# Petition — Water Transport Ass'n v. Interstate Commerce Commission > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385011_0886%3A1 ## Record - **Collection:** Supreme Court brief - **Document type:** Petition - **Published:** January 1, 1984 - **Citation:** 465 U.S. 1006 ## Text Office - Supreme Court, U.S. R3-"59n FILED Nov 2 1983 No. 83- STEVAS, CLERK IN THE Supreme Court of the United States OCTOBER TERM, 1983 WATER TRANSPORT ASSOCIATION, Petitioner, Vv. INTERSTATE COMMERCE COMMISSION, UNITED STATES OF AMERICA, CSX CORPORATION, TEXAS GAS RESOURCES CORPORATION, and EASTERN COAL TRANSPORTATION CONFERENCE, Respondents. PETITION FOR A WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE DISTRICT OF COLUMBIA CIRCUIT RICHARD A. ZELLNER A. DUNCAN WHITAKER, P.C. NEIL K. EVANS ALAN M. WISEMAN MARK E. STAIB (Counsel of Record) GREGORY M. GORDON Scott E. FLIcK HAHN, LOESER, Howrey & SIMON FREEDHEIM, DEAN 1730 Pennsylvania Ave., N.W. & WELLMAN Washington, D.C. 20006 800 National City (202) 783-0800 E. 6th Building Counsel for Petitioner Cleveland, Ohio 44114 Water Transport Association (216) 621-0150 as WILSON - EPES PRINTING Co.. INC. - 789-0096 - WASHINGTON, D.C. 20001 QUESTION PRESENTED Whether the provisions of the Panama Canal Act pro- hibiting a railroad from acquiring any interest in a water carrier prior to a full hearing and determination by the Interstate Commerce Commission that competition will not be reduced and that the transaction is in the public interest prohibit the second largest railroad in the United States from acquiring a 100% ownership interest in the nation’s largest inland water carrier through a voting trust prior to such a hearing and determination. PARTIES All parties are named in the caption.* *In accordance with Rule 21.1(b) of the Rules of the Supreme Court, the members of the Water Transport Association and their parent companies, subsidiaries (except wholly-owned subsidiaries) and affiliates are set forth beginning at page 113a of the Appendix. (i) TABLE OF CONTENTS Page ng tg 2-4 y 3 | CEE i REET PS oe oe RE A ei i I OU EE OD... nsnccnecocesvsosstuasnsebnctedecunaminesnante iii Ee Me I on oscieececccseceocecthchonncntsntenctoges iv ET TAR RRM a TCR Da 1 EE AEE ae ee eee Sed 2 STATUTES AND REGULATIONS INVOLVED ......... 2 i so sceseceulgibdibehiicinseadiaiab amen 3 Se i Oe 4 B. The Proceedings Before the ICC ..........0.00000...... 5 C. Proceedings in the Court of Appeals ................... 7 REASONS FOR GRANTING THE WRIT ........0........... 11 A. A Railroad’s Acquisition of a 100% Ownership Interest in a Competing Water Carrier Through a Voting Trust, Prior to a Full Hearing and Specific Findings by the Interstate Commerce Commission, is Prohibited by the Panama SIR IEES Ae CEI et ce EE Rae PRE Be 11 B. The Court of Appeals’ Decision Will Substan- tially Impair the National Transportation Policy and Nullify the Congressional Prohibi- tion of Railroad Acquisition of Water Carriers.. 18 SEES APRS eRe BE TTS ONO SAE 23 (iii) iv TABLE OF AUTHORITIES CASES Page American Waterways Operators, Inc. v. United States, 386 F. Supp. 799 (D.D.C. 1974), aff'd SS Ge SIs O CIPIIED: scspencetesnbicssicapbinestncnes 11 Chicago, Milwaukee, St. Paul & Pacific Railroac Control, Bremerton Freight Car Ferry, Inc., 312 ee sc aabdipcemationes 16 F. & M. Schaefer Corp. v. C. Schmidt & Sons, Inc., 607 F.2d 814 (2d Cir. 1979)..................00..cccccocceres 22 FTC v. Lancaster Colony Corp., 434 F. Supp. 1088 I SPEND ca tesecacuniedis souhsdis tomaimanoncuiasiaaones 22 FTC Weyerhaeuser Co., 665 F.2d 1072 (D.C. Cir. Sanda gE ROE ID Seen 9 aaa CP rea 22 Illinois Central Railroad—Control—John I. Hay SSE ay SEED MRININIED wiccqncoasnancbtumietbsacnonseecsmesne 16, 17 Investigation of Seatrain Lines, Inc., 206 I.C.C. Billed RE a 2 ESAS Selo OS: bee NE 18, 17 Lake Line Applications Under Panama Canal Act, en I IE casedien disease scckasbcenedctendessecin 11, 20 Motor Vehicle Manufacturers’ Association v. State Farm Mutual Automobile Insurance Co., 108 8S. I er 16 Nicholson Universal Steamship Co. Ownership, 248 tT nn 12-18 Water Transport Association v. CSX Corp., No. 88-1874 (D.D.C. June 29, 198%) .......................... 7 Water Transport Association v. CSX Corp., Nos. 88-1715, 88-1716 (D.C. Cir. June 30, 1983) ........ 7 STATUTES AND REGULATIONS ey NE COIN vice rstddgsetserecedeoringponsiion 2 Rs AE CIND CUED cincdtdvncsinccctensccnccenserceconcbed 8, 8, 12 Rae DUE aitiekenceseetiadisanpescuncdictsinnsbasos 8,14 49 U.S.C. § 10101 (Supp. V 1981) ................ 8, 18, 14, 18 49 U.S.C. §1010la (Supp. V 1981) ...........00000002... 18 49 U.S.C. § 11821 (Supp. V 1981) .......................... passim 49 U.S.C. §11821(b) (Supp. V 1981) 2.000000... 13 49 U.S.C. §11821(c) (Supp. V 1981) .........00000...... 13 49 U.S.C. § 11343 (Supp. V 1981) ......0......... 8, 5, 15, 21 v TABLE OF AUTHORITIES—Continued Page 49 U.S.C. § 11844 (Supp. V 1981) ................0...... 3 ee tA se cee aR 3,6 uit We MOR CRIED ccccdcesecesercecicesleccinvconkcnts 5 BR eo. ) Lenn aE 8,15 LEGISLATIVE MATERIALS Act of Aug. 24, 1912, ch. 390, § 11, 37 Stat. 566.. 2 Act of Oct. 17, 1978, Pub. L. No. 95-478, §§ 1, 2, eS i a 3,138 48 Cong. Rec. 6928, 9232, 10458, 11055 (1912)....... 12 ke MR | eee 14 H.R. Conf. Rep. No. 1430, 96th Cong., 2d Sess. 1438, reprinted in 1980 U.S. Code Cong. & Ad. News PES III anv hnsNecUitscardhesesazehasael tevmbacabaileh: stseasmenates 19 H.R. Rep. No. 423, 62d Cong., 2d Sess. 12 (1912).. 11-12 Message of the President to Congress, February 26, 1908, S. Doc. Vol. 17, 60th Cong., 1st Sess. Fit ireh ARES ea BOE ie OC ERE a WLS 19 National Transportation Policy, Pub. L. No. 76- 785, 54 Stat. 898, 899 (1940) 0000 ee. 14, 18 Railroad Revitalization and Regulatory Reform Act of 1976, Pub. L. No. 94-210, 90 Stat. 31........ 20 S. 1855, 86th Cong., Ist Sess. (1959) 000000. 19 S. 48, 97th Cong., 2d Sess. (1982) 00.0.0... cee 19 Staggers Rail Act of 1980, Pub. L. No. 96-448, §§ 101(a), 707, 94 Stat. 1895, 1897, 1965-66.... 18, 20 IN THE Supreme Court of the United States OCTOBER TERM, 1983 No. 83- WATER TRANSPORT ASSOCIATION, Petitioner, V. INTERSTATE COMMERCE COMMISSION, UNITED STATES OF AMERICA, CSX CORPORATION, TEXAS GAS RESOURCES CORPORATION, and EASTERN COAL TRANSPORTATION CONFERENCE, Respondents. PETITION FOR A WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE DISTRICT OF COLUMBIA CIRCUIT Petitioner, the Water Transport Association (“WTA”), respectfully requests that a writ of certiorari issue to re- view the judgment of the United States Court of Ap- peals for the District of Columbia Circuit entered in this case on August 4, 1983. OPINIONS BELOW The opinion of the Court of Appeals majority (Wald and Scalia, JJ.) and the dissenting opinion of Judge Harold H. Greene, sitting by designation, are not officially reported, but are reproduced at pp. la and 33a of the Appendix to this petition, respectively. The unreported 2 decision of the Interstate Commerce Commission denying the WTA’s petition for a declaratory order is reproduced at p. 51a of the Appendix. JURISDICTION The judgment of the Court of Appeals was entered on August 4, 1983. Appendix, p. 68a. A petition for rehear- ing with suggestion for rehearing en banc was filed on Saturday, August 6, 1983 and was denied the same day, although five of the ten judges of the court did not par- ticipate in considering the suggestion for rehearing en banc, and a sixth judge voted to defer consideration of the rehearing en banc. Appendix, pp. 7la, 72a. A peti- tion for reconsideration of the order denying rehearing en banc was filed on August 13, 1983, and was denied on October 28, 1983. Appendix, p. 74a. The jurisdiction of this Court is invoked pursuant to 28 U.S.C. § 1254(1) (1976). STATUTES AND REGULATIONS INVOLVED The principal statutory provision involved is Section 11 of the Panama Canal Act of 1912' (codified as amended at 49 U.S.C. § 11321 (Supp. V 1981)). It provides in relevant part that a rail carrier, or a person controlling a rail carrier, ‘may not own, operate, control or have an in- terest in a water common carrier or vessel carrying prop- erty or passengers on a water route with which it does or may compete for traffic” unless the Interstate Commerce Commission has determined after a “full hearing” that such “ownership, operation, control or interest will still allow that water common carrier or vessel to be operated — in the public interest advantageously to interstate com- merce and that it will still allow competition, without reduction, on the water route in question.” The full text of the statute as presently codified is reproduced at p. 75a of the Appendix. 1 Act of Aug. 24, 1912, ch. 390, § 11, 37 Stat. 566. 3 Section 11 of the Panama Canal Act as enacted is re- produced at p. 77a of the Appendix. Sections 5(15)-(17) of the Interstate Commerce Act, 49 U.S.C. §§ 5(15)-(17) (1976), which contained the relevant provisions of the Panama Canal Act, as amended, prior to their 1978 re- codification without substantive change in Section 11321, is reproduced at p. 79a of the Appendix.? Sections 11343 and 11344 of the Interstate Commerce Act, 49 U.S.C. §§ 11343-44 (Supp. V 1981), which pro- hibit an ICC-regulated carrier from acquiring “control” of another such carrier without Commission approval are reproduced at p. 8la of the Appendix. The Voting Trust Rules, 49 C.F.R. § 1013 (1982), promulgated by the Com- mission to permit persons “to acquire interests in regu- lated carriers” * while “avoid{ing] an unlawful control violation” * under Sections 11343-44 are reproduced at p. 86a of the Appendix. STATEMENT Under the Panama Canal Act provisions ofthe Inter- state Commerce Act, 49 U.S.C. § 11321 (Supp. V 1981), a railroad or a person controlling a railroad is forbidden to “own, operate, control, or have an interest in’ a com- peting water carrier or vessel without first obtaining In- terstate Commerce Commission approval after a full hear- ing. This case involves the application of the Panama Canal Act prohibition to the acquisition by CSX Corpora- tion (“CSX”), a holding company whose subsidiaries now comprise the nation’s second largest railroad system, of 2The entire Interstate Commerce Act, including the Panama Canal Act, was recodified in 1978, but such recodification was not intended to make any substantive change in the law. Act of Oct. 17, 1978, Pub. L. No. 95-478, §$ 1, 2, 92 Stat. 1887 (codified as amended at 49 U.S.C. § 10101 (Supp. V 1981)). For this reason, reference to the precodification text of the Panama Canal Act is appropriate to ascertain its meaning. 8 44 Fed. Reg. 59909 (1979). 449 C.F.R. § 1018.1(a) (1982). 4 the nation’s largest inland water carrier, the affiliates of Texas Gas Resources Corporation (“Texas Gas”) known as American Commercial! Lines, Inc. (“ACL”). As shown on the maps appended to this petition (pp. 89a, 90a), the routes and geographic regions served by ACL in many instances overlap and parallel those served by CSX’s rail- road subsidiaries. CSX and ACL are giants in their respective industries. In 1982, CSX had revenues from rail freight operations in excess of $4.3 billion. CSX blankets a 22-state area east of the Mississippi, operating from the Great Lakes to the Gulf of Mexico and from the Atlantic Coast to the Mississippi River. CSX is the nation’s largest coal car- rier, transporting more than 224,000,000 tons of coal in 1982. ACL’s barging operations constitute one of the principal integrated water transportation businesses on the Mississippi River and its tributaries, covering the in- land waterway system, extending from Pittsburgh in the east to Tulsa in the west, from Minneapolis in the north to New Orleans in the south and across the Gulf of Mexico. Like CSX, ACL transports a huge volume of traffic, comprised of many of the identical commodities transported by CSX, including coal, grain and chemicals. In 1982, ACL’s traffic amounted to 18.4 billion ton miles. In the barge transport industry, which includes many family-owned and run operations, ACL is a dominant force. There is strong competition for transportation of bulk commodities between CSX and water carriers, in- cluding ACL. A. The Tender Offer On June 6, 1983, Coastal Corporation (‘Coastal’) com- menced a tender offer for the common stock of Texas Gas. To thwart the Coastal offer, Texas Gas entered into an agreement with CSX which resulted in CSX’s making a competing tender offer for all of the shares of Texas Gas. On June 23, 1983, Texas Gas agreed to pay Coastal $18 5 million in exchange for Coastal’s withdrawal of its tender offer. The agreement between CSX and Texas Gas provided that the shares of ACL would be placed in a voting trust pending proceedings before the ICC. CSX and Texas Gas acknowledged in the agreement that the use of a voting trust might not be “legally possible.” Although ICC reg- ulations permit the use of a voting trust “to avoid an unlawful control violation” under 49 U.S.C. § 11843," the Commission had never determined that a voting trust per- mitted a rail carrier to acquire a water carrier without violating the more encompassing prohibition of the Pan- ama Canal Act provisions contained in Section 11321. Appendix, p. 57a. Texas Gas nevertheless filed a voting trust agreement with the ICC on June 10, 1988, which was superseded by a revised agreement filed on June 14, 1983. Appendix, p. 91a. On June 20, 1983, at the re- quest of CSX and Texas Gas, the ICC staff issued an “in- formal nonbinding” opinion letter that the revised voting trust agreement would “insulate” CSX and Texas Gas “from violation of the Commission’s policy against an un- authorized acquisition of control of a regulated carrier.” Appendix, pp. 106a-107a. The staff did not determine that the voting trust arrangement would allow CSX to avoid acquiring an “interest” prohibited by the Panama Canal Act. B. The Proceedings Before the ICC On June 23, 1983, the WTA on behalf of itself and its members * filed with the ICC a petition seeking a de- claratory order that the CSX-Texas Gas voting trust 5 49 C.F.R. § 1013.1(a) (1982) (emphasis eupplied). * The membership of the WTA consists of certificated water car- riers that are actively engaged in serving the public on the coastal and inland waterways of the United States. They compete with both the railroads owned by CSX and the bargeline subsidiaries of Texas Gas, in general and on specific routes. 6 agreement would not insulate CSX from a violation of the Panama Canal Act if it proceeded to acquire an “inter- est” in the Texas Gas water carrier affiliates. The WTA’s petition pointed out that Section 11321 prohibits a rail- road not only from acquiring “control” of a competing water carrier, but also from acquiring an “interest” in such a water carrier. For this reason, the WTA con- tended that a voting trust arrangement could not prevent a violation of Section 11321 because the Commission’s voting trust rules, 49 C.F.R. § 1013 (1982), relate only to unauthorized acquisitions of “control.” The WTA’s petition also asserted that the use of a voting trust ar- rangement would defeat the plain intent of the Panama Canal Act by denying the WTA and other interested parties their statutory right to a “full hearing” before CSX’s acquisition of a 100% interest in the Texas Gas water carrier subsidiaries. Finally, the WTA contended that the voting trust agreement was inadequate, in any event, because of uncertainties regarding its scope, inter- locking corporate directors, the presence of continuing fi- nancial interests, and the absence of restrictions on anti- competitive communication and cooperation between CSX and ACL. Six days later, on June 29, 1983, to accommodate the expediency of the tender offer, the ICC denied WTA’s petition and its June 27, 1983 motion to enjoin CSX from acquiring Texas Gas shares in violation of the Panama Canal Act.’ The Commission admitted that its “prior * When the WTA filed its declaratory order petition on June 28, 1983, CSX was not scheduled to begin purchasing any Texas Gas shares until midnight on July 7, 1988. Late on Friday afternoon, June 24, 1988, counsel for the WTA (as well as the ICC staff) learned that CSX had announced that it was acceierating its time- in the United States District Court for the District of Columbia, 7 decisions applying [the Panama Canal] statute have held that its limitation extends to any interest in a competing water carrier, not merely to an interest enabling a rail- road to exercise control of a water carrier or to influence directly a water carrier’s operations.” Appendix, p. 57a (emphasis supplied). Nevertheless, in order to avoid “in- terfer[ing] in the ... marketplace” (Appendix, p. 51a), the Commission permitted the voting trust arrangement because other provisions of the statute permit a railroad to maintain an interest in a water carrier where the two do not compete (see Appendix, p. 66a) or where mainte- nance of the interest will not reduce competition. (See Appendix, p. 63a) The Commission concluded that “an interest is [not] prohibited by section 11321... [unless] the relationship enables the railroad to adversely affect competition from water carriers... .” Appendix, p. 63a. The Commission, however, reached this conclusion even though the statute provides that a determination that a railroad and a water carrier do not compete or that a railroad’s interest in a water carrier will not reduce com- petition can be made only after a “full hearing,” and no hearing of any kind was held regarding the present transaction. C. Proceedings in the Court of Appeals On the WTA’s appeal from the ICC’s decision, a sharply divided panel of the Court of Appeals affirmed.’ The seeking injunctive relief against CSX's purchase of any Texas Gas shares until the WTA had been accorded its right to a hearing by the ICC. Following the ICC decision on the afternoon of June 29, the District Court (Gasch, J.) entered a temporary restraining order barring the acquisition of Texas Gas shares by CSX in order to enable the WTA to appeal the ICC’s decision. Water Transport Ass'n v. CSX Corporation, No. 83-1874 (D.D.C. June 29, 1988). The Court of Appeals denied CSX’s motion for summary reversal of Judge Gasch's order and denied its petition for a writ of mandamus. Water Transport Ass'n v. CSX Corporation, Nos. 83-1715, 88-1716 (D.C. Cir. June 30, 1983). *On July 8, 1983, the Court of Appeals had enjoined CSX from purchasing any Texas Gas shares pending a determination on the 8 panel majority (Wald and Scalia, JJ.) expressly refused to approve “all of the Commission’s broad language.” Ap- pendix, p. 8a; see Appendix, p. 10a n.10. The majority considered it significant, however, that in two prior ICC cases under the Panama Canal Act, the parties had en- tered into purchase agreements prior to seeking ICC ap- proval. Although in each of those cases the agreement remained entirely executory, and no party to the ICC proceedings had contended that the existence of the pur- chase agreement itself created a prohibited “interest,” ° the majority characterized the difference between a pur- chase contract contingent on ICC approval and a voting trust arrangement as only a “short step” (Appendix, p. 27a), and concluded on that basis that “the statutory phrase ‘any interest whatsoever’ cannot be taken liter- ally.” *° Appendix, p. 25a. Based on the twin premises that the statute does not mean what it says and that the same treatment neces- sarily must be given to both a wholly-executory purchase agreement contingent on ICC approval and 100 percent ownership subject to a voting trust arrangement, the ma- jority conclnded that the latter must be allowed or else “(t]he Canal Act purpose to permit the ICC to approve rail-water mergers that are in the public interest would be frustrated. ..” Appendix, p. 29a. merits, and ordered that the appeal be heard on an expedited basis. On July 11, 1988, the Chief Justice denied CSX’s application for relief from the interlocutory injunction. In the Court of Appeals, the Eastern Coal Transportation Conference, an association of ship- pers, intervened in support of the WTA. CSX and Texas Gas inter- vened as respondents. ® See Appendix, pp. 22a-28a; see also Appendix, p. 41a. 10 The quoted language, “any interest whatsoever,” is from the text of Section 5(15) of the Interstate Commerce Act prior to its recodification in Section 11821 in 1978. See Appendix, p. 79a. As indicated at note 2, supra, the recodification did not change the sub- stantive meaning of the statute. 9 District Judge Harold H. Greene, sitting by designa- tion, dissented. Judge Greene emphasized that Section 11321 provides that “a [rail] carrier ... may not own, operate, control, or have an interest in a water com- mon carrier . . . with which it does or may compete for traffic,” and that “(t]he Commission regard[ed] the ad- dition of the term ‘intrest’ as having so little significance that it treat[ed] ‘interest’ and ‘control’ as essentially in- terchangeable, and the term ‘interest’ for practical pur- poses as mere surplusage.” Appendix, p. 38a (emphasis in original). Judge Greene also reasoned that both the Congressional purpose and the structure of the statute required rejec- tion of the ICC’s interpretation. He recognized that “ft}here is a long history in this country of attempts by railroads to acquire surface freight transport domina- tion by attempting to drive water carriers out of busi- ness,” that “[t]he Panama Canal Act is aimed directly at these aggressive actions,” and that “[{t]he flat prohibi- tion of railroad takeovers in section 11321 is an expres- sion of this congressional concern.” Appendix, p. 34a. Although he agreed with the majority that Congress had intended to permit railroad-water carrier mergers “where it could be demonstrated that competition would not be harmed and that the joint rail-water operation would be in the public interest,” he emphasized that “Congress also specified that such a determination was to be made only after a hearing.” Appendix, p. 35a. In view of this hear- ing requirement, Judge Greene rejected the ICC’s con- struction of the term “interest,” stating: The Commission’s construction of the statute in this case stands this fairly straightforward statutory scheme on its head. Instead of making its determi- nation regarding the appropriateness of the acqui- sition within the framework of the prior hearing required by subsection (c), the ICC transfers the de- cision-making process to subsection (a) by the simple device of determining at the very outset of its con- sideration that a voting trust is not an “interest” within the meaning of the Act. 10 Appendix, p. 35a. Judge Greene also recognized that “(this ... is by any measure a massive takeover of a water carrier by a railroad” (Appendix, p. 33a), and that if, by means of the establishment of a voting trust, this very large merger is allowed to take place with- out a prior hearing, the same procedure will success- fully be used in every future corporate takeover of a water carrier by a railroad... . [T]he statutory requirement for a hearing in advance of Commission action will become a dead letter. Appendix, p. 45a. Finally, Judge Greene rejected the majority’s concern that enforcing the terms of the statute might require rail- roads to acquire water carriers by means “less efficient” than tender offers. Appendix, p. 46a. He noted that “fmJechanisms for acquisition other than tender offers do exist” (Appendix, p. 45a), but stated that even if they did not, the result could not be different: In the end, a choice may have to be made among the various objectives that may be imputed to the Con- gress. The majority is concerned about the practical difficulties railroads may encounter in acquiring wa- ter carriers if “interest” is given its natural mean- ing and if a hearing is required in advance, and it suggests that this might complicate achievement of the legislative objective of allowing some takeovers . . But plainly the dominant congressional pur- pose is embodied in the prohibition against the ac- quisition of a water carrier by a competing rail car- rier. It seems to me that, if in the process of statu- tory construction one purpose or the other must be given preference, the general prohibition should be preferred over the limited escape clause. Appendix, pp. 47a-48a." 11In its August 4, 1983 judgment (Appendix, p. 68a), the Court of Appeals extended its injunction until August 5, 1983, and it later 11 REASONS FOR GRANTING THE WRIT A. A Railroad’s Acquisition of a 100% Ownership Inter- est in a Competing Water Carrier Through a Voting Trust, Prior to a Full Hearing and Specific Findings by the Interstate Commerce Commission, is Prohibited by the Panama Canal Act The Panama Canal Act prohibitions involved in this case were Congress’ response to a long history of railroad abuse of the ownership and control of water carriers. “(Railroads [had] bought up water competition and by applying their economic leverage, reduced water tariffs to the point of forcing independent water carriers off the rivers and lakes. The plain tendency of this acquisition scheme was to create a rail monopoly over water traffic.” American Waterways Operators, Inc. v. United States, 386 F. Supp. 799, 803 (D.D.C. 1974), affd mem., 421 U.S. 1006 (1975); see also Lake Line Applications Under Panama Canal Act, 33 I.C.C. 699, 712 (1915). The House Report to the Panama Canal bill referred to this history of abuse: The apprehension of railroad-owned vessels driving competition from the canal may or may not be ex- aggerated, but it is certain that the evil, which is only anticipated there, already exists in the coast- wise trade on both coasts, as well as on our lakes and rivers. The evil is prevalent, recognized, and com- plained of. The proper function of a railroad corpo- ration is to operate trains on its tracks, not to oc- cupy the waters with ships in mock competition with itself, which in reality operate to the extinction of all genuine competition. In answering demands for extended the injunction again to August 6, Appendix, pp. 108a-109a. On August 6, the Court of Appeals denied WTA’s motion to further extend the injunction (Appendix, p. 110a), as did Justices Brennan and Powell. See Appendix, p. 1lla-112a. On August 7, CSX acquired Texas Gas and placed the shares of ACL in the voting trust. On September 29, 1983, the merger was consummated. 12 the exclusion of railroad-owned ships from the canal .. . the committee thinks it wise, just, and opportune to broaden the amendment so as to serve the higher, wider, more pressing, and more necessary purposes of excluding the railroads from operating vessels in competition with their tracks anywhere in the coast- wise trade generally or in the lake [sic] and rivers. H.R. Rep. No. 423, 62d Cong., 2d Sess. 12 (1912). Judge Greene correctly recognized that two features of the legislation Congress enacted in response to the rail- roads’ destruction of genuine competition on the water- ways are key to its proper interpretation. First, Congress could have enacted legislation simply prohibiting or limit- ing railroad “ownership” or “control” of water carriers. It did not do so. Congress instead made it unlawful for any railroad to “own, lease, operate, control, or have any interest whatsoever (by stock ownership or otherwise, either directly, indirectly, through any holding company, or by stockholders or directors in common, or in any other manner)” in a competing water carrier. 49 U.S.C. § 5(15) (1976) (emphasis supplied). The statutory pro- hibition is as broad and inclusive as any can be, and Congress fully understood its scope. The “slightest in- terest,” even “[r]ailroad ownership of 1 share” of a wa- ter carrier’s stock, is enough to activate the statutory prohibition."* In Nicholson Universal Steamship Co. Ownership, 248 I.C.C. 43, 67 (1941), Chairman Eastman stated in his concurring opinion: [T]hat the authors of this prohibition intended to, and did, use language so broad and comprehensive that all such obstacles [concerning proof of control or influence] to the [complete] enforcement of the complete separation [between railroads and compet- ing water carriers] which they desired would be overcome. 12 48 Cong. Rec. 9232, 11055 (1912) (remarks of Sen. Brandegee) ; see also id. at 6928 (remarks of Rep. Malby) ; id. at 10458 (remarks of Sen. Smith). 13 As the ICC earlier stated, ‘‘[t]here is nothing in the lan- guage of the statute that would warrant” restricting the statutory prohibition to “such an interest as enables a railroad to control or exercise a direct influence over the activities and policies of the water carrier.” Investiga- tion of Seatrain Lines, Inc., 206 I.C.C. 328, 333 (1935). “The interest which a rail carrier is forbidden to have in a water carrier with which it does or may compete is any interest and the prohibition is absolute... .”"™* Id. at 333 (emphasis in original). Second, Congress recognized that in some limited cir- cumstances, the public interest might be served by joint rail-water operations, but it conditioned the ICC’s au- thority to permit railroads to acquire or maintain inter- ests in water carriers on exacting substantive and proce- dural standards. ICC approval may be granted only if “the Commission finds that [such] ownership, operation, control, or interest will still allow that water common car- rier or vessel to be operated in the public interest ad- vantageously to interstate commerce and that it will still allow competition, without reduction, on the water route in question.” 49 U.S.C. §11321(b) (Supp. V 1981). Moreover, such approval may be granted “only after a full hearing.” * 49 U.S.C. § 11321(c) (Supp. V 1981). 13The statutory language remained unchanged until the 1978 recodification of the Interstate Commerce Act, at which time the words “have an interest in” were substituted for “have any inter- est whatsoever” and the following parenthetical. The revision note makes clear that the substitution was made because the new lan- guage was “more inclusive.” 49 U.S.C. § 11821 note (Supp. V 1981). In addition, as noted above, the recodification was not intended to change the substance of the statute. Act of Oct. 17, 1978, Pub. L. No. 95-4738, §§ 1, 2, 92 Stat. 1887 (codified as amended at 49 U.S.C. § 10101 (Supp. V 1981)). The original language and congressional understanding are therefore authoritative with respect to congres- sional intent as to the scope of the statutory prohibition. 14 As originally enacted, the statute further limited the ICC’s authority to approve joint rail-water operations existing as of July 1, 1914. In 1940, Congress amended the statute to permit 14 As these provisions and the statute’s structure demon- strate, Congress’ plain intention was to create a prohibi- tion of the broadest possible scope and then permit the Commission in narrow circumstances, and subject to stringent procedural requirements, to grant exceptions to the general prohibition. The Commission cannot make any exceptions prior to conducting a full hearing and making the specific findings respecting competition and public interest set forth in the Panama Canal Act." No “incidental authority”, for an “interim” period or other- wise, as found by the majority (Appendix, p. 3a), can be derived from the Commission’s power to create excep- tions to the statutory prohibition, since that power is con- ditional upon a prior hearing. Under the precedent es- tablished by the Court of Appeals, there is nothing to stop any railroad in the future from by-passing the clear Congressional prohibition of a railroad’s acquiring an in- terest in a water carrier through the voting trust device. In Judge Greene’s words, “[{t]he Commission’s con- struction of the statute in this case stands this fairly Commission approval of new rail-water relationships, but only sub- ject to the same substantive and procedural! limitations as were con- tained in the original Act. National Transportation Policy, Pub. L. No. 76-785, 54 Stat. 898 (1940) (codified as amended at 49 U.S.C. § 10101 (Supp. V 1981)). As then-Senator Truman stated, “[t]he Panama Canal Act is still the law; it is in the law as the Senate committee wanted it to be there, and is still the Panama Canal Act, just as it always has been.” 86 Cong. Rec. 11541 (1940). 15 In the Act as it existed in 1940, Congress provided: Notwithstanding the provisions of paragraph (15) of this sec- tion [the prohibition], the Commision shall have authority, upon application of any carrier... and after hearing, by order to authorize such carrier to acquire ownership of . . . an inter- est ... if the Commission shall find that the . . . acquisition of such . . . interest will not prevent such common carrier by water ... from being operated in the interest of the public and with the advantage to the convenience and commerce of the people and that it will not exclude, prevent, or reduce com- petition on the route by water under consideration. 49 U.S.C. §5(17) (1976). (Emphasis supplied.) 15 straightforward statutory scheme on its head.” Appendix, p. 35a. The Commission admitted that “[o]ur prior de- cisions applying . . . [the Panama Canal] statute have held that its limitation extends to any interest in a com- peting water carrier, not merely to an interest enabling a railroad to exercise control of a water carrier or to in- fluence directly a water carrier’s operations.” Appendix, p. 57a (emphasis supplied). Moreover, in promulgating the Voting Trust Rules under which the present trans- action was allowed to proceed, the Commission made clear that the rules were designed to permit persons “to acquire interests in regulated carriers’ without violating Section 11343’s separate and more general prohibition on transfers of “control” of regulated carriers without ICC approval. 44 Ted. Reg. 59909 (1979). Nevertheless, without holding any hearing, the Commission determined that a voting trust arrangement “prevents the railroad from influencing water carrier competition” (Appendix, p. 63a), and thus that CSX would acquire “no prohibited interest in a water carrier’ under the Panama Canal Act. Appendix, p. 52a. The Commission thus fashioned its own policy for this case, ignoring the policy determination made by Congress and embodied in the Panama Canal Act that railroads and water carriers be completely divorced unless and un- til the ICC has made the required statutory determina- tions after a full hearing. The ICC did not stand neutral and conduct a hearing as the statute required. Rather, the Commission admitted that it was making its own policy: “{I]t is Commission policy to avoid interference in the workings of the marketplace where the law we are to enforce does not require our intervention.” Appendix, pp. 5la-52a. As Judge Greene correctly observed, the Commission’s newly adopted policy for this case is a euphemism for a refusal to enforce the prohibi- tion of the law unless there is no construction, no matter how remote from the congressional purpose, 16 which would permit an escape. If the Commission were committed to a neutral policy of enforcing the statute as written and as it was intended to be ap- plied, it would not have felt a need to state the agency pol!vy in these terms. Whatever may be true in other circumstances, the policy underlying this statute is not to defer to the marketplace where rail and water carriers are involved. The statute directs that railroads shall not—obviously regardless of the marketplace—acquire such carriers unless it has first been determined that such takeovers could not harm competition. Appendix, p. 47a n.31 (con’t). Where Congress has es- tablished a presumption or a policy, then an agency must adhere to and enforce that presumption and carry out that policy, and not make one of its own choosing. Motor Vehi- cle Manufacturers’ Association v. State Farm Mutual Au- tomobile Insurance Co., 103 S. Ct. 2856, 2866-67 (1983). And, “a new administration may not choose not to en- force laws of which it does not approve, or to ignore stat- utory standards in carrying out its regulatory functions.” Id. at 2875 n.* (Rehnquist, J., dissenting). Significantly, even the Court of Appeals majority did not attempt to defend the Commission’s analysis. It dis- claimed the Commission’s “broad language” (Appendix, p. 3a), describing it as “inconsistent with our rationale for affirming the ICC’s decision.” Appendix, p. 10a n.10. The majority instead relied on two prior ICC decisions * as “implicitly hold[ing] that a purchase contract con- tingent on ICC approval is not an ‘interest’” prohibited by the Panama Canal Act (Appendix, p. 25a), and on that basis discerned an ambiguity in the statute that simply does not exist. As the majority admitted (Ap- pendix, pp. 22a-23a), the meaning of the statutory term 16 Tilinois Central Railroad—Control—John I. Hay Co., 317 I.C.C. 89 (1962) ; Chicago, Milwaukee, St. Paul & Pacific Railroad Control, Bremerton Freight Car Ferry, Inc., 312 I.C.C. 558 (1961). 17 “interest” simply was not in issue in either of those cases, and the ICC did not even comment on the matter.’’ Noth- ing in the majority’s opinion can support the ICC’s im- permissible determination to allow CSX’s acquisition of the Texas Gas water carriers prior to holding the “full hearing” plainly required by the Panama Canal Act."* 17 The majority also plainly misinterpreted the effect of the pur- chase agreement in the John Hay case, and thereby concluded that the WTA had made some concession it never in fact made. See Appendix, p. 27a. The majority stated that a purchase price ad- justment provision of the agreement provided in John Hay “ob- viously gave [the railroad! a substantial stake in John Hay’s future profitability and concomitant incentive to steer traffic to John Hay from other water carriers.” Appendix, p. 22a. In fact, exactly the opposite was true. The effect of the adjustment clause was to increase the purchase price by the amount of any increase: in John Hay’s earned surplus between the date of the purchase agreement and the closing date. See 317 I.C.C. at 62. Thus, all interim profits accrued to the benefit of the John Hay shareholders, with the result that the railroad had neither an economic interest in John Hay nor an economic incentive to prefer John Hay over other water carriers. 18 The majority seemed to be influenced by a concern, mentioned repeatedly in its opinion, that there was no clear precedent deter- mining whether ICC approval of a railroad’s acquisition of an interest in a water carrier must precede the acquisition. See Ap- pendix, pp. 14a-l6a, 17a-18a, 20a, 22a-23a. Ultimately, however, the majority “reject{ed] ... [the] alternative’ argument of CSX of overturning the Commission's interpretation that the statute requires “prior approval ... [of] ... acquisition[s]....” Appendix, p. 25a n.27. In fact, the ICC previously made clear in Jnvestigation of Seatrain Lines, Inc., supra, that the statute requires a preacquisi- tion determination whether the rail carrier “do[es] or may com- pete” with the water carrier in question. 206.1.C.C. at 336-37. The majority also stated (Appendix, p. 29a), that even if it had agreed with the WTA’s interpretation of the Panama Cana! Act, it could not have ordered the ICC to seek an injunction barring the CSX tender offer. Whatever the merits of this contention, the fact is that the ICC expressly based its refusal to seek an injunction on its belief that, in view of the voting trust arrangement, CSX would not acquire any prohibited “interest.” See Appendix, p. 52a. More- over, had either the Court of Appeals or the ICC declared that 18 B. The Court of Appeals’ Decision Will Substantially Impair the National Transportation Policy and Nullify the Congressional Prohibition of Railroad Acquisitions of Water Carriers In enacting the Panama Canal Act, Congress recognized the special need for water transport competition as a check on the abuses of railroad power and acted to pre- serve and protect independent water carriers from rail- road intrusion. Congress has never retreated from that determination. In the National Transportation Policy, Congress “declared [it to be part of] ... the national transportation policy ... to preserve the inherent advan- tages of each mode [of transportation].” Pub. L. No. 76- 785, $1, 54 Stat. 899 (1940) (codified as amended at 49 U.S.C. § 10101 (Supp. V 1981)). In the 1980 Staggers Rail Act of 1980, Congress reaffirmed the policy of the United States Government “to ensure effective competi- tion and coordination between rail carriers and other modes [of transportation]” and “to prohibit predatory pricing and practices, [and] to avoid undue concentra- tions of market power... .” Pub. L. No. 96-448, §101(a), 94 Stat. 1897 (current version at 49 U.S.C. §§ 10101a(5), (13) (Supp. V 1981)). In the same legis- lation, Congress provided: With respect to the relationship between water carriers and rail carriers, none of the amendments made by this Act shall be construed to make lawful (1) any competitive practice that is unfair, destruc- tive, predatory, or otherwise undermines competition and that was unlawful on the effective date of this Act, or (2) any other competitive practice that is unfair, predatory, or otherwise undermines competi- tion. Pub. L. No. 96-448, § 707, 94 Stat. 1965-66 (1980) (em- phasis supplied). As stated in the Conference Report, completion of CSX’s tender offer would have entailed a Panama Canal Act violation, it is highly unlikely that any injunctive action would have been necessary. 19 “(t)he intent [of this provision] is that none of the amendments made by this Act is to be used to legitimize the undermining of rail-water competition.” H.R. Conf. Rep. No. 1430, 96th Cong., 2d Sess. 143, reprinted in 1980 U.S. Code Cong. & Ad. News 4110, 4175. In this context, it is highly significant that Congress has never repealed the key statute—the Panama Canal Act—which regulates rail-water carrier relationships.’® For more than 70 years, the Panama Canal Act has served as the keystone of a consistent policy of preserving an independent water transportation industry, free of railroad intrusion. In 1908, President Theodore Roosevelt submitted the Preliminary Report of the Inland Water- ways Commission to Congress, stating: The report shows that commerce was driven from the Mississippi by the railroads. While production was limited, the railways, with their convenient ter- minals, gave quicker and more satisfactory service than the waterways. Later they prevented the res- toration of river traffic by keeping down their rates along the river, recouping themselves by higher charges elsewhere. They also acquired water fronts and terminals to an extent which made water com- petition impossible. Throughout the country railways have secured control of canals and steamboat lines that today inland waterway transportation is largely in their hands. Message of the President to Congress, February 26, 1908 (transmitting the Preliminary Report of the Inland Wa- terways Commission), reproduced in S. Doc. Vol. 17, 60th Cong., 1st Sess. iii-vii (1908). The Panama Canal Act was passed against the history of fierce competition between railroads and water car- riers, in which railroads used every device and means to 19In two instances, bills were introduced to repeal the Panama Canal Act, but each bill failed to elicit Congressional support and died in committee. See S. 48, 97th Cong., 2d Sess. (1982); S. 1355, 86th Cong., Ist Sess. (1959). 20 drive water carrier competitors out of business. The ac- quisition of bargelines by railroads became an extremely effective way of eliminating competition. The acquired carrier was itself immediately eliminated as a competitor, and it could then be used as a weapon, to drive independ- ents out of the market, and to keep them out. As the ICC found in Lake Line Applications Under Panama Canal Act, 33 I.C.C. 699, 716 (1915): These boat lines under the control of the .. . rail- roads have been first a sword and then a shield. When these railroads succeeded in gaining control of the boat lines which had been in competition with paral- leling rails in which they were interested, and later effected their combination through the Lake Line As- sociation, by which they were able to and did drive all independent boats from the through lake-and-rail transportation, they thereby destroyed the possibility of competition with their railroads other than such competition as they were of a mind to permit. Hav- ing disposed of real competition via the lakes, these boats are now held as a shield against possible com- petition of new independents. Since it appears from the records that the railroads are able to operate their boat lines at a loss where there is now no com- petition from independent lines, it is manifest that they could and would operate at a further loss in a rate war against independents. The large financial resources of the owning railroads make it impossible for an independent to engage in a rate war with a boat line so financed. With railroad rates and practices now largely deregu- lated ® and in view of the numerous recent railroad con- solidations, the preservation of water carrier competition 2° Deregulation of the railroads commenced with the Railroad Revitalization and Regulatory Reform Act of 1976 (the “4-R Act”), Pub. L. No. 94-210, 90 Stat. 31 (codified as amended in scattered sections of 15, 45 and 49 U.S.C.), and continued with the Staggers Rail Act of 1980, Pub. L. No. 96-448, 94 Stat. 1895 (current version in scattered sections of 49 U.S.C.). 21 is all the more important today.*' The Commission’s de- cision in this case nevertheless permitted one of the na- tion’s largest railroads to acquire the nation’s largest in- land water carrier. As Judge Greene correctly recog- nized, if this transaction can be permitted to go forward through use of a voting trust mechanism, then every rail- road acquisition of a water carrier will be permitted to do so, and the prior hearing requirement of the Panama Canal Act will have been nullified. In permitting the CSX-Texas Gas stock transaction to proceed, the Commission not only ignored the mandate of the Panama Canal Act, it refused to consider the obvious anti-competitive impact of the transaction, even during the interim of several years which will elapse before com- pletion of Commission and appellate proceedings on CSX’s application to dissolve the voting trust and the two years permitted under the voting trust for divestiture. Indeed, the voting trust itself has a ten-year duration. The Com- mission “expressly refused to consider” whether “the spe- cific independent voting trust agreement at issue [here] was adequate” to preserve competition.” At the same time, the Commission admitted that nothing in the voting trust agreement prevents either concerted action by CSX and ACL or unilateral action by either of them detri- 21 Since 1980, four giant rail systems have been created by merger. In 1980, Burlington Northern acquired the St. Louis-San Francisco Railroad. That same year, CSX was created by the merger of the Chessie System and the Seaboard Coast Line. In 1982, the Southern and the Norfolk & Western Railroads combined. In 1983, Western Pacific merged into Union Pacific. In October, 1983, the Southern Pacific and Santa Fe announced their contemplated merger. As a result, there are now only three big eastern railroads: the Norfolk Southern, CSX, and Conrail. There soon will only be three big western railroads: the Burlington Northern, Pac. Reil, and the Southern Pacific-Santa Fe. 22 Brief for Respondent Interstate Commerce Commission, Water Transport Ass’n v. Interstate Commerce Commission, No. 83-1737 (D.C. Cir.), dated August 19, 1983, at 29. 22 mental to competing carriers and shippers alike. Appen- dix, p. 63a-64a.™ The ICC’s treatment of this merger of two giants in the surface transportation industry stands in stark con- trast to judicial responses to mergers of other horizontal competitors. In the latter context, the courts have made clear that the danger of interim harm to competition should the transaction be allowed to proceed frequently is so great that only a “full stop” preliminary injunction will adequately preserve competition pending a determi- nation on the merits. See, e.g., F. & M. Schaefer Corp. v. C. Schmidt & Sons, Inc., 597 F.2d 814, 818 (2d Cir. 1979); FTC v. Lancaster Colony Corp., 434 F. Supp. 1088, 1097 (S.D.N.Y. 1977); see also FTC v. Weyer- haeuser Co., 665 F.2d 1072, 1085-86 (D.C. Cir. 1981). Here, the transaction has been permitted to proceed with- out regard to the statutory hearing requirements, with- out regard to the competitive harm that may result, and without regard to the National Transportation Policy. This decision, permitting the second largest railroad to acquire the largest inland water carrier, if not reviewed now by this Court, will necessarily be viewed as judicial authorization of the voting trust device for acquisitions by other railroads of water carriers, all contrary to the Congressional mandate of the Panama Canal Act.* Un- 23 The majority opinion conceded that the ICC had never before this case considered “whether, as under § 11,343, a railroad can use an independent voting trust to acquire a water carrier before the ICC has had time to conduct a hearing and give or withhold its approval.” Appendix, p. 6a. Yet the ICC ruled contrary to the Congressional mandate without even holding a hearing. 24 With respect to future railroad acquisitions of water carriers, the ICC stated that: Depending on the structure of their transaction, the parties might wish to create a temporary voting trust under the Com- mission’s voting trust guidelines to hold the stock of the water carrier pending formal hearings on the acquisition. The Com- mission has already announced its own view that such trusts 23 less this Court acts now, the Court of Appeals’ decision will establish a precedent that effectively nullifies the Congressional mandate that a railroad cannot acquire an interest in a water carrier prior to the hearing require- ments and determinations of the Panama Cana! Act. The decision will substantially impair the National Transpor- tation Policy in favor of a strong independent water car- rier industry which the Panama Canal Act was designed to protect and maintain. CONCLUSION The petition for a writ of certiorar should be granted. Respectfully submitted, RICHARD A. ZELLNER A. DUNCAN WHITAKER, P.C. NEIL K. EVANS ALAN M. WISEMAN Mark E. STAIB (Counsel of Record) GREGORY M. GORDON Scott E. FLIck HAHN, LOESER, HowReY & SIMON FREEDHEIM, DEAN 1730 Pennsylvania Ave., N.W. & WELLMAN Washington, D.C. 20006 800 National City (202) 783-0800 E. 6th Building Counsel for Petitioner Cleveland, Ohio 44114 Water Transport Association (216) 621-0150 November 2, 1983 are permissible, under the Panama Canal Act, 49 U.S.C. § 11321. Its interpretation has been endorsed in this Court’s decision. Response of Interstate Commerce Commission to (1) Petition for Reconsideration of Order Denying Petitioners’ Suggestion for Re- hearing En Banc and (2) Motion to Stay Issuance of Mandate. Brief for Respondent Interstate Commerce Commission. Water Transport Ass’n v. Interstate Commerce Commission, No. 83-1737 (D.C. Cir.), dated August 19, 1983, at 4. APPENDIX APPENDIX TABLE OF CONTENTS Page Majority Opinion, United States Court of Appeals for the District of Columbia Circuit, filed August fA RA Si ain en Ee ae A Rim ep aS la Dissenting Opinion, United States Court of Ap- peals for the District of Columbia Circuit, filed August 4, 1983 .............. teed gid aaicitie beacuse Miaieaeipciaes 38a Decision of the Interstate Commerce Commission, LNG ROSS SNe ate. ae 5la Judgment, United States Court of Appeals for the District of Columbia Circuit, filed August 4, 1983.. 68a 5. Order, United States Court of Appeals for the Dis- trict of Columbia Circuit, filed August 6, 1983........ Tla 6. Order, United States Court of Appeals for the Dis- trict of Columbia Circuit, filed August 6, 1983...... 72a 7. Order, United States Court of Appeals for the Dis- trict of Columbia Circuit, filed October 28, 1983...... 74a 8. 49 U.S.C. § 11821 (Supp. V 1981) .......................0006 75a 9. Act of August 24, 1912, Ch, 390, § 11, 37 Stat. 566.. 77a BB Ee Te BCR KC EG) (ROTO vaeciracnecicccvtbcsccvetoenes 79a 11. 49 U.S.C. §§ 11348-11344 (Supp. V 1981) ............... 8la et OM em R em amoee 86a ce Se Ge SIE, NII cocci cossniniss sensnsnoriencnantitebenadonpeoniicn 89a 14. Map of American Commercial Barge Lines ............ 90a 15. June 13, 1983 Voting Trust Agreement .................. 9la 16. Letter of Louis E. Gitomer, Deputy Director, Rail Section, Interstate Commerce Commission to Eugene D. Gulland, dated June 20, 1983 .00.00000000000... 106a 17. Order, United States Court of Appeals for the Dis- trict of Columbia Circuit, filed August 5, 1983........ 108a 18. 19, 20. ii APPENDIX TABLE OF CONTENTS—Continued Page Order, United States Court of Appeals for the Dis- trict of Columbia Circuit, filed August 6, 1983........ 110a Letter of Christopher W. Vasil, Deputy Clerk, Office of the Clerk, Supreme Court of the United States to Alan M. Wiseman, Howrey & Simon........ llla List of Parents, Subsidiaries (Except Wholly- Owned Subsidiaries) and Affiliates of Water Transport Association Members ....0........0.0...ccccccc000 118a la MAJORITY OPINION—Filed August 4, 1983 UNITED STATES COURT OF APPEALS FOR THE DISTRICT OF COLUMBIA CIRCUIT No. 83-1737 WATER TRANSPORT ASSOCIATION, y Petitioner INTERSTATE COMMERCE COMMISSION and UNITED STATES OF AMERICA, Respondents CSX CORPORATION and TEXAS GAS RESOURCES CORPORATION, EASTERN COAL TRANSPORTATION CONFERENCE, Intervenors Petition for Review of an Order of the Interstate Commerce Commission Argued July 20, 1983 Decided August 4, 1983 Richard A. Zeller, with whom Neil K. Evans, Alan M. Wiseman, James R. Fox, and Robert F. Ruyak were on the brief, for petitioners. Ernest Abbott, Attorney, Interstate Commerce Com- mission, with whom John Broadley, General Counsel, and Ellen D. Hanson, Associate General Counsel, Interstate Commerce Commission, were on the brief, for respondent, 2a Interstate Commerce Commission. Henri F. Rush and Edward J. O’Meara, Attorneys, Interstate Commerce Commission, also entered appearances for respondent, Interstate Commerce Commission. John J. Powers, III, Attorney, Department of Justice, entered an appearance for respondent, United Stutes of America. Peter J. Nickles, with whom Eugene D. Gulland and Ellen Bass were on the brief, for intervenors, CSX Cor- poration, et al. William L. Slover, C. Michael Loftus, and Donald G. Avery were on the brief for intervenor, Eastern Coal Transportation Conference. Before: WALD and SCALIA, Circuit Judges, and HAROLD H. GREENE,* District Judge for the District of Columbia. Opinion for the Court filed by Cireuit Judge WALD. Dissenting opinion filed by District Judge GREENE. WALD, Circuit Judge: CSX Corp. (which operates a railroad) agreed to acquire by tender offer Texas Gas Resources Corp. (Texas Gas), which in turn owns Ameri- can Commercial Barge Lines, Inc. (which operates a barge line). Water Transport Association (WTA), an organization of barge operators, asked the Interstate Commerce Commission (ICC or Commission) to declare that the tender offer violates the Panama Canal Act, 49 U.S.C. $11,821. WTA argued that § 11,321(a) (1) makes it unlawful for a railroad to “own, operate, con- trol, or have an interest in” a competing water carrier unless the Commission has approved the transaction after a full hearing, and that no hearing had been held. The ICC held that the tender offer did not violate the Canal Act because CSX and Texas Gas had agreed to put the barge line stock into an independent voting trust until * Sitting by designation pursuant to 28 U.S.C. § 292(a). 3a the ICC held a hearing and approved or disapproved the transaction. WTA appeals the ICC’s decision. We affirm the ICC’s decision, though not all of the Commission’s broad language. We hold that the ICC, as an incident to its authority under § 11,321 to approve the acquisition after hearing, may authorize CSX to pro- ceed with the tender offer if CSX agrees to hold the barge line in a temporary ICC-approved independent voting trust until a hearing can be held. I. BACKGROUND A. Statutory Scheme Two sections of the Interstate Commerce Act restrict a railroad’s power to acquire a water carrier. One, 49 U.S.C. § 11,343, deals generally with one carrier acquir- ing another carrier; the other, id. § 11,321, is specifically concerned with a rail carrier acquiring a water carrier. 1. Provisions Governing Merger of Two Carriers 49 U.S.C. § 11,343(a) requires advance ICC approval before one carrier can merge with or otherwise acquire control of another carrier: The following transactions . . . may be carried out only with the approval and authorization of the Commission : (1) consolidation or merger .. . of at least 2 car- riers into one corporation .... (3) acquisition of control of a carrier by any num- ber of carriers. (4) acquisition of control of at least 2 carriers by a person that is not a carrier. (5) acquisition of control of a carrier by a person that is not a carrier but that controls any number of carriers. 4a The ICC “shall approve” the transaction if it finds the transaction is “consistent with the public interest.” Jd. $ 11,344(c). Before giving its approval, the ICC must conduct a full evidentiary hearing, which can take sev- eral years for a merger of two large railroads, see id. $11,345(b), and 10 months for other transactions of “regional or national transportation significance,”’ see id. § 11,345 (c). Because of this long delay, merging carriers often have an economic incentive to complete the transaction first and seek ICC approval later. The ICC has long per- mitted carriers to do this by use of an independent voting trust. If the acquiring carriers puts the stock of the acquired carriers in an independent voting trust, the ICC holds that the transaction does not violate § 11,343 because the acquiring carrier does not “control” the ac- quired carrier. See Voting Trust Rules, 49 C.F.R. * 1013 (1982). This construction of $ 11,343 has been upheld by the courts ' and is not disputed here. 2. The Panama Canal Act The second relevant provision of the Interstate Com- merce Act, and the principal focus of this case, is 49 U.S.C. § 11,321, which derives from § 11 of the Panama Canal Act of 1912.2 Congress specifically designed the Canal Act to protect independent water carriers from unfair competition by rail-owned water carriers. As pres- ently codified, it forbids a rail carrier to “own, operate, control, or have an interest in” a competing water car- rier unless the ICC finds that the ownership, control, or 1 See B.F. Goodrich Co. v. Northwest Indus., 303 F. Supp. 53, 58- 61 (D. Del. 1969), aff'd without reaching this issue, 424 F.2d 1349, 1357 (3d Cir.), cert. denied, 400 U.S. 822 (1970) ; Illinois Cent. R.R. v. United States, 263 F. Supp. 421, 424 (N.D. Ill. 1966) (3-judge court), aff'd mem., 385 U.S. 457 (1967). 2 Ch. 390, 37 Stat. 560, 566-67 (1912). 5a interest will not be contrary to the “public interest” and will not reduce water competition: (a) (1) Notwithstanding [§ 11,343], a [rail] carrier . May not own, operate, control, or have an in- terest in a water carrier . . . with which it does or may compete for traffic. (b) Notwithstanding subsection (a) of this section, the Commission may authorize a [rail] carrier... to own, operate, control, or have an interest in a water common carrier ... when the Commission finds that ownership, operation, control, or interest will still allow that water common carrier . . . to be operated in the public interest . . . and that it will still allow competition, without reduction, on the water route in question. Section 11,321(a)(2) gives the Commission authority to determine whether a rail carrier “does or may compete” with a water carrier: The Commission may decide . . . questions of fact related to competition or the possibility of competi- tion under this subsection on an application of a car- rier. . . . The Commission may begin a proceeding under this subsection on its own initiative or on application of a shipper .. . if the carrier has not applied to the Commission and had the question of competition or the possibility of competition deter- mined.... Any Commission action, whether a finding of fact on competition under subsection (a) (2), or approval of ownership, control, or interest despite the existence of competition under subsection (b), may be taken “only after a full hearing.” Jd. § 11,321(c¢). Cases where a rail carrier has sought to acquire a competing water carrier have been few and far between. 6a As a result, the ICC had no occasion before this case to consider whether, as under § 11,343, a railroad can use an independent voting trust to acquire a water carrier before the ICC has had time to conduct a hearing and give or withhold its approval.® B. The CSX Tender Offer Texas Gas is a public corporation whose primary busi- ness is running a natural gas pipeline system. American Commercial Barge Lines, a wholly-owned subsidiary of Texas Gas, is an ICC-regulated water carrier that oper- ates a barge line east of the Mississippi. Its operations represent about 10% of Texas Gas revenues. On June 6, 1983, Coastal Corp. made a hostile tender offer for 51% of Texas Gas’ stock at $45 per share. Texas Gas looked for a “white knight” to make a friendly tender offer at a higher price and on June 9 found CSX Corp., which agreed to purchase 100% of Texas Gas’ stock at $52 per share. CSX’s primary business is oper- ating a large railroad east of the Mississippi. The rail- road is, of course, regulated by the ICC. 3 The only cases we are aware of where a rail carrier has sought ICC approval for its plan to acquire a water carrier are Illinois Cent. R.R.—Control—John I. Hay Co., 317 I.C.C. 89 (1962) (par- ties executed purchase contract contingent on ICC approval under §§ 11,343 and 11,321) and Chicago, Milwaukee, St. Paul & Pac. R.R. Control, Bremerton Freight Car Ferry, Inc., 312 1.C.C. 553 (1961) (same). Cf. Investigation of Seatrain Lines, 206 I.C.C. 328 (1935) (railroad acquired minority interest in a newly formed water car- rier and requested ICC approval for continued ownership) . See also Ohio Barge Line Control, 250 I.C.C. 56, 61 (1941) (steel company that owned railroad acquired barge line and claimed it did not need to apply for ICC approval under the Canal Act because barge line did not compete with railroad; issue of competition not decided) ; Warrier & Gulf Navigation Co. Control, 250 I.C.C. 26, 31 (1941) (same); Nicholson Universal S.S. Co. (Interest of N.Y. Cent. R.R.), 248 1.C.C. 43 (1941) (railroad covertly controlled water carrier without seeking ICC approval). 7a Texas Gas and CSX recognized that the merger of CSX with Texas Gas’ barge line subsidiary required ICC ap- proval under 49 U.S.C. § 11,343 (requiring ICC approval before one carrier can acquire another) and might require approval under id. § 11,321 (requiring ICC approval for a rail carrier to own a competing water carrier). They therefore agreed to place the barge line stock in an in- dependent voting trust pursuant to ICC voting trust guidelines established under £11,343. See 49 C.F.R. $1013 (1982). The voting trust was irrevocable and instructed the trustee, Midlantic National Bank, not to “create any de- pendence or intercorporate relationship” between CSX and American Commercial Barge Lines, nor to vote the trust stock “to elect any ... representative of Texas Gas, CSX or their affiliates as an officer or director of the [barge line].”* CSX committed to apply to the ICC for authority to control American Commercial Barge Lines “‘as soon as practicable.” ° CSX hoped that the vot- ing trust would allow the overall CSX-Texas Gas merger to go forward while the ICC was considering whether to approve CSX’s application to acquire the barge line subsidiary. ‘ Voting Trust Agreement between Texas Gas Transmission Corp. and Midlantic Nat’] Bank "4 (June 13, 1983), reprinted in Peti- tioner’s Appendix (“App.”) item C, at 3. Technically, the entity placed in trust was a Texas Gas subsidiary called American Commercia] Lines, Inc., which in turn wholly owns American Commercial Barge Lines, Inc. We use the latter name to refer to both subsidiaries. 5 Letter from Texas Gas and CSX to ICC, June 10, 1983, at 1, App. item B, at 1. At oral argument, counsel for CSX reiterated CSX’s commitment to apply promptly for ICC approval of the trans- action, and stated that 60 to 90 days would be a reasonable time within which to prepare an application. We expect CSX to apply for ICC approval of its takeover of American Commercial Barge Lines, under both 49 U.S.C. § 11,348 and id. § 11,321, within 90 days after CSX acquires Texas Gas’ stock. 8a The ICC staff reviewed the voting trust agreement and requested various changes, including an instruction to the trustee to sell the barge line if the ICC disapproves the merger.” After CSX and Texas Gas made the changes, the ICC staff issued its “informal nonbinding Commission opinion” that the trust “does effectively in- sulate . . . CSX from violation of the Commission’s pol- icy against an unauthorized acquisition of control of a regulated carrier.” ’ The ICC staff opinion did not dis- cuss whether the voting trust also insulated CSX from having an unlawful “interest” in American Commercial Barge Lines under § 11,321. C. Proceedings Before the ICC On June 23, 1983, WTA petitioned the ICC for a declaration that the voting trust, even if it satisfied §$ 11,343’s command that one carrier not control another without prior ICC approval, did not satisfy § 11,321’s requirement that a rail carrier not hold any “interest” in a water carrier without prior ICC approval.* The Association also asked the ICC to take appropriate steps to prevent the merger from going forward.° * Voting Trust Agreement, supra note 4, "7(c), App. item C, at 7-8; see Letter from Texas Gas to ICC, June 14, 1983, App. item D (describing changes in the trust agreement). Thus, the dissent is mistaken in its assumption that the Commission “made its deter- mination ... on the basis of an abstract examination of voting trusts in general.” The record shows that the Commission staff reviewed and required modifications to this voting trust in partic- ular. * Letter from Louis Gitomer, Deputy Director, ICC Rail Section, to Eugene Gulland, Attorney for Texas Gas, June 20, 1983, App. item E (emphasis added). * Petition of Water Transp. Ass’n for a Declaratory Order Per- taining to Voting Trust Agreement Filed by Texas Gas Resources and CSX Corp., App. item F. * WTA asked the ICC to enjoin the merger of CSX and Texas Gas. Motion of Water Transp. Ass’n for an Order Enjoining CSX 9a On June 29, the ICC denied WTA’s request. The Com- mission did not address the factual question whether CSX “does or may compete” with American Commercial Barge Lines. Nor did the Commission discuss whether § 11,321 requires a rail carrier to obtain Commission ap- proval before acquiring a non-controlling “interest” in a water carrier, as opposed to first acquiring the interest and then seeking Commission approval (§ 11,343 would in any event require advance ICC approval before the rail carrier could control the water carrier). Rather, it held that a temporary independent voting trust, designed to insulate a water carrier from contro? ty a rail carrier pending an ICC decision whether the merger may proceed, is not prohibited by § 11,321. Water Transport Associa- tion—Petition for Declaratory Order—American Com- mercial Lines Voting Trust, Finance Docket No. 30,215, at 9 (July 1, 1983) [hereinafter cited as ICC Decision). After reviewing the legislative history, the ICC found that the Panama Canal Act was intended “to prohibit (rail-water] relationships with possible adverse impacts on competition.” Jd. at 7. The temporary voting trust was consistent with this purpose because it reasonably insulated the barge line from CSX control, and thus pre- vented significant harm to water competition during the Corp. from Violating the Interstate Commerce Act and Staying its Acquisition of Shares of Stock of Texas Gas Resources Corp., App. item I. The ICC, however, has no power to enjoin anything, and must go to district court to seek an injunction if it decides that in- junctive relief is appropriate. See 49 U.S.C. § 11,702(a) (3) (“The Interstate Commerce Commission may bring a civil action .. . to enforce an order of the Commission . . . when it is violated by a [rail] carrier ....”). We think WTA’s technical misstep in asking more than the ICC could give is not significant for purposes of the present case. If the ICC had reached the question of appropriate remedy, it presumably would have understood WTA to petition for appropriate steps to prevent the merger—i.e., an ICC order statir + that the merger was unlawful and an attempt to enforce that order in district court. 10a limited period the trust remained in effect. The Com- mission explained: {A]n independent voting trust of the type entered into here is merely a temporary device designed to avoid a technical violation of the law in the context of a corporate acquisition. It is not, and cannot, be a device for holding stock on a permanent basis. This fact alone largely prevents the voting trust de- vice from becoming a tool for altering rail-water competitive relationships. Id. at 9. Moreover, if CSX were to attempt to influence barge operations notwithstanding the trust, the ICC could act at that time; an injunction was not needed to prevent “speculative future violations.” Jd. at 8. Finally, to the extent the statute was ambiguous, policy considerations favored an interpretation that would “avoid interference in the workings of the marketplace.” Jd. at 1.’° 10 We have discussed in text those aspects of the ICC’s decision which we find persuasive. Some of the reasoning in the opinion suggests that an independent voting trust is valid under § 11,321 even if not limited to the time period needed to obtain an ICC deci- sion under § 11,321. See, e.g., ICC Decision at 5 (“the holding of an independent voting trust certificate, standing alone, is not the type of interest prohibited by section 11321”); id. at 7 (“the test of whether an interest is prohibited by section 11321 is whether the relationship enables the railroad to adversely affect competition from water carriers”). This language is dicta, since CSX had committed to apply promptly for ICC approval. See note 5 supra and accompanying text. It is also inconsistent with our rationale for affirming the ICC’s decision. See notes 28-30 infra and accompanying text. We uphold the voting trust only as an interim device to permit the ICC to hold a hearing and decide whether the two carriers compete and, if so, whether a permanent relationship between the two carriers is in the public interest and will not reduce competition. lla D. Proceedings Before this Court Under the securities laws governing tender offers, CSX could begin to purchase tendered Texas Gas shares at midnight, June 29, 1983, the same day that the ICC is- sued its decision. WTA sought and obtained a temporary restraining order from the district court forbidding CSX to purchase any Texas Gas shares for ten days, to give WTA time to appeal the ICC’s decision to this court. A motions panel of this court continued the stay pending our review of the merits.'' In view of the stay, and the power of Texas Gas shareholders to withdraw their tendered shares from the CSX offer after August 7, we ordered expedited briefing and argument. E. Issue Presented WTA, supported by intervenor Eastern Coal Trans- portation Conference (an association of coal producers), raises again the question of statutory construction it raised before the ICC: Can a rail carrier acquire a water carrier prior to the full hearing required by § 11,321 if it places the water carrier stock in a tem- porary ICC-approved independent voting trust pending the § 11,321 hearing? WTA concedes that the voting trust prevents CSX from controlling American Commer- cial Barge Lines. It argues, however, that CSX still has a financial interest in the barge line that, absent ICC approval after full hearing, is within § 11,321/a) (1)’s ban on a railroad’s owning, operating, controlling, or having an “interest” in a competing water carrier.” "Order, Water Transp. Ass’n v. CSX Corp. (July 8, 1983) (Judges Wright and MacKinnon; Judge Scalia dissenting). 12 The Association also argues that even if voting trust owner- ship is not per se a violation, the ICC’s voting trust guidelines do not adequately insulate the barge line from control by CSX. This challenge can be quickly dismissed. In developing the voting trust guidelines, the ICC proposed complex and rigorous rules to elimi- 12a The ICC, supported by intervenors CSX and Texas Gas, argues that it reasonably interpreted an ambiguous stat- ute to comport with modern business conditions. The Commission emphasizes that CSX agreed to acquire Texas Gas under the threat of a hostile tender offer by Coastal Corp., and the acquisition must be completed quickly if at all. For the Commission to hold a full hearing before approving the voting trust would, as a practical matter, kill the deal, thus depriving CSX of its right to a hear- ing under § 11,321(a)(2) and § 11,321(b) on whether it competes with American Commercial Barge Lines and if so, whether the purchase nevertheless is in the public interest. The United States Department of Justice, named as a respondent, neither supports nor opposes the ICC’s posi- tion nor explains its own view of § 11,321. nate any possibility of abuse of the trust. It decided instead to adopt weaker guidelines (plus a procedure for informal agency review of trust agreements) so as not to “burden the transportation industry with complex voting trust regulations to combat abuses by a small number of individuals in very limited circumstances.” 44 Fed. Reg. 59,909 (1979). The Commission also announced its intent “to monitor closely the continued use of these devices and to take whatever action is necessary, including forced divestiture of stock, in those instances where a voting trust agreement has been improp- erly used. /d. In short, the ICC considered and found acceptable the risk of abuse of a voting trust. It is not enough, then, for WTA to show that a voting trust that meets the guidelines—as the CSX trust does—would permit an overreaching rail carrier to influence the trust-held water carrier. Rather, WTA must show that the ICC’s decision to accept some risk of abuse in return for the benefit of less burdensome regulation was arbitrary and capricious. We do not think it is. The ICC consid- ered the relevant factors, and WTA does not seriously attack the Commission’s balancing of the costs of additional regulation against the costs of minimal guidelines. l3a Il. THE VALIDITY OF A TEMPORARY INDEPENDENT VOTING TRUST A. History and Purpose of § 11,321 To determine whether the ICC’s construction is con- sistent with congressional intent, we must review the Panama Canal Act’s adoption and its subsequent inter- pretation by the ICC and amendment by Congress. 1. The Original Panama Canal Act Prior to 1912, the Interstate Commerce Act did not restrict the merger of two carriers, nor did the ICC regulate water carriers. The railroads used this freedom to engage in a variety of schemes to drive competing water carriers out of business. One popular tactic was to buy a water carrier, price its service so low that other water carriers were forced to close down, and then raise prices again.’* In 1912, in $11 of the Panama Canal Act, Congress acted to preserve rail-water competition by barring rail- roads from owning or controlling competing water carriers: [After July 1, 1914], it shall be unlawful for any railroad company ... to own, lease, operate, con- trol, or have any interest whatsoever (by stock ownership or otherwise, either directly, indirectly, through any holding company, or by stockholders or directors in common, or in any other manner) in any common carrier by water . . . with which said rail- road . . . does or may compete... . Congress gave the ICC jurisdiction to decide the factual question whether actual or potential competition existed: 1% See H.R. Rep. No. 423, 62d Cong., 2d Sess. 12 (1912); Lake Line Applications Under Panama Canal Act, 33 I.C.C. 699, 716 (1915). l4a Jurisdiction is hereby conferred on the Interstate Commerce Commission to determine questions of fact as to the competition or possibility of competition, after full hearing, on the application of any rail- road company or other carrier. Such application may be filed for the purpose of determining whether any existing service is in violation of this section . or for the purpose of asking an order to install new service not in conflict with the provisions of this paragraph. The commission may on its own motion . inquire into the operation of any vessel in use by any railroad ... which has not applied to the commission and had the question of competition. . . determined as herein provided. Finally, Congress included a grandfather provision per- mitting railroads that already owned barge lines to con- tinue to do so if continued ownership was in the public interest and water competition would not be reduced thereby: If the Interstate Commerce Commission shall be of the opinion that any such existing specified service by water . . . is being operated in the interest of the public and . . . that such extension will neither ex- clude, prevent, nor reduce competition on the route by water under consideration, the Interstate Com- merce Commission may, by order, extend the time during which such service by water may continue to be operated beyond July [1, 1914]. There is no firm evidence, either in the statutory text or the legislative history, that Congress focused on the question of when—before or after the acquisition—the ICC would determine the existence or absence of com- petition in the event a rail carrier proposed to buy a water carrier. The second paragraph of the statute (quoted above) contemplates an application with regard to “existing service,’ which suggests the possibility of ac- quiring first and applying for ICC approval later. On l5a the other hand, this language may refer only to service existing at the time the Act was passed. It is likely that Congress gave little thought to new acquisition (though it clearly contemplated new service by existing carriers) ; its primary focus was on providing for divestiture where past mergers had reduced competition."* There was also no significant discussion of what the term “interest” might mean. The debate proceeded al- most entirely in terms of the pros and cons of railroad “ownership” or “control” of water carriers.’ It seemed to be agreed that a railroad could own neither all nor part of the stock of a competing water carrier.’* But 14 See, e.g., 48 Cong. Rec. 11,058 (1912) (statement of Sen. Sim- mons) (“some inconvenience to the rail carriers in divesting them- selves of their property in water transportation is to be expected”’) ; id. at 11,056 (statement of Sen. Brandegee) (Congress wants rail carriers ‘to divest themselves of attempting to do any transporta- tion by water’); id. at 10,458 (statement of Sen. Smith) (there should be “careful provision made as to the time and manner of enforcing such a provision against companies with established busi- ness”); id. at 6928 (statement of Rep. Malby) (railroads will be “obliged ... to dispose of their . . . steamboat lines’). 15 See, e.g., id. at 11,217 (statement of Rep. Covington) (Act for- bids a railroad “to own, operate, or control in any manner any water carrier with which it may compete’); id. at 11,205 (state ment of Rep. Sims) (bill “prevents railroad owership of water carriers operated .. . in competition with their rail lines”); id. at 11,063 (statement of Sen. Bristow) (bill “forbid[{s] railroads from owning such competing steamship lines”) ; id. at 11,058 (statement of Sen. Simmons) (“railroads shall not be permitted to own water carriers in competition with them”’) ; id. at 6595 (statement of Rep. Knowland) (bill “prevent[s] any control, directly or indirectly”). See also Letter from C.A. Prouty, ICC Chairman, to President Taft (Mar. 12, 1912), reprinted in 48 Cong. Rec. 10,463 (1912) (“it is absolutely essential that rail carriers be prohibited from owning or controlling, directly or indirectly, competing water carriers”). 16 See, e.g., 48 Cong. Rec. 6568 (1912) (statement of Rep. Brous- sard) (Act addresses “whether steamships owned in whole or in part by railroad companies shall be permitted to use the canal”) ; id. at 6595 (interchange between Rep. Hardy and Rep. Knowland) (quoted in note 17 infra). 16a the one attempt in the debate to delineate what other relationships might be permitted ended inconclusively with the sponsor of the railroad provision urging the representative who had pointed out an ambiguity (con- cerning the same stockholders owning shares in both a railroad and a water carrier) to “give that careful study and correct it if he can.” ** 2. The Transportation Act of 1920 In 1920, Congress gave the ICC authority to regulate carrier mergers generally. The Transportation Act of 1920, ch. 91, sec. 407, § 5(2), 41 Stat. 456, 481 (current version at 49 U.S.C. § 11,843), provided that the ICC could approve mergers that “will be in the public interest”: Whenever the Commission is of opinion, after hear- ing, upon application of any carrier ... that the acquisition . . . of the control of any other such car- rier or carriers either under a lease or by the pur- chase of stock or in any other manner... will be in the public interest, the Commission shall have authority by order to approve and authorize such acquisition .... Congress did not change the Panama Canal Act, merely renumbering its three paragraphs as $§ 5(9)-(11) of the revised §5 of the Interstate Commerce Act. 17 See id. at 6594-95: Mr. HARDY. ... You prevent a railroad company from own- ing stock in a water line, but you do not prevent the same stock- holders that own stock in a railway company from owning stock in a water line. Mr. KNOWLAND. We prevent any control, directly or in- directly ; and I think that would cover it.... Mr. HARDY. Just one moment. I do not think that a railroad company would be owning an interest in a ship line because one of its stockholders owned an interest in a ship line. . . because the railroad does not own what its stockholders own. Mr. KNOWLAND. I hope the gentleman will give that care- ful study and correct it if he can. 17a 3. Early ICC Interpretation of the Panama Canal Act The Interstate Commerce Commission, during the 1920s and 1930s, gave the Panama Canal Act a liberal inter- pretation that the 1912 Congress may not have contem- plated. The ICC’s interpretation is important because it was endorsed by a later Congress. In Southern Pacific Company’s Ownership of Atlantic Steamship Lines, 77 I.C.C. 124 (1923), the ICC found that Southern Pacific’s proposed new water service would compete with Southern Pacific’s rail lines, id. at 137, but nevertheless approved the new service. The Commission construed the Canal Act to permit new service under the same standard that governed continuance of existing serv- ice—whether the new service would be in the public inter- est and would not reduce water competition. /d. at 128- 29. The Commission explained: The purpose of the Panama Canal amendment... was not to forbid railroad ownership, operation, or control of steamship lines, but to forbid the use of such ownership or control in such a manner as to restrict movement of interstate commerce... . Id, at 187. Investigation of Seatrain Lines, Inc., 206 LC.C. 328 (1935), extended the Southern Pacific holding to railroad investment in new water carriers as well as new service by existing rail-owned water carriers. Seatrain, 15% owned by two railroads, was formed in 1932 to carry rail- cars by boat up and down the Eastern seaboard. At roughly the same time, the railroads applied to the Com- mission to determine whether their stock holding violated the Panama Canal Act. The Commission found that the railroads’ minority ownership of Seatrain fell within the Canal Act’s prohibition of “any interest whatsoever” and that the new company competed with the two railroads. Id. at 333, 335. Nevertheless, the Commission approved 18a continued stock ownership by the railroads because Sea- train’s service was in the public interest and would not reduce water competition. Jd. at 335-36. Significantly, the Commission did not suggest that it was improper for the railroads to acquire an interest in a competing water carrier first and ask the Commission’s approval later. 4. The Transportation Act of 1940 Against this background, Congress in 1940 enacted major amendments to the Interstate Commerce Act.’* Economic times had changed and the railroads were in poor financial shape and were beset by strong competition from unregulated water carriers. At the railroads’ urg- ing, Congress brought water carriers under ICC control with the purpose, among other things, of protecting rail- roads against unrestrained water carrier competition.’ Congress also amended the Panama Canal Act with the specific purpose of endorsing the ICC’s interpretation of the Canal Act, in the Southern Pacific and Seatrain Lines cases, to permit railroad acquisitions of water carriers that were in the public interest and would not reduce competition.” The Canal Act (codified at 49 U.S.C. §5 (14)-(16)) now provided (significant changes italicized) : 18 Transportation Act of 1940, ch. 722, 54 Stat. 898. 19 See S. Rep. No. 433, 76th Cong., Ist Sess. 1 (1939) (‘With one-third of the railroad mileage already in bankruptcy .. . and with another third tottering on the verge of bankruptcy, action must be taken to preserve not only the railroads but an adequate trans- portation system for this country.”) ; id. Part II (Minority Views), at 2 (“Where has the demand for regulation [of water carriers] come from? It comes from the railroads.”). 2° Transportation Act of 1940, supra note 18, sec. 7, § 5(14)-(16), 54 Stat. at 909-10; see H.R. Rep. No. 2832 (Conf. Rep.), 76th Cong., 3d Sess. 69 (1940): The so-calied Panama Canal Act provisions . . . have been modified for the purpose of .. . making more certain the au- thority of the Commission, in connection with which there has 19a (14) Notwithstanding [the predecessor to § 11,343], from and after [July 1, 1914], it shall be unlawful for any [rail] carrier . .. to own, lease, operate, control, or have any interest whatsoever (by stock ownership or otherwise, either directly, indirectly, through any holding company, or by stockholders or directors in common, or in any other manner) in any common carrier by water . . . with which such car- rier aforesaid does or may compete... . (15) Jurisdiction is hereby conferred on the Com- mission to determine questions of fact . . . as to the competition or possibility of competition, after full hearing, on the application of any railroad company or other carrier. Such application may be filed for the purpose of determining whether any existing service is in violation of [$5/14)] ... or may pray for an order under the provisions of [§ 5(16)]. The Commission may on its own motion . . . inquire into the operation of any vessel in use by any railroad . which has not applied to the Commission and had the question of competition . . . determined as herein provided .... (16) Notwithstanding the provisions of [§ 5(14)], the Commission shall have authority . . . to author- ize [a rail] carrier to own or acquire ownership of, to lease or operate, to have or acquire control of, or to have or acquire an interest in, 4 common carrier by water . .. if the Commission shall find that the apparently been doubt, with respect to installation of new service. See also 86 Cong. Rec. 10,175 (1940) (statement of Rep. Lea, House floor manager for the Act) (approving the ICC’s reasoning in South- ern Pacific) ; id. at 11,271 (statement of Sen. Clark) (complaining that Congress was endorsing the ICC’s Seatrain Lines opinion) ; id. at 11,285 (statement of Sen. Wheeler) (“the decisions of the Inter- state Commerce Commission were in exact accord with the intent of Congress”’). 20a continuance or acquisition . . . will not prevent such common carrier by water . . . from being operated in the interest of the public . . . and that it will not exclude, prevent, or reduce competition on the route by water under consideration ... . Congress clearly expected rail carriers to be able, with ICC approval, to acquire competing water carriers. How- ever, the congressional debate again failed to focus on when—before or after the acquisition took place—the ICC would determine whether competition existed under $5(15) or if the acquisition was in the public interest under § 5/16). The language of £ 5/16) does, however, seem to contemplate both advance inquiry by a railroad that wants to acquire a Commission review of an existing arrangement if the railroad buys first and asks permis- sion later.” If Congress did not consider the timing of the ICC’s inquiry, far less did it consider the subtler question whether an advance approval requirement, coupled with § 5(14)’s ban on “any interest whatsoever,” would inter- dict financial arrangements that a rail carrier and a water carrier might want to or need to make pending ICC review of a merger. 21 The only indication in the extensive debate over the amend- ments that a railroad must obtain prior approval is a few scattered comments that suggest that the congressmen who made them may have assumed that a railroad would obtain approval first and ac- quire a water carrier afterwards. See 85 Cong. Rec. 11,612 (1940) (question by Sen. Clark) (inquiring whether the bill “empowers the Interstate Commerce Commission to authorize railroads to ac- quire [competing water] lines”); id. at 11,613 (response by Sen. Reed) (a railroad with a terminal at Duluth could “operate boat lines to Buffalo, if [it] could secure permission for the Interstate Commerce Commission to do so”); id. (statement of Sen. Taft) (“under the proposed legislation the Interstate Commerce Commis- sion is given power to authorize a railroad to acquire a competing water service”). 2la Congress has not amended the Panama Canal Act since 1940. The differences between the current version in § 11,321 (quoted in part I.A supra) and the 1940 version arise from a 1978 recodification of the Interstate Com- merce Act that was intended to be “without substantive change.” 49 U.S.C. note preceding § 10,101. Congress has, however, substantially deregulated the railroad in- dustry (notably rate-setting practices) in the Railroad Revitalization Regulatory Reform Act of 1976** and the Staggers Rail Act of 1980.** The Staggers Act, more- over, establishes “the policy of the United States... to minimize the need for Federal regulatory control over the rail transportation system.” 49 U.S.C. § 10,101la‘2).** B. ICC Cases [nolving Water Carrier Acquisitions Only five reported ICC decisions in the 43 years since the 1940 revision of the Panama Canal Act involve rail- road acquisition of a water carrier. Of these, only two are directly relevant. Both involved purchase contracts 22 Pub. L. No. 94-210, 90 Stat. 31 (1976) (current version in scattered sections of 45, 49 U.S.C.). 23 Pub. L. No. 96-448, 94 Stat. 1895 (1980) (amending 49 U.S.C. §§ 10,101-11,917). *4Congress also provided in the Staggers Act, somewhat obliquely : With respect to the relationship between water carriers and rail carriers, none of the amendments made by this Act shall be construed to make lawful... any competitive practice that is unfair, destructive, predatory, or otherwise undermines competition .... Id. § 707, 94 Stat. at 1965-66 (codified at 49 U.S.C. § 10,706 note). This provision was apparently designed to alleviate concern that the railroads might use their new rate-setting freedom to set predatory rates that would drive water carriers out of business. See H.R. Rep. No. 1430 (Conf. Rep.), 96th Cong., 2d Sess. 143 (1980), reprinted in 1980 U.S. Code Cong. & Ad. News 4110, 4175: The intent is that none of the amendments made by this Act is to be used to legitimize the undermining of rail-water 22a contingent on ICC approval. In /llinois Central Railroad —Control—John I. Hay Co., 317 LC.C. 39 (1962), II- linois Central agreed to purchase John Hay for $9,000,000 plus earnings from date of agreement to date of closing, less any dividends paid. Jd. at 62 (hearing examiner’s report). John Hay promised to continue its business without substantial change until closing, agreed not to enter into contracts with other carriers unless required to do so by law, and agreed to various other conditions. Id. at 68. This binding purchase contract obviously gave Illinois Central a substantial stake in John Hay’s future profitability and concomitant incentive to steer traffic to John Hay from competing water carriers. It aiso gave Illinois Central the power, through enforcing the pro- visions of the contract, to restrict John Hay’s freedom to engage in the full range of corporate activities. Never- theless, no one suggested that Illinois Central, by signing the purchase contract, had illegally acquired an “‘interest”’ in the barge line within the meaning of § 5(14)’s prohibi- tion on “any interest whatsoever.” The Commission con- sidered on the merits and disapproved the proposed take- over. /d. at 53-54, Similarly, in Chicago, Milwaukee, St. Paul & Pacific Railroad Control, Bremerton Freight Car Ferry, Inc., 312 IL.C.C. 553 (1961), Bremerton Ferry agreed to sell its business for $105,000, to incur no obligations except in the usual course of business until closing, and to main- tain its physical properties in substantially as good con- dition as they were in at time of agreement. Z/d. at 556. Once again, no one questioned whether the railroad had competition. Railroad rates and practices that... are unfair, destructive, predatory, or otherwise undermine competition .. . shall continue to be prohibited. The conferees rejected a broader House provision that “none of the amendments made by this Act shall be construed to modify... existing law with respect to competition and coordination [between rail carriers and water carriers}. H.R. 7235, § 808, reprinted in H.R. Rep. No. 1085, 96th Cong., 2d Sess. 33 (1980). 23a acquired a forbidden “interest” in the water carrier. This time, the ICC approved the transaction on the grounds that the two carriers did not compete. I/d. at 557." C. Is This Voting Trust an “Interest”? 1. Standard of Review We preface our analysis by noting the limited scope of our review. Asa general rule, courts must give “great 25 In two of the other three cases, Ohio Barge Line Control, 250 LC.C,. 57 (1941), and Warrior & Gulf Navigation Co. Control, 250 I.C.C, 26 (1941), a steel company that already owned a railroad acquired a barge line and applied for ICC approval under the prede- cessor to § 11,343 (governing carrier mergers generally). In both cases the steel company claimed that the railroad and the barge line did not compete and did not apply either for ICC approval of the acquisition under §5(16) or even for an ICC determination under §$5(15) whether the railroad and barge line competed. The ICC, without suggesting that the failure to apply was improper, declined to pass on whether the railroad and the barge line com- peted. See 250 I.C.C. at 61; 250 I.C.C. at 31. In the fifth case, Nicholson Universal S.S. Co. Ownership (Inter- est of N.Y. Cent. R.R.), 248 I.C.C. 43 (1941), the Commission, after investigation on its own motion, found that the New York Central Railroad for some time had covertly controlled Nicholson Steamship Co. through a web of director interlocks and a non- independent voting trust. The Commission ordered divestiture. /d. at 66. With regard to the import of the language from ICC opinions quoted by the dissent, we would point out that in the only case involving a voting trust, Nicholson Universal S.S. Co. Ownership (Interest of N.Y. Cent. R.R.), 248 I.C.C. 43 (1941), the majority did not hold that a permanent voting trust was per se a forbidden “interest.” Instead, it found that the New York Central’s verma- nent trust conferred an “interest” only after concluding that the trust conferred the power to control. See id. at 63-64. This narrow analysis was no accident, for Chairman Eastman expressed his separate view that the existence of control was “not of prime importance” because the voting trust necessarily conferred an “interest” in the water carrier. /d. at 68 (Eastman, Chmn., con- curring). 24a deference to the interpretation given the statute by the officers or agency charged with its administration.” EPA v. National Crushed Stone Association, 449 U.S. 64, 83 (1980) (citation and footnote omitted); see National Wildlife Federation v. Gorsuch, 698 F.2d 156, 166-67 (D.C. Cir. 1982).°° Of course, if the ICC’s interpreta- tion is “inconsistent with the language of the [Canal Act], as interpreted in light of the legislative history, or if it ‘frustrate[s] the policy that Congress sought to implement,’ no amount of deference can save it.” Na- tional Wildlife Federation, 693 F.2d at 171 (quoting Federai Election Commission v. Democratic Senatorial Campaign Committee, 454 U.S. 27, 32 (1981)). How- ever, we should not lightly assume that the plain lan- guage of the statute forecloses the Commission’s interpre- tation, for, in Learned Hand’s words, “it is one of the surest indexes of a mature and developed jurisprudence not to make a fortress out of the dictionary, but to re- member that statutes always have some purpose or object to accomplish, whose sympathetic and imaginative dis- covery is the surest guide to their meaning.” Cabell v. Markham, 148 F.2d 737, 739 (2d Cir.), aff'd, 326 U.S. 404 (1945) (quoted in Watt v. Alaska, 451 U.S. 259, 266 n.9 (1981) ). If the statutory language and legislative purpose per- mit the agency’s construction, that construction “must 26 The ICC decision in this case bears appropriate indicia war- ranting judicial deference. The ICC, which Congress has given exclusive jurisdiction to approve or disapprove carrier mergers, see 49 U.S.C. § 11,841(a), is “precisely the type of agency to which deference should presumptively be afforded.” Federal Election Comm'n v. Democratic Senatorial Campaign Comm., 454 U.S. 27, 37 (1981). Moreover, the ICC has fully explained its reasons, has reached a result consistent with its past decisions, see ICC Decision at 4-5 (distinguishing prior cases as involving either control or a permanent interest) and has relied on policy considerations rather than “narrow dissection of the language of the Act.” National Wildlife Fed’n v. Gorsuch, 693 F.2d 156, 169 (D.C. Cir. 1982). 25a be upheld if it is ‘sufficiently reasonable,’ even if it is not ‘the only reasonable one or even the reading the court would have reached’ on its own.” National Wildlife Fed- eration, 693 F.2d at 171 (quoting FEC v. Democratic Senatorial Campaign Committee, 454 U.S. at 39). 2. The Short Step From Purchase Contract to Vot- ing Trust The John Hay and Bremerton Ferry cases can be taken to implicitly hold that a purchase contract contingent on ICC approval is not an “interest” in a water carrier within the meaning of the Canal Act. Moreover, the ICC could not reasonably have held otherwise. A railroad and a water carrier are unlikely to embark on the long and costly process of seeking ICC approval without a defini- tive merger agreement. Such an agreement, however, necessarily gives the acquiring railroad a stake in the future earning power of its prospective partner. One could reasonably call this stake, even though it is con- tingent on ICC approval, an “interest” in the water car- rier. See Black’s Law Dictionary 729 (5th ed. 1979) (“Interest. The most general term that can be employed to denote a right, claim, title, or lega! share in some- thing.”). Nevertheless, such a right or claim must be permissible because Congress contemplated that railroads could acquire water carriers. Thus, unless, contrary to the Commission’s interpreta- tion, the statute does not require advance approval of acquisitions,” we are forced to conclude that the statu- tory phrase “any interest whatsoever” cannot be taken literally.** Moreover, the legislative history is of scant 27 We reject this alternative. The ICC’s actions in the present case reflect its view that prior approval is needed for this acqui- sition, and we find that interpretation a reascnable one in light of the statutory language and history. 28 John Hay and Bremerton Ferry can also be taken to implicitly hold that a purchase contract, even if it is an “interest” within the 26a help in deciding which interests are permitted and which forbidden. Congress expressly considered neither the scope of the term “interest”? nor the tension between a literal reading of the term and the express authorization in § 11,3821(b) for rail-water mergers. To decide which interests are permitted, we must refer to the basic Canal Act policy to preserve rail-water com- petition and thus consider the ability and incentive of the meaning of the Canal Act, is one that can be acquired pending ICC approval of a more substantial interest. The argument that a railroad can acquire a minimal interest without prior ICC approval is in some ways more attractive than the argument that the phrase “any interest whatsoever’—which sounds absolute—cannot be read that way. It is consistent with Commission precedent, for the Commission has never objected to a party’s failure to seek advance approval despite several opportunities to do so. See Ohio Barge Line Control, 250 I.C.C. 57 (1941); Warrior & Gulf Navigation Co. Control, 250 I.C.C. 26 (1941) (both discussed in note 25 supra) ; Investigation of Seatrain Lines, 206 I.C.C. 328 (1935) (discussed in subsection A.3 supra). Moreover, it would do little violence to the statutory scheme. Advance approval would still be required for a controlling interest, under § 11,343 as well as § 11,321, and there seems scant anticompetitive danger from a noncontrolling interest held only for the interim period needed to seek ICC approval. ICC counsel and CSX both argue that this interpretation of the Canal Act provides an alternate ground for sustaining the Com- mission’s decision. ICC Brief at 10 n.1; CSX Brief at 25-29. We need not decide that question here, for the ICC chose to rely on a nonliteral interpretation of the term “interest,” and we are able to uphold that interpretation. We are, however, surprised that the dissent, while rejecting the Commission’s construction that some “interests” may exist while approval is sought, nonetheless readily accepts the proposition that prior approval is required in all cases. See dissenting op. at 13. For, were we to accept the dissent’s literal 27a railroad to influence the water carrier or water competi- tion and the ability and incentive of the water carrier to compete with the rail carrier. If it be conceded—and WTA concedes it—that a pur- chase contract contingent upon ICC approval of the un- derlying transaction is not an “interest” within the meaning of § 11,321(a) (1), it is but a short step to hold that the temporary ICC-approved independent voting trust used by CSX is not an “interest” either.*® The pur- chase contracts in John Hay and Bremerton Ferry and the voting trust in the present case share two critical features. Both are strictly limited in time duration and both insulate the water carrier from railroad control pending a full ICC hearing. Either way the rail carrier has some incentive to in- fluence the water carrier’s operations because the rail carrier may reap the benefit of the water carrier’s future profitability. But in both cases, the incentive is diluted because the ICC may disapprove the transaction, thus 29 See WTA Brief at 47 (John Hay case “demonstrates how the statute should work’’). 30 WTA concentrates its statutory argument exclusively on the term “interest” in the statutory phrase “own, operate, control, or have an interest in.” Intervenor Fastern Coal] Traffic Conference raises the alternate possibility that the voting trust is proscribed because CSX will continue to “own” (in an equitable sense) Ameri- can Commercial Barge Lines. Eastern Coal Traffic Conference Brief at 5. We think the term “own,” like the term “interest,” cannot be an absolute. One who holds a contract to purchase (as in John Hay and Bremerton Ferry) is often called an “equitable” owner, yet, to make the statute work, purchase contracts must be per- missible. Ultimately, the precise content of both terms must be assessed on the basis of the purpose they are meant to serve. The critical analytical point is that there must be some minimal leeway in § 11,821(a)(1)’s proscription of ownership or interest, or else the merger authority in § 11,321(b) becomes a dead letter. 28a eliminating any anticipated future profits.*' In addition, the potential for influence is limited by the short dura- tion of the purchase contract or voting trust. Moreover, the rail carrier lacks the control over the water carrier needed to embark on major anticompetitive actions such as predatory pricing.® As for the water carrier, it may lack an incentive to compete vigorously with its potential future master. But again, this possible lack of incentive would exist no mat- ter how the deal is structured. Moreover, the water car- rier has greater ability to compete with full managerial authority vested in an independent trustee tha» with management’s hands tied by a restrictive purchase con- tract. Cf. Lamoille Valley Railroad v. ICC, No. 82-1498, 31 It is necessary to this argument that the voting trust continue for only a short period of time. This condition is satisfied in this case because CSX committed to apply promptly for ICC review of its contemplated merger with American Commercial Barge Lines and the voting trust—at ICC insistence—provides for divestiture should the ICC disapprove the merger. Thus, CSX has only a short- term stake in the barge line’s future profits. WTA and the dissent attempt to distinguish a voting trust from a purchase contract on the basis that in the latter, the water carrier retains the benefit of earnings in the interim period while the ICC is deciding whether to approve the merger. WTA Reply Brief at 22-23; dissenting op. at 9-10. This is only partly correct; if the purchase price is fixed at date of agreement, with no adjust- ment for earnings between date of agreement and date of closing (Bremerton Ferry involved such an agreement), the rail carrier receives the benefit of interim earnings unless the ICC disapproves the transaction. Moreover, so long as the interim period is short, the railroad’s extra stake in interim earnings should not substan- tially increase its financi«] stake in or incentive to influence the water carrier’s operations. 32 In the case of a voting trust, the railroad actually owns the supra, we think the ICC’s voting trust guidelines (including ad- vance ICC review of the trust agreement), the temporary nature of the voting trust, and ICC authority to remedy any attempted abuse of the trust, suffice in this regard. 29a slip op. at 71 (D.C. Cir. June 28, 1983) (finding it a close question whether a purchase contract gave one railroad premature control over another railroad). Moreover, the ICC’s interpretation is consistent with the dual purpose of the Canal Act to permit some rail- water mergers while preserving vigorous water competi- tion and with the congressional policy, stated in the Staggers Act, “to minimize the need for Federal regula- tory control over the rail transportation system.” 49 U.S.C. §10,101(a) (2). An ICC ruling that a voting trust violates the Canal Act would foreclose the common acquisition device of the tender offer. This would force railroads to use less desirable alternative means if they could, and foreclose acquisition entirely if it could not be made by purchase contract (a likely consequence in this case because of the competing tender offer from Coastal Corp.). In addition, such a ruling might, as in this case, disrupt a much larger merger of which the water carrier acquisition is only a small part. The Canal Act purpose to permit the ICC to approve rail-water mergers that are in the public interest would be frus- trated, at minimal gain in preventing anticompetitive railroad practices. D. The ICC’s Enforcement Discretion Even if the present voting trust violated the Panama Canal Act, we would be unable to award WTA the re- lief which it seeks. The dissent is doubtless correct when it states, see dissenting op. at 17 n.33, that the Commis- sion has no discretion not to enforce the Panama Canal Act prohibition—and cases such as Adams v. Richardson, 480 F.2d 1159 (D.C. Cir. 1973), adequately support that proposition. The present case, however, is two steps short of that situation. First, the Commission is not saying that it will not enforce the prohibition against all viola- tions, or even against all violations involving a voting trust, but only against this particular voting trust. No 30a case we are aware of supports the unlikely proposition that an agency must proceed against every single violator —and indeed Moog Industries v. FTC, 355 U.S. 411 (1958), holds precisely the contrary. Second, in denying WTA’s petition (and still assuming that the present voting trust is a violation) the Commis- sion would not even be saying that it declines to enforce the Act’s prohibition against this particular violation— but only that it declines to enforce it through the par- ticular means that WTA seeks, namely, the extreme remedy of an injunction. The Commission could have explored other remedies, such as a daily fine for viola- tion or an order to sell the barge line or spin it off to shareholders either promptly after completing the tender offer or after a full hearing. The Commission’s choice among these options would presumably depend largely on its assessment of the likelihood that it would permit the merger after full hearing (either because the two carriers do not compete or because the merger is in the public interest) and of the injury to competition in the interim. The Commission’s weighing of these factors and its con- sequent exercise of its enforcement discretion, if review- able at all,** would be reviewable only under the arbi- trary and capricious standard of the Administrative Pro- cedure Act, 5 U.S.C. § 706(2) (A). We do not see how, in the application of such a test, the dissent can conclude that the Commission had no choice except to select the remedy of injunction. That is especially so since one of the central considerations governing that choice, “the adverse effect on competition that might result from [a particular enforcement strategy]” is “clearly within the 33 See Southern Ry. v. Seaboard Allied Milling Corp. 442 U.S. 444, 452-63 (1979) (ICC decision not to investigate lawfulness of seasonal rate increase is not reviewable); City of Chicago v. United States, 396 U.S. 162, 165-66 (1969) (although ICC decision not to investigate railroad’s abandonment of passenger service would have been unreviewable, its written decision after investiga- tion was subject to APA review). 3la i special competence of” and “call{s] for the discretionary determination by” the agency. Moog Industries v. FTC, supra, 355 U.S. at 413. Even assuming, then, the correctness of the dissent’s position on the meaning of the statute, the outcome would not be what the dissent proposes, an order reaguiring the Commission to seek injunctive relief; but at most a re- mand for the somewhat quixotic purpose of enabling the Commission to decide whether it wishes to seek that extreme remedy against an arrangement which it has found to be essentially harmless. III. CONCLUSION In sum, we think, in the circumstances of this case, that the ICC has given its governing statute a reasonable interpretation. We affirm the ICC’s decision that the Panama Canal Act, 49 U.S.C. § 11,321, permits a rail carrier to acquire water carrier stock without prior hear- ing if it puts the stock into an ICC-approved independent voting trust for the minimum period needed to secure a full hearing on whether the Canal Act permits the stock ownership.* % WTA charges that CSX will acquire, in addition to the voting trust, two other “interests” in American Commercial Barge Lines: interlocking directors and a $20 million debt now owed by the barge line to Texas Gas. Texas Gas promised to eliminate the director interlocks before CSX acquires any Texas Gas stock and the Commission apparently accepted the promise, for it did not discuss the interlocks in its opinion. We have no basis for doubting this promise; moreover, the voting trust agreement would seem to instruct the trustee to eliminate any interlocks. See text accompanying note 4 supra. Finally, the Commission has ample power to remedy any abuse of the trust, including possibly disapproving the prospective merger. As for the $20 million loan, CSX states in its brief that it has been repaid. CSX Brief at 38 n.1. In view of WTA’s failure to bring the loan agreement to the ICC’s attention at the time called 34 82a We lift the stay effective 24 hours from the date of this decision; the mandate will issue at the usual time. for under ICC practice, see ICC Decision at 8, and of the substantial probability of mootness, we decline to decide whether, as the ICC stated, a bona fide debtor-creditor relationship is permitted by the Canal Act. 33a DISSENTING OPINION—Filed August 4, 1983 GREENE, District Judge, dissenting: The Panama Canal Act provides that a rail carrier “may not... have an interest in a water common carrier . . . with which it does or may compete for traffic.” 49 U.S.C. § 11321(a) (1). A railroad may escape that prohibition only if the Interstate Commerce Commission finds that such interest as the carrier intends to acquire “will still allow competi- tion, without reduction, on the water route in question.” ' 49 U.S.C. § 11321(b). However, even so, “[t]he Com- mission may take action under this section only after a full hearing.” 49 U.S.C. § 11321(c¢). CSX Corporation, the third largest railroad in the United States, seeks to acquire Texas Gas Resources Corporation, one of whose fully-owned subsidiaries is American Commercial Lines, Inc. (ACL) which operates American Commercial Barge Lines, Inc. (ACBL), the largest water carrier engaged in operations on the inland waterway system of the United States. This, then, is by any measure a massive takeover of a water carrier by a railroad. Since the merger required ICC approval, CSX and Texas Gas established a voting trust arrangement whereby CSX would own the acquired shares of ACL but a bank trustee would exercise voting power. The ICC ruled that, in view of the establishment of the voting trust, CSX was not acquiring an “interest” within the 149 U.S.C. §11321(b). The ICC must also find that, notwith- standing the interest, the water common carrier will be operated in the public interest. 2CSX is the parent company of several railroads, including the Chessie System Railroads and the Seaboard System Railroads. CSX is also the nation’s largest rail carrier of coa! It operates from the Great Lakes to the Gulf of Mexico, and from the Mississippi River to the Atlantic Ocean. 34a meaning of the statutory prohibition, and it permitted the acquisition to go forward. The Court affirms the Commission decision, albeit on a different rationale. I dissent. L There is a long history in this country of attempts by railroads to acquire surface freight transport domination by attempting to drive water carriers out of business. Water transportation being the cheaper mode, rail car- riers typically sought to overcome their economic dis- advantage by buying water carriers, lowering prices to levels at which competing water carriers were forced out of business, and then raising the prices charged by the remaining water carriers, so as to eliminate any differen- tial between water and rail rates.‘ The Panama Canal Act is aimed directly at these aggressive actions.‘ The flat prohibition’ on railroad takeovers in section 11321 is an expression of this congressional concern. The % See American Waterways Operators, Inc. v. United States, 386 F. Supp. 799, 803 (D.D.C. 1974); Lake Line Applications Under Panama Canal Act, 33 I.C.C. 699, 712-14 (1915). The House report on the Panama Canal Act states: The evil is prevalent, recognized, and complained of. The proper function of a railroad corporation is to operate trains on its tracks, not to occupy the waters with ships in mock competition with itself, which in reality operate to the extinction of all genuine competition. H.R. Rep. No. 423, 62nd Cong., 2d Sess. 12 (1912). ‘This is not an ancient law, ill suited to modern conditions. Congress reaffirmed its purpose a number of times, the last time as late as 1980. See section 7 of Public Law No. 96-448, 94 Stat. 1895, 1965-66 (1980); 11.R. Conf. Rep. No. 1430, 96th Cong., 2d Sess. 142-43 (1980), reprinted in 1980 U.S. Code Cong. & Adm. News 4110, 4175. 5 Prior to the 1978 codification of the Act (Pub. L. No. 95-473, 92 Stat. 1342 (1978)), the statute prohibited a railroad from having “any interest whatsoever” in a water carrier. The codifica- tion substituted the present wording which, according to the his- torical and revision note to section 11321, is even more inclusive than the prior language. 35a escape provision codified in subsection (b) was added in 1940 to provide relief where it could be demonstrated that competition would not be harmed and that the joint rail- water operation would be in the public interest. Trans- portation Act of 1940, Pub. L. No. 76-785, 54 Stat. 898, 909-10. However, as noted, Congress also specified that such a determination was to be made only after a hearing. The Commission’s construction of the statute in this case stands this fairly straightforward statutory scheme on its head. Instead of making its determination regard- ing the appropriateness of the acquisition within the framework of the prior hearing required by subsection (c),® the ICC transfers the decision-making process to subsection (a) by the simple device of determining at the very outset of its consideration that a voting trust is not an “interest” within the meaning of the Act. The hear- ing required by the statute is thus postponed until the time the railroad moves for approval of the acquisition itself and for dissolution of the voting trust. As for the issue of competition, the procedure adopted by the Com- mission drains the Act’s prohibition of whatever meaning may be left in the wake of its method of dealing with the term “interest.” * ®I do not understand the Court to hold that th [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385011_0886%3A1. Public record. Not legal advice.