Amicus Curiae Brief — Square D Co. v. Niagara Frontier Tariff Bureau, Inc.

(9) Supreme Court, U.S,

FILED

Iu the Supreme Court of the \ |

OCTOBER TERM, 1985

SQUARE D COMPANY, ET AL., PETITIONERS

Vv.

NIAGARA FRONTIER TARIFF BUREAU, INC., ET AL.

ON PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT

BRIEF FOR THE UNITED STATES

AS AMICUS CURIAE IN SUPPORT OF PETITIONERS

CHARLES FRIED

Acting Solicitor General

CHARLES F., RULE

Acting Assistant Attorney General

JERROLD J. GANZFRIED

Assistant to the Solicitor General

ROBERT B. NICHOLSON

STEPHEN MAC ISAAC

Attorneys

Department of Justice

ROBERT S. BURK Washington, D.C. 20530

General Counsel (202) 633-2217

HENRI F. RuSH

Deputy General Counsel

TIMM L. ABENDROTH

Attorney

Interstate Commerce Commission

Washington, D.C. 20423

JIM J. MARQUEZ

General Counsel

ROSALIND A, KNAPP

Deputy General Counsel

Department of Transportation

Washington, D.C. 20590

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QUESTION PRESENTED

Whether Keogh v. Chicago & N.W. Ry., 260 U.S.

156 (1922), compels dismissal of a claim for dam-

ages under the Sherman Act (15 U.S.C. 1) in an

action brought by shippers alleging that carriers en-

gaged in conduct that clearly violated a rate bureau

agreement approved by the Interstate Commerce

Commission.

(1)

TABLE OF CONTENTS

Page

Interest of the United States —................-..............- sahieeks 1

RSE RE 2

I a seeldaieeibeumniialipe 6

EET ER Gen ee oe 20

TABLE OF AUTHORITIES

Cases:

Bigelow v. RKO Radio Pictures, Inc., 327 U.S.

a ne See Yee ee ee 9

Board of Trade v. ICC, 646 F.2d 1187 ................... 14

California v. FPC, 369 U.S. 482 ..................--....-..... 10

Carnation Co. Vv. Pacific Westbound Conference,

EEE IN ea a Te 7,9,12

Chicago Mercantile Exchange v. Deaktor, 414 U.S.

REE SENET SSS ee A ea PC RC ne x

Clark v. Uebersee Finanz-Korp., 332 U.S. 480 ........ 17

Continental Ore Co. v. Union Carbide & Carbon

Sa i tclinalnatinionin 9

Eastman Kodak Co. vy. Southern Photo Materials

ST ee ee Re ee 9

Far East Conference v. United States, 342 U.S.

RAPS OND AS Cee ee ee 12

FMC vy. Seatrain Line, Inc., 411 U.S. 726 ............. 11,17

Georgia Vv. Pennsylvania R.R., 324 U.S. 4389........ 18

Goldfarb v. Virginia State Bar, 421 U.S. 773........ 11

Hanover Shoe, Inc. v. United Shoe Machinery

elimi 4,9

Hawaii v. Standard Oil Co., 405 U.S. 251 _............ 4

Hughes Vv. Rowe, 449 U.S. & ...2222.........ccecccccccceceee eee 6

ICC v. American Trucking Associations, Inc., No.

RT a 10, 13

Illinois Brick Co. v. Illinois, 431 U.S. 720 ........... 4,9

Keogh v. Chicago & N.W. Ry., 260 U.S. 156........ passim

Lafayette v. Louisiana Power & Light Co., 435

I ta a 12

IV

Cases—Continued :

Lower Lake Erie Iron Ore Antitrust Litigation,

MDL 587 (E.D. Pa. June 6, 1985) ......................

Mandeville Island Farms, Inc. v. American Crystal

ee Ges Se es ee a ce

MCI Communications Corp. v. AT&T, 708 F.2d

1081, cert. denied, 464 U.S. 891 0.000000...

Minsky v. Auto Driveaway Co., 757 F.2d 718, cert.

denied, No. 84-457 (Nov. 13, 1984) 00000.

Mitsubishi Motors Corp. v. Soler Chrysler-

Plymouth, Inc., No. 83-1569 (July 2, 1985)...

National Gerimedical Hospital v. Blue Cross, 452

REN naan oS Re A ers a Ae

Niagara Frontier Tariff Bureau, Inc.—Agreement,

RR IRD ire See taser ener

Northern Pac. Ry. v. United States, 356 U.S. .

Otter Tail Power Co. v. United States, 410 U.S.

366

Pennsylvania R.R. v. United States, 363 U.S. 202..

Phonetele, Inc. v. AT&T, 664 F.2d 716, cert. de-

es

Rate Bureau Investigation, 349 I.C.C. 811

Reiter v. Sonotone Corp., 442 U.S. 3380 _...............

Ricci v. Chicago Mercantile Exchange, 409 U.S.

I heticcviickasensinibeadiaaaiiih iia aan

Silver v. New York Stock Exchange, 373 U.S.

ii a a rel area

Southern Motor Carriers Rate Conference v.

United States, No. 82-1922 (Mar. 27, 1985)...

Story Parchment Co. v. Paterson Parchment Pa-

SP a ee es

Strobl v. New York Mercantile Exchange, No. 84-

vous (a5 Cor. Guay G, B68) ...............................-.

Union Labor Life Insurance Co. v. Pireno, 458

eg SERA a ET. Se ite

United States v. Borden Co., 308 U.S. 188 _......

United States v. Chicago, M., St. P. & P.R.R., 294

gS RM oR Pra SR

United States v. National Association of Securities

Dealers, Inc., 422 U.S. 694

alateanipeeibiapeiiiatianielddaialliiaalibiebitatadtialeiatintininaaeinid 9,

Page

10, 13

10, 17

8

V

Cases—Continued : Page

United States vy. Niagara Frontier Tariff Bureau,

Inc., 1984-2 Trade Cas. (CCH) { 66,167 _.......... 2

United States v. Philadelphia National Bank, 374

SIRS ST, SR ES 10, 11

United States v. RCA, 358 U.S. 334 ........................ 10

United States v. Western Pac. R.R., 352 U.S. 59_... 8

United States Navigation Co. v. Cunard Steam-

I i cicibesbaneateenaces 12

Weinberger v. Hynson, Westcott & Dunning, 412

ES Sa Se eS ee ee 17

Wheat Rail Freight Rate Antitrust Litigation, In

re, 759 F.2d 1305, petition for cert. pending,

ad dnsieiniiebeiied 18, 19

Zenith Radio Corp. v. Hazeltine Research, Inc.,

ENS CeO 2e 9

Constitution, statutes and rule:

U.S. Const. Art. I, § 8, Cl. 3 (Commerce Clause) .. 12

Airline Deregulation Act of 1978, Pub. L. No. 95-

I IOI TI ccchscecnieniencinciscsnemestatmesionnes 16

Interstate Commerce Commission Act, 49 U.S.C.

10101 et seq.:

RE aR TaN ae 15

5 | ee eevee er enmnnn——— 17, 19

EEE ee 2

nce cesetsaenccs 2

Motor Carrier Act of 1980, Pub. L. No. 96-296,

EE RE a ae eee 15

Railroad Revitalization and Regulatory Reform

Act of 1976, Pub. L. No. 94-210, 90 Stat. 31

FF itn bitisrtemencibinininnineientnicintimabancnenere 19

Reed-Bulwinkle Act, ch. 491, 62 Stat. 472 et seq.:

iit cesitsionnnscnischsemndecesenericapanninstti 2

IT iicrcecpiceniceceenineneminanwosoensndinnests 3

3

7

Sherman Act, 15 U.S.C. 1 et seq. -....00020..0020202 eee...

Shipping Act, 46 U.S.C. 814 _..0000000 eee

Staggers Rail Act of 1980, Pub. L. No. 96-448,

i a aisineseminiaiaenes 17, 19

SB SIE eS ee 7

VI

Miscellaneous:

H.R. Rep. 96-1069, 96th Cong., 2d Sess. (1980) ....

Interstate Commerce Commission :

37th Annual Report of the Interstate Com-

merce Commission (1923) ................--..--------

Collective Ratemaking in the Trucking In-

SSH! FIDERENENE Oma e mS aie eB aEE OT

IST HY ETRE eS ee Ce

acerca cdiheeisisatcbincidsitlantses

D. Wyckoff & D. Maister, The Motor Carrier In-

III“ Sibiccbindsbbamnseicedsihcdiieatuiietateianbieninhniiidgnibicnin

Page

15

13

15

16

13

15

— ——————————— ———

Iu the Supreme Court of the United States

OCTOBER TERM, 1985

No. 85-21

SQUARE D COMPANY, ET AL., PETITIONERS

Vv.

NIAGARA FRONTIER TARIFF BUREAU, INC., ET AL.

ON PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT

BRIEF FOR THE UNITED STATES

AS AMICUS CURIAE IN SUPPORT OF PETITIONERS

INTEREST OF THE UNITED STATES

The issue in this case is whether this Court’s deci-

sion in Keogh v. Chicago & N.W. Ry., 260 U.S. 156

(1922), should be applied to bar an antitrust dam-

age action based on conduct that, absent the implied

immunity created in Keogh, would violate the Sher-

man Act. The United States has primary respon-

sibility for enforcement of the antitrust laws. It

therefore has a substantial interest in urging that

immunities from the antitrust laws be recognized

only where essential to the attainment of other con-

gressional regulatory objectives and only to the ex-

tent intended by Congress.

(1)

2

STATEMENT

1. Petitioners are two corporations that purchased

trucking services from respondent motor carriers.

The carriers are members of respondent Niagara

Frontier Tariff Bureau, Inc. (NFTB), a rate bureau

that operates pursuant to an Agreement approved

by the Interstate Commerce Commission (ICC). Un-

der the Agreement, respondents may set rates col-

lectively and, if they comply with various notice and

hearing and record-keeping requirements set forth

in the Agreement and ICC regulations, the Reed-

Bulwinkle Act immunizes their conduct from chal-

lenge under the antitrust laws. See 49 U.S.C.

10706."

In 1983 petitioners filed separate class action com-

plaints* alleging that respondents had violated the

149 U.S.C. 10706(b) (2) codifies Section 5a of the Reed-

Bulwinkle Act, ch. 491, 62 Stat. 472. It provides that an

ICC-approved Agreement among carriers “may be * * * car-

ried out under its terms and under the conditions required

by the [ICC], and the antitrust laws * * * do not apply

to parties and other persons with respect to making or carry-

ing out the agreement.” The Agreement in this case was ap-

proved by the ICC in Niagara Frontier Tariff Bureau, Inc.—

Agreement, 297 I.C.C. 494 (1955).

2 The complaints, originally filed in the United States Dis-

trict Court for the District of Columbia, were transferred to

the Western District of New York, where a complaint filed by

the United States containing essentially the same allegations

was then pending. The government suit resulted in a consent

decree enjoining respondents from discussing rates except

“within an authorized ratemaking body of a rate bureau with

a rate agreement,” and from “harassing, discouraging, co-

ercing, or threatening in any way any motor carrier to with-

draw, forbear from filing, or modify in any way said carrier’s

planned or actual independent rates.” United States Vv.

Niagara Frontier Tariff Bureau, Inc., 1984-2 Trade Cas.

(CCH) { 66,167, at 66,533 (W.D.N.Y.).

3

Sherman Act, 15 U.S.C. 1 et seq., by conspiring dur-

ing a fifteen year period to “ ‘fix, raise and main-

tain prices and to inhibit or eliminate competition

* * * without complying with the terms of the

NFTB [A]greement and by otherwise engag[i]ng

in conduct that either was not or could not be ap-

proved by the ICC’” (Pet. App. 39a). Specifically,

the complaints alleged that the tariffs filed by re

spondents through the NFTB were set by a clan-

destine “ ‘Principals Committee ’” in violation of the

Agreement. Petitioners also claimed that respond-

ents resorted to “threats, coercion and retaliation”

to prevent carriers from exercising their statutory

right * to file tariffs independently. Petitioners sought

monetary and injunctive relief.

Respondents moved for judgment on the pleadings,

arguing that petitioners’ damages claims were barred

by Keogh v. Chicago & N.W. Ry. (Keogh), 260 U.S.

156 (1922). The district court found Keogh con-

trolling and dismissed the complaint in its entirety

(Pet. App. 43a-50a).* ,

2. The court of appeals, in an opinion by Judge

Friendly, affirmed in part and reversed in part (Pet.

App. la-42a).

Point-by-point, the court of appeals examined why

the four factors that formed the basis for the hold-

ing in Keogh “do not seem so compelling today as

® Under Section 5a(6) of the Reed-Bulwinkle Act, 62 Stat.

473, a rate bureau agreement must afford each carrier “the

free and unrestrained right to take independent action either

before or after any determination arrived at” collectively.

*The district court also concluded that the petitioners’

allegation of a “broader conspiracy” to inhibit competition

involving conduct not related to rates was insufficient to avoid

dismissal under Keogh (Pet. App. 48a-50a).

4

they did in 1922” (Pet. App. 9a). First, in response

to the concern expressed in Keogh that antitrust dam-

ages might result in forbidden discrimination among

shippers,® the court of appeals observed that such

fear was “scarcely applicable to class actions” that

provide more uniform relief (id. at 10a). Second,

Keogh referred to the difficulty of determining

whether the “hypothetical lower rate” proposed as

the benchmark for assessing antitrust damages would

have been approved by the ICC as reasonable and

“non-discriminatory” (260 U.S. at 164). The court

of appeals noted (Pet. App. 1la) that in light of the

“many later cases” where “similar issues” had been

referred to the ICC, the situation was now quite

different from that which obtained in 1922. The

third factor in the Keogh rationale was the difficulty

in proving injury because lower rates might have

been passed on to shippers’ customers. 260 U.S. at

165. But, as the court of appeals commented (Pet.

App. 12a), this Court has itself labeled as dictum

Keogh’s reference to passing-on” (Hanover Shoe,

Inc. v. United Shoe Machinery Corp., 392 U.S. 481,

491 n.8 (1968)), and recent decisions of this Court

appear to reject that rationale altogether. See Jlli-

nois Brick Co. v. Illinois, 4381 U.S. 720, 723-726

(1977); Hawaii v. Standard Oil Co., 405 U.S. 251,

263 n.14 (1972); Hanover Shoe, Inc., 392 U.S. at

487-494.

5 This Court noted in Keogh that antitrust damages would,

in effect, provide to successful plaintiffs a “rebate” not shared

by shippers who chos2 not to sue. Even among several plain-

tiffs, moreover, it was “highly improbable” that different

courts and juries would provide to each the same measure of

relief and that, too, would give some shippers a preference

over competitors. 260 U.S. at 163.

5

The court of appeals also questioned as “no longer

seem[ing] so self-evident” Keogh’s central premise

—that a rate the ICC has determined to be “legal”

cannot be illegal under the antitrust laws (Pet. App.

13a). The court reasoned that the existence of a

“zone” within which a rate might fall and still pass

muster under the Interstate Commerce Act would

allow shippers to base an antitrust action on the

difference between the rate actually charged and the

“lower but still reasonable rate that would have pre-

vailed under free competition” (ibid.). Moreover,

the court noted (ibid.) that post-Keogh precedent had

firmly established that “implied exemptions to anti-

trust liability are ‘strongly disfavored,’” and that

“activity could be challenged under the antitrust laws

despite the existence of an administrative agency

with authority to regulate the activity.” Finally, the

court found (Pet. App. 15a) that “[t]he case for

reaching a contrary conclusion today to that reached”

in Keogh “is particularly strong in light of recent

statutes which rely increasingly on competition

rather than regulation to insure the reasonableness

of rail and motor carrier rates.”

Although the court of appeals found (Pet. App.

3a) “much of the reasoning of Keogh * * * out-

dated,” it held that Keogh’s “language has not been

overruled and that if there is to be an overruling,

that task is for the Supreme Court” (Pet. App. 3a).

Accordingly, the district court’s order was affirmed

insofar as it dismissed damage claims based on the

respondents’ rate-fixing activities.*

®* As to petitioners’ claims for injunctive relief, however, the

court of appeals reversed. It also indicated that petitioners

should be allowed to amend their complaints “to state claims

for damages other than damages arising from the filed tariffs.”

Pet. App. 36a-40a.

6

DISCUSSION

The United States believes that review by this

Court is appropriate. In its present posture, the

case does not require the Court to decide whether

respondents’ conduct violated the antitrust laws.

Nor does this case implicate the express immunity

that would be available under the Reed-Bulwinkle

Act if respondents had complied with their ICC-

approved Agreement. Rather, deeming the allega-

tions of the complaint to be true,’ respondents have

engaged in conduct that violated the Agreement and

that is illegal per se under the antitrust laws. The

question presented is whether carriers can violate

both their Agreement and the Sherman Act and yet

be immune from a treble damage action. Despite its

serious doubts about the continued soundness of

Keogh, the court of appeals felt compelled to affirm

the district court’s dismissal of the rate-related por-

tions of the complaints. We submit that for the

reasons stated by the court of appeals, this Court

should consider whether the balance struck in Keogh

remains a proper formulation for accommodating the

objectives of the antitrust laws and the Interstate

Commerce Act. Numerous post-Keogh developments

in antitrust and other areas of the law, and in the

regulatory environment, render that 1922 decision an

anomaly in 1985. The issue of Keogh’s continued

vitality is important, for its prohibition of private

damage actions in cases of this sort substantially

undermines congressional efforts to substitute com-

petition for regulation in the motor carrier and other

industries.

7™Since the complaint was dismissed on the pleadings, its

allegations must for present purposes be taken as true. See,

e.g., Hughes v. Rowe, 449 U.S. 5, 10 (1980).

7

1. In Keogh, a shipper brought an antitrust ac-

tion alleging that various railroads had violated the

Sherman Act by conspiring to fix tariffs filed with

and ultimately approved by the ICC. The Court

held that a shipper could not maintain a private anti-

trust damage action for rates filed with the ICC,

advancing for this conclusion the four reasons Judge

Friendly addressed below.

As the court of appeals’ opinion persuasively dem-

onstrates, developments in antitrust and other areas

of the law since 1922 have substantially eroded the

foundations of Keogh. For example, Keogh’s notion

that antitrust damages are inimical to a regulatory

scheme aimed at preventing discrimination among

shippers at the hands of carriers was rejected by this

Court in Carnation Co. v. Pacific Westbound Confer-

ence, 383 U.S. 213, 219 n.3 (1966).° In any event,

as the court of appeals noted (Pet. App. 10a-1lla),

a class action under Fed. R. Civ. P. 23—a proce-

dural device unavailable in 1922—effectively relieves

Keoch’s fear that piecemeal litigation would result

8 Carnation involved an antitrust damage action brought by

shippers against water carriers. The shippers claimed that

the carriers had fixed rates in a manner that did not qualify

for express immunity under Section 15 of the Shipping Act,

46 U.S.C. 814, which, like the Reed-Bulwinkle Act, immunizes

collective ratemaking undertaken pursuant to an agreement

approved by the regulatory agency. In rejecting the claim that

antitrust damages would violate the Shipping Act’s objective

of preventing discrimination among shippers, this Court stated

that “Congress was concerned with assuring equality of treat-

ment by [carriers], not with equality of treatment by juries in

collateral proceedings,” and noted that “[t]here is no reason

to believe that Congress would want to deprive all shippers of

their right to treble damages merely to assure that some ship-

pers do not obtain more generous awards than others.” 383

U.S. at 219 n.3.

8

in lack of uniformity and, hence, discrimination

among shippers. 260 U.S. at 163.

Similarly, although in 1922 there may have been

“no conceivable proceeding” in which the ICC could

pass on the validity of a hypothetical rate proposed

as the standard for measuring antitrust damages,

260 U.S. at 164, that is not necessarily the case

today. As the court of appeals observed, since Keogh

was decided this Court itself has in “many * * *

cases * * * directed the suspension of judicial pro-

ceedings pending the referral of similar issues to the

ICC” (Pet. App. 1la).*° Moreover, the fact that a

particular tariff filed in violation of an ICC-approved

agreement may be “reasonable” does not establish

that a lower tariff is unreasonable, i.e., that it would

be rejected by the ICC as falling below a “zone of

reasonableness * * * between maxima and minima

within which a carrier is ordinarily free to adjust

its charges.” United States v. Chicago, M., St. P. &

P. R.R., 294 U.S. 499, 506 (1935).

Keogh also expressed apprehension that a shipper

would be unable to demonstrate that it was in fact

injured, or to present anything but wholly specula-

tive proof on the measure of damages. 260 U.S. at

165. These concerns rested not on any conflict be-

tween the antitrust laws and the Interstate Com-

merce Act but instead on views that this Court has

since reconsidered regarding the proof necessary to

® See, e.g., United States v. Western Pac. R.R., 352 U.S. 59,

62-70 (1956) ; Pennsylvania R.R. v. United States, 363 U.S.

202, 203-206 (1960). See also Ricci v. Chicago Mercantile Ex-

change, 409 U.S. 289 (1973) (antitrust action stayed pending

administrative determination of validity of defendant’s con-

duct under regulatory statute) ; Chicago Mercantile Exchange

v. Deaktor, 414 U.S. 113 (19738).

9

sustain an antitrust damage award. In Hanover

Shoe, Inc. v. United Shoe Machinery Corp., 392 U.S.

at 491 n.8, this Court characterized as “dictum”

Keogh’s statement that a shipper might not be able

to prove damages because a lower rate might have

been “passed-on” to its customers. And this Court’s

decision in Illinois Brick Co. v. Illinois, supra, estab-

lished that only those parties who, like petitioners,

purchase directly from a defendant can recover anti-

trust damages.”

Finally, one of Keogh’s basic premises—that be-

cause Congress provided some form of regulatory

relief it could not have also intended to provide an

antitrust remedy—is not tenable today. This Court

repeatedly has held that the existence of a remedy

under a regulatory statute does not, standing alone,

preclude a plaintiff from seeking relief under the

antitrust laws. See, e.g., Carnation Co. v. Pacific

Westbound Conference, 383 U.S. at 224 (avail-

ability of reparations under the Shipping Act does

not bar damage award in antitrust suit) ; Otter Tail

Power Co. v. United States, 410 U.S. 366, 373-375

(1973) (Federal Power Commission’s authority to

compel interconnection does not preclude court from

ordering interconnection in an antitrust action) ;

10In numerous cases decided subsequent to Keogh, this

Court has emphasized that an antitrust plaintiff is not re-

quired to demonstrate the amount of its damages with ‘‘mathe-

matic precision.” See, e.g., Zenith Radio Corp. v. Hazeltine

Research, Inc., 395 U.S. 100, 123-125 (1969) ; Continental Ore

Co. v. Union Carbide & Carbon Corp., 370 U.S. 690, 697 & n.7

(1962) ; Bigelow v. RKO Radio Pictures, Inc., 327 U.S. 251,

263-265 (1946) ; Story Parchment Co. v. Paterson Parchment

Paper Co., 282 U.S. 555, 561-566 (1931); Eastman Kodak

Co. v. Southern Photo Materials Co., 273 U.S. 359, 378-379

(1927).

10

United States v. Philadelphia National Bank, 374

U.S. 321, 351-352 (1963) (banking agency’s ap-

proval of merger does not bar Clayton Act chal-

lenge) ; Silver v. New York Stock Exchange, 373 U.S.

341 (1963) (neither the Securities Exchange Act nor

stock exchange rules posed a legal barrier to anti-

trust action); United States v. RCA, 358 U.S. 334,

344 (1959) (Federal Communications Act does not bar

antitrust suit against television and radio licensees) ;

United States vy. Borden Co., 308 U.S. 188, 195-199

(1939) (neither the Agricultural Adjustment Act

nor the Capper-Volstead Act displaced the Sherman

Act); California v. FPC, 369 U.S. 482 (1962)

(Clayton Act not displaced by the Natural Gas

Act)." Lower courts have similarly rejected argu-

ments that a regulatory remedy precludes antitrust

relief. See, e.g., Strobl v. New York Mercantile Ex-

change, No. 84-7328 (2d Cir. July 5, 1985), slip op.

5028-5031; MCI Communications Corp. v. AT&T,

708 F.2d 1081, 1102-1103 (7th Cir.), cert. denied,

464 U.S. 891 (1983); Phonetele, Inc. v. AT&T, 664

F.2d 716, 734-735 (9th Cir. 1982), cert. denied, 459

U.S. 1145 (1983).

2. Continued application of Keogh is also incon-

sistent with this Court’s numerous subsequent hold-

ings that implied immunity from the antitrust laws

is disfavored. Because the antitrust laws embody

“fundamental national policies” favoring competition

(Otter Tail Power Co. v. United States, 410 U.S. at

11 Indeed, in ICC v. American Trucking Associations, Inc.,

No. 82-1643 (June 5, 1984), this Court stated (slip op. 6) that

“Tw]henever the Commission finds an effective tariff unlaw-

ful, injured parties can recover both damages under [the In-

terstate Commerce Act] and whatever additional amounts the

antitrust laws allow”; see also slip op. 7 (O’Connor, J.,

dissenting).

11

374), implied immunity is appropriate only where

there is a “plain repugnancy between the antitrust

and regulatory provisions” (United States v. Phila-

delphia National Bank, 374 U.S. at 350-351) (foot-

note omitted), and even then “only to the minimum

extent necessary [to] make the [statutory scheme]

work.” Silver v. New York Stock Exchange, 373 U.S.

at 357. In short, as this Court noted in Goldfarb v.

Virginia State Bar, 421 U.S. 773, 787 (1975), “our

cases have repeatedly established that there is a heavy

presumption against implicit exemptions.” See also

Union Labor Life Insurance Co. v. Pireno, 458 U.S.

119, 126 (1982); National Gerimedical Hospital v.

Blue Cross, 452 U.S. 378, 388-389 (1981); FMC v.

Seatrain Line, Inc., 411 U.S. 726, 733 (1973).

The presumption against implied antitrust im-

munity is particularly compelling where, as here,

Congress has crafted a regulatory scheme that pro-

vides for express antitrust immunity. Under such

circumstances the scope of immunity should not

extend beyond the limits laid down by statute, be-

cause “[i]f Congress had desired to grant any

further immunity, Congress doubtless would have

said so.” United States v. Borden Co., 308 U.S. at

201. It strains credulity to suggest that, in grant-

ing express immunity in the Reed-Bulwinkle Act for

collective ratemaking undertaken in conformity with

an ICC-approved Agreement, Congress intended to

immunize conduct that violates such an Agreement

and thereby subverts both the Reed-Bulwinkle Act

and the Sherman Act.” Collective ratemaking out-

#2 We agree with the court of appeals that Congress did not

“overrule” Keogh in passing the Reed-Bulwinkle Act (Pet.

App. 25a). But there is also no indication that in passing that

12

side the scope of an expressly immunized Agreement

is naked price fixing; allowing shippers to bring

private damage actions would further both regula-

tory and antitrust objectives by ensuring that car-

riers comply with the terms of their ICC-approved

Agreement when they set rates collectively rather

than competitively.

Nor would antitrust damages subject respondents

in this case to “duplicative and inconsistent stand-

ards,” or otherwise interfere with the operation of

the regulatory scheme. See United States v. National

Association of Securities Dealers, Inc., 422 U.S. 694,

735 (1975). As the court of appeals noted (Pet.

App. 14a n.3), an antitrust damage award premised

on a rate lower than that filed by a carrier would

not necessarily pose even a theoretical inconsistency

Act Congress intended to fix by legislative fiat the balance this

Court struck in Keogh in 1922 between the Interstate Com-

merce Act and the antitrust laws. The issue in this case is

whether Keogh’s judicially-crafted immunity currently pro-

vides the proper accommodation of the Sherman Act and a

particular regulatory scheme. In the 63 years since Keogh

was decided this Court’s approach to implied immunity ques-

tions has evolved substantially; over the same period of time

there have been significant changes in the regulatory environ-

ment governing respondents’ conduct. There is thus no reason

to conclude that the result reached in Keogh is “cast in

bronze.” Lafayette v. Louisiana Power & Light Co., 435 U.S.

389, 421 n.2 (1978) (Burger, C.J., concurring). Cf. Mande-

ville Island Farms, Inc. v. American Crystal Sugar Co., 334

U.S. 219, 229-235 (1948) (coverage of Sherman Act evolves

with changing judicial conceptions of congressional power

under the Commerce Clause). Compare Carnation Co. v.

Pacific Westbound Conference, 383 U.S. at 220-222, with

United States Navigation Co. v. Cunard Steamship Co., 284

U.S. 474 (1932) and Far East Conference v. United States,

342 U.S. 570 (1952).

13

with the ICC’s regulatory authority.” Moreover, as a

practical matter, it is extremely unlikely that damage

actions would result in any actual interference with

the ICC’s exercise of its regulatory authority be-

cause, as this Court noted in ICC v. American Truck-

ing Associations, Inc., No. 82-1643 (June 5, 1984),

slip op. 6 n.4, the ICC is currently capable of review-

ing only an insignificant fraction of the total tariffs

filed.* There may be cases where the ICC has

reached a specific determination that would fore-

close certain issues in an antitrust action.” When

13 Unlike the situation in Southern Motor Carriers Rate

Conference v. United States, No. 82-1922 (Mar. 27, 1985),

where the challenged conduct was contemplated under a state

regulatory scheme, here it is alleged that respondents violated

the ICC-approved ratemaking Agreement. Of course, the

present case does not implicate the considerations of comity

that informed the Court’s decision in Southern Motor

Carriers.

14 In 1983 the ICC examined 188 tariffs out of 1.2 million

filed, and suspended 11 (Pet. App. 14a n.3); see Interstate

Commerce Commission, JCC 83, Tables 6 & 8, at 113-114

(1984). By contrast, at the time Keogh was decided the total

number of tariffs filed annually was approximately eight per-

cent of what it is today. See Interstate Commerce Commis-

sion, 37th Annual Report of the Interstate Commerce Com-

mission 37 (1923) (94,780 tariffs filed). In view of the

1200% increase in tariff filings between 1923 and 1983, in

today’s regulatory environment the ICC’s decision not to

investigate a particular tariff surely cannot be regarded as

tantamount to regulatory approval. See, e.g., MCI Communi-

cations Corp. V. AT&T, 708 F.2d at 1104-1105 (where agency

is able to investigate only a “small percentage” of 1,371 tariffs

filed annually, tariff that agency has neither “dictated nor

approved” is not immune from antitrust challenge).

15 Thus, a finding that the challenged conduct was within

the terms of the approved Agreement would trigger express

immunity under the Reed-Bulwinkle Act. Were respondents

14

that occurs, steps may be taken, or rulings made,

that are suitable to the particular circumstances.

But that flexibility is unavailable if Keogh is read

broadly and applied automatically. Simply because

an antitrust damage action might in some cases con-

flict with a specific ICC determination does not war-

rant the conclusion that, as a matter of law, no such

antitrust damage actions should be permitted. Here,

the petitioners allege that respondents have engaged

in conduct that was not approved, and could not be

approved, by the ICC. Respondents’ claim to im-

munity is therefore reduced to a talismanic invoca-

tion of Keogh, and should be rejected.”

3. The issue this case presents is important, and

review by this Court is needed to ensure that con-

gressional efforts to promote competition in the

motor carrier and other once extensively regulated

industries are not frustrated.

As the facts of this case demonstrate, carriers

armed with Keogh immunity have a strong incentive

to form cartels that flout the intent of Congress in

to contest whether their conduct in fact violated the ICC-

approved Agreement, that issue could be referred to the

ICC for determination in the first instance. See Board of

Trade v. ICC, 646 F.2d 1187, 1193 (7th Cir. 1981). The doc-

trine of primary jurisdiction is, of course, not absolute; it

requires referral only where the agency’s expertise is neces-

sary to an informed judicial determination. See note 9,

supra.

16 The ICC has taken the position that “relief from the

antitrust laws * * * obtains only where the approved agree-

ment is carried out strictly in conformity with its provisions

and within the terms and conditions prescribed by this Com-

mission” (Rate Bureau Investigation, 349 I.C.C. 811, 824

(1975) ).

eee

15

conferring limited express immunity in the Reed-

Bulwinkle Act. Keogh thus insulates a large and

important segment of the national economy from the

salutary effects of the antitrust laws.’ The need to

reexamine Keogh is all the more pressing in light

of Congress’s decision, in passing the Motor Carrier

Act of 1980, Pub. L. No. 96-296, 94 Stat. 793 et

seq., substantially to reduce the regulation of the

motor carrier industry.“ Congress determined that |

“protective regulation” had given rise to both “op-

erating inefficiencies” and “anticompetitive pricing,”

49 U.S.C. 10101 note (Congressional Findings and

Declaration of Policy), and in order to combat these

problems it greatly relaxed entry restrictions, and

17 As of 1980, almost half of the motor carrier industry

was subject to ICC regulation (see H.R. Rep. 96-1069, 96th

Cong., 2d Sess. 2 (1980)), and that percentage is likely to

increase as a result of the relaxed entry standards under the

Motor Carrier Act of 1980. In 1979, total revenues in the

domestic motor carrier industry (i.e., ICC-regulated carriers

and others) amounted to 142.7 billion dollars, and motor car-

rier services accounted for 24% of total domestic transporta-

tion ton-miles. See ICC, Collective Ratemaking in the Truck-

ing Industry 72 (1983). Taken together, motor carrier and

rail expenditures comprise approximately 93% of total do-

mestic freight transportation expenditures. Jbid. Expendi-

tures for domestic freight and passenger transportation con-

sistently account for approximately 20% of gross national

product; freight transportation expenditures alone consist-

ently account for approximately nine percent of gross na-

tional product. See D. Wyckoff & D. Maister, The Motor

Carrier Industry, Table I-1, at xxv (1977). Anticompetitive

pricing in a basic industry such as transportation, of course,

hac ramifications throughout the economy.

18 For a summary of the changes wrought by the Motor

Carrier Act of 1980, see Collective Ratemaking in the Truck-

ing Industry, supra, at 24-25.

16

narrowed the scope of express immunity available

under the Reed-Bulwinkle Act.”

The Motor Carrier Act of 1980 is but one example

of several recent major pieces of legislation that un-

mistakably reflect Congress’s determination that con-

sumer welfare would be better served if regulated

entities were subject, to a much greater extent than

in the past, to the free play of competitive forces.

The details of deregulation, of course, vary from

industry to industry, but the basic thrust of con-

gressional intent—particularly in the domestic trans-

portation sector—could not be clearer: Competition

rather than regulation is the order of the day.” Since

19 Although the conduct forming the basis for the com-

plaints here occurred largely if not entirely before the effec-

tive date of the Motor Carrier Act of 1980, the rule an-

nounced by the court of appeals appears broad enough to

permit carriers to argue that post-1980 conduct is immunized

as well. Moreover, in the Motor Carrier Act Congress deter-

mined that the regulatory scheme applicable prior to 1980

was deficient precisely because it resulted in anticompetitive

pricing (see page 15, supra). This finding, and the legislative

attention it prompted, undermine any argument that allowing

an antitrust damage action for pre-1980 conduct outside the

scope of express immunity under the Reed-Bulwinkle Act

would frustrate congressional intent. Well before the 1980

legislation, the regulatory and decisional premises on which

Keogh was based had been markedly superseded (Pet. App.

9a-15a), and the practical limits of the ICC’s regulatory over-

sight had been strained by the burgeoning number of tariff

filings. Compare Interstate Commerce Commission, JCC 80,

Table 7, at 113 (605,538 tariffs filed in 1980) with 37th An-

nual Report of the Interstate Commerce Commission, supra,

at 37 (94,780 tariffs filed in 1923).

2° See, e.g., Airline Deregulation Act of 1978, Pub. L. No.

95-504, 92 Stat. 1705 et seq. (amending Federal Aviation Act

of 1958 “to encourage, develop, and attain an air transporta-

tion system which relies on competitive market forces to deter-

mine the quality, variety, and price of air services”) ; Staggers

17

conduct is now initiated more “by business judgment

and not regulatory coercion, courts must be hesitant

to conclude that Congress intended to override the

fundamental national policy embodied in the anti-

trust laws.” Otter Tail Power Co. v. United States,

410 U.S. at 374; FMC v. Seatrain Lines, Inc., 411

U.S. at 737. That policy, of course, is to promote

consumer welfare by encouraging vigorous price

competition. See, e.g., Reiter v. Sonotone Corp., 442

U.S. 330, 343 (1979); Northern Pac. Ry. v. United

States, 356 U.S. 1, 4-5 (1958). And as this Court

stated recently in Mitsubishi Motors Corp. v. Soler

Chrysler-Plynwuth, Inc., No. 83-1569 (July 2, 1985),

slip op. 20, “[t]he treble-damages provision wielded

by the private litigant is a chief tool in the antitrust

enforcement scheme, posing a crucial] deterrent to

potential violators.”

Conversely, a mechanical application of Keogh

would “ ‘impute to Congress a purpose to paralyze

with one hand what it sought to promote with the

other.’” Weinberger v. Hynson, Westcott & Dun-

ning, 412 U.S. 609, 631 (1973), quoting Clark v.

Uebersee Finanz-Korp., 332 U.S. 480, 489 (1947).

If the court of appeals is correct that Keogh bars

private damage actions “whenever tariffs have been

filed” (Pet. App. 6a-7a), congressional efforts to

promote competition will be severely impeded. Al-

though Congress has greatly limited the substantive

authority of the ICC with respect to rail and motor

carrier rates, it has not eliminated all regulatory

Rail Act of 1980, Pub. L. No. 96-448, § 101a, 94 Stat. 1897

(codified at 49 U.S.C. 10101la(1)) (in public interest “to

allow, to the maximum extent possible, competition and the

demand for services to establish reasonable rates for trans-

portation by rail’).

18

oversight. Tariff filing requirements form the foun-

dation of the regulatory regimes administered by

the ICC, and these requirements will presumably

remain in effect as long as the Commission is em-

powered to exercise any authority whatsoever with

respect to rates. Accordingly, if Keogh continues to

bar private damage actions whenever a tariff has

been submitted to—but not specifically rejected by—

the ICC, the perverse result of congressional attempts

to encourage competition will be that carriers are

free from both regulatory scrutiny and the potent

incentive damage actions provide to obey the com-

mands of the antitrust laws.”

The decision in this case is but one of several where

the lower federal courts have concluded that Keogh

immunizes carriers from damage liability for activ-

ities that are illegal per se under the antitrust laws

and outside the scope of express immunity under the

Reed-Bulwinkle Act. See In re Wheat Rail Freight

Rate Antitrust Litigation, 759 F.2d 1305 (7th Cir.

1985), petition for cert. pending, No. 85-112; Minsky

v. Auto Drireaway Co., 757 F.2d 718 (7th Cir. 1984),

cert. denied, No. 84-457 (Nov. 13, 1984); In re Lower

Lake Erie Iron Ore Antitrust Litigation, MDL 587

21 Petitioners, being intimately familiar with the industry,

are in the best position to monitor the respondents’ day-to-day

compliance with their ICC-approved Agreement, and have

powerful incentives to sue when carriers violate the Agree-

ment. See Reiter, 442 U.S. at 344 (“private suits provide a

significant supplement to the limited resources available to

the Department of Justice for enforcing the antitrust laws

and deterring violations”). Thus, this case is of substantial

importance to the economy, even though, under Keogh, the

government may institute enforcement actions and private

parties may sue for injunctive relief. See Georgia v. Penn-

sylvania R.R., 324 U.S. 439 (1945).

19

(E.D. Pa. June 6, 1985). Rote application of Keogh’s

antitrust immunity under such circumstances thwarts

competition without providing any benefit to the op-

eration of the regulatory scheme. Thus, review in

this case is warranted.”

*2 Keogh was applied in In re Wheat Rail Freight Rate

Antitrust Litigation, supra, for example, as a bar to an anti-

trust damage action against rail carriers in a case where the

ICC was precluded by statute from assessing the reasonable-

ness of the rates in question and the only regulatory authority

the Commission could exercise was whether the rates were

discriminatory. The Seventh Circuit’s decision thus amounts

to a holding that as long as the ICC has any authority over

rates, an antitrust action is barred. This outcome flies in the

face of Congress’s decision in the Railroad Revitalization and

Regulatory Reform Act of 1976, Pub. L. No. 94-210, 90 Stat.

31 et seq., and the Staggers Rail Act of 1980, Pub. L. No.

96-448, § 101(a), 94 Stat. 1897, to allow “to the maximum

extent possible, competition * * * to establish reasonable

rates for transportation by rail.” 49 U.S.C. 10101a(1). A peti-

tion for a writ of certiorari in In re Wheat Rail Freight Rate

Antitrust Litigation is currently pending before the Court

(No. 85-112), and if the Court grants review in the present

case it may wish to postpone consideration of the petition in

No. 85-112 for disposition in light of its decision here.

20

CONCLUSION

The petition for a writ of certiorari should be

granted.

Respectfully submitted.

CHARLES FRIED

Acting Solicitor General

CHARLES F, RULE

Acting Assistant Attorney General

JERROLD J. GANZFRIED

Assistant to the Solicitor General

ROBERT B. NICHOLSON

STEPHEN MACc ISAAC

Attorneys

ROBERT S. BURK

General Counsel

HENRI F. RuSH

Deputy General Counsel

TIMM L. ABENDROTH

Attorney

Interstate Commerce Commission

JIM J. MARQUEZ

General Counsel

ROSALIND A. KNAPP

Deputy General Counsel

Department of Transportation

AUGUST 1985

W uv. S. Government painting orrice; 1985 461531

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