extent of these costs, an exploration

that is the Commission’s responsibility to perform rather

than a burden resting on the opponents of the agreement.

That this is the proper interpretation of Svenska is

made clear in another case decided that term, Volks-

wagenwerk Aktiengesellschaft v. FMC, 390 U.S. 261, 273

(1968), in which the Court emphasized that a broad read-

ing of section 15 is tied to the Commission’s duty “to con-

sider the antitrust implications” of the agreements it ap-

proves. Moreover, this court has repeatedly adhered to

this interpretation. In Seatrain International, S.A. v.

FMC (Seatrain 1), 584 F.2d 546 (D.C. Cir. 1978), we re-

manded to the Commission an order approving an inter-

modal tariff agreement between conference members be-

cause of its failure to adequately explore its antitrust im-

plications sayin, ,

[the Commission] must conduct whatever proceedings

are necessary for it to secure sufficient information so

that its final decision will reflect “a consideration of

the relevant factors.”

Id. at 550. One of these factors was the agreement’s

“likely anticompetitive effects.” Jd. at 549. In Seatrain

Internationa, S.A. v. FMC (Seatrain II), 598 F.2d 289

(D.C. Cir. 1979), the court again remanded the same order

to the Commission for its continued failure to “perform its

duties with a full understanding of the economic and com-

mercial situation.” Jd. at 295. The court warned the

agency,

74a

1]

[aJntitrust considerations thus must be fully consid-

ered and anticompetitive agreements can be approved

only if there are “serious” and “important” advan-

tages for the public.

Id. at 293. In United States Lines, Inc. v. FMC, 584 F.2d

519 (D.C. Cir. 1978), furthermore, this court explicitly

rejected the argument that the FMC need only consider

the evidence of anticompetitive effects put forward by the

opponents of an agreement, calling the FMC’s duty to in-

vestigate the antitrust implications of agreements an “in-

dependent statutory responsibility.” Jd. at 531.

The Commission itself seems to have admitted in other

cases that it must explore the noncompetitive conse-

quences of agreements before it can decide if they are

“justified.” See Brief for Respondent FMC at 34 (“The

scope and depth of proof required for approval varies from

case to case in relation to the degree of invasion of the

antitrust laws.’’); Agreement No. 57-96— Pacific

Westbound Conference—Extension of Authority for

Inter-Modal Services, 19 F.M.C. 291, 300 (1975); Agree-

ment No. 8760-5 —Modification of the West Coast United

States & Canada/India, Pakistan, Burma & Ceylon Rate

Agreement, 17 F.M.C. 61, 62 (1973).

However, the Commission has patently failed to meet

this “independent statutory responsibility” in this case.

Although in 1977, just one year earlier, the FMC limited

an extension of the involved agreement to one year be-

cause it “determined that a closer examination is needed

regarding agreements between all water carriers and

minibridge carriers,” J.A. 35, in 1978, this “closer exam-

ination” was reduced to a cursory glance. The FMC’s sole

bases for concluding that “[t)he actual anticompetitive ef-

fect of Agreement No. 10140 does not appear to be of

major significance—it is most certainly not ‘severe,’” J.A.

153, despite its recognition that “[a]s a price fixing agree-

ment, Agreement No. 10140 is per se violative of the

Sherman Act,” J.A. 149, are conclusory statements un-

supported by data, analysis, or even explanation.

75a

12

The majority opinion accepts this conclusory “exper

judgment” that any anticompetitive effects engendered by

the agreement will be justified if the carriers survive; they

remand only to decide whether the conference is truly

threatened. See Maj. Op. at 56-62. They do so on the

ground that no disputed fact questions were raised, that

the Department’s objections were merely economic and

antitrust “theories.” See id.

While it may well be that the Commission need not have

a formal “on the record” evidentiary hearing, see United

States Lines, Inc. v. FMC, 584 F.2d 519, 536-37 (D.C.

Cir. 1978), in my view, it has to do more than it did to

meet the Srenska burden. It must provide a record that

explores, discusses, and investigates in detail the anti-

competitive effects of this agreement. The implications of

the decision are enormous; they deserve more attention

than they received. Two areas in particular need further

substantiation.

A. The Effects on Intermodal Transportation

I find it difficult to understand how as critical an issue

as the immunization from the antitrust laws of intermodal

transportation can be decided without a full airing of the

economic effects of this expansion of section 15 authority.

The decision has the potential to significantly affect the

economics of intermodal carriers, all-water carriers, con-

ference carriers, and independent carriers.

Intermodalism, although existing in embryonic form in

1916 when the Shipping Act was passed, did not become a

major factor in the transportation industry until the ad-

vent of containerization in the late 1950’s. It has since

been hailed as the wave of the future, in large part be-

cause it is supposed to lead to the reduction of shippers’

costs. See Note, Containerization and Intermodal Service

in Ocean Shipping, 21 Stan. L. Rev. 1077, 1090-91 (1969)

(“Intermodal service offers the shipper both internal sav-

ings and procedural simplification .... The combination

76a

13

of containerization and intermodal service creates a rein-

forcing effect and provides savings and service options

that neither could offer independently.”). The nonconfer-

ence carriers like Seatrain and United Statés Lines

pioneered the transition to intermodalism; the carrier

conferences, despite the FMC’s encouragement, delayed

implementation of intermodal innovations. Chief Judge

Wright wrote in Seatrain I], 598 F.2d 289, 296 (D.C. Cir.

1979):

[i]t seems at best naive to expect a cartel, which has

no more important purpose than preserving stability

in its industry, to pioneer innovations .... Thus

conferences might well be viewed as less effective ve-

hicles for implementing intermodal service.

This agreement threatens to depress even further any in-

centive for conference members to enter into intermodal

ventures by doing away with competition between water

and intermodal carriers and artificially equalizing their

rates.

The ultimate issue in this case is who, if anyone, will

benefit from the admitted economies of containerization

and intermodalism: shippers and their customers or the

carrier cartels. See Final Report of the National Trans-

portation Policy Study Commission: National Transporta-

tion Policies Through the Year 2000 at 286 (1979);

Schmeltzer & Peavey, Prospects and Problems of the

Container Revolution, 1 J. Mar. L. & Com. 211 (1970);

Note Coordination of Intermodal Transportation, 69

Colum. L. (Rev. 247, 252 (1969); Note, Containerization

and Intermodal Service in Ocean Shipping, 21 Stan. L.

Rev. 1077, 1095-96 (1969); McGee, Ocean Freight Rate

® “Technological advances in an industry do not usually

create problems of public policy; the price system will au-

tomatically bring about adjustments between the produc-

ers and consumers in the industry in accordance with the

changed conditions. The noncompetitive and regulated na-

ture of the ocean-shipping industry, however, inhibits

77a

14

Conferences and the American Merchant Marine, 27 U.

Chi. L. Rev. 191, 226 (1960).

Intermodal arrangements can embrace an infinite vari-

ety of combinations, including cross-country surface as

well as international air hauls. By allowing all water con-

ference carriers to agree with minibridge land and air car-

riers on through rates from any point of origin to any des-

tination, the Commission is excluding from the reach of

our antitrust laws and the free murket a momentous

transportation development, not remotely anticipated by

the drafters of section 15 in 1916, without any kind of full

airing of the effects of such insulation on the transporta-

tion industries, shippers and customers.

B. The Anticompetitive Possibilities of Agreement No.

10140

Agreement No. 10140 threatens not only to forestall the

assimilation of technological innovation into the industry,

but in so doing, to undermine any price competition which

heretofore existed to limit the monopolistic tendencies of

the carrier cartels. When Congress passed the Shipping

Act, 1916, allowing the carrier conferences to set rates, it

relied on the presence of independent nonconference car-

riers to assure that the conferences did not exploit the

shippers.'° See Alexander Report, supra note 3, at 298-

300. The same concern for preserving independent carriers

was evinced during the debates on the 1961 amendments

to the Shipping Act, see Index to Legislative History of

these automatic adjustments. Substructures brought about

by containerization and intermodal services have not been

reflected in price changes, and these rigidities have

created undesirable allocative effects.

10This concern manifested itself in the inclusion of provisions

in the Shipping Act protective of the independents such as 46

U.S.C. § 812 (prohibiting conferences’ use of certain predatory

practices) and 46 U.S.C. § 814 (requiring conferences to admit

all qualified carriers).

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Steamship Conferences Dual Rate Law, S. Doc. 100, 87th

Cong., 2d Sess. 425 (1962) (statement of Senator

Kefauver), and has been noted by the Court, see Federal

Maritime Board v. Isbrandtsen Co., 356 U.S. 481, 491

(1958) (“The Congress in § 14 [of the Shipping Act] has

flatly prohibited practices of conferences which have the

purpose and effect of stifling the competition of independ-

ent carriers.”). By creating a binding agreement between

independent minibridge operators and a conference to con-

trol both all-water and intermodal rates, Agreement No.

10140 not only prevents the development of intermodal

routing by the conference, and the resultant trickling-

down of benefits to shippers, but also eliminates the possi-

bility that independents will pass on part of the savings

engendered by intermodalism to the shippers. See Larner,

Public Policy in the Ocean Freight Industry in Promoting

Competition in Regulated Markets 103, 133 (Philips, ed.

1975) (advocating rejection of rate agreements between

group carriers in one mode and individual carriers in

another). Quite simply, it allows the conference to control

the through rate of the intermodal service at the price

prevailing on the water carrier routes. The independents’

role as a potential brake on prices is thus destroyed.

It seems to me that Svenska requires that the Commis-

sion explore much more thoroughly than it did the extent

of the effect of this agreement, with its potential for

eliminating competitive restraints central to the Congres-

sionally devised plan, on price and service. Any rational

weighing of the benefits against the costs of Agreement

No. 10140 requires the collection and analysis of data on

its effect on competition (1) between water carrier confer-

ence members, (2) between minibridge operators, (3) be-

tween water carrier members and minibridge operators,

and (4) between all of the above and Baltic carriers, as

well as its repercussions on shippers and consumers.

Moreover, this agreement may run counter to a specific

prohibition contained in the statute. Section 15 forbids the

Commission to approve any agreement “between carriers

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not members of the same conference ... that would

otherwise be naturally competitive, unless in the case of

agreements between carriers, each carrier, ... retains

the right of independent action.” The FMC and Seatrain

assert that the 48 hour “opt-out” provision of the agree-

ment sufficiently preserves “the right of independent ac-

tion” to meet the statutory mandate. J.A. 109-10. How-

ever, they back this assertion with little, and I might add,

highly equivocal evidence.'! Therefore, I would require

the Commission to investigate the practical utility of the

“opt-out” provision, and to issue findings on its conformity

with section 15’s “independent action” requirements.

Finally, it is becoming clear that Agreement No. 10140

has an anticompetitive “ripple effect.” The FMC, we are

informed, has authorized dual rate contracts for inter-

modal shipments covered by conference agreements. Be-

cause Congress specifically authorized dual rate agree-

ments in 1961, the FMC is maintai

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