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

Supreme Court, U.S, 3

(0) FELED

No. 85-21 NOV 23 1905

' FSPANIOL, JR.

nthe oupreme Court ofthe Snide stati ates— ~

OCTOBER TERM, 1985

SQUARE D COMPANY, ET AL., PETITIONERS

Vv.

NIAGARA FRONTIER TARIFF BUREAU, INC., ET AL.

ON WRIT OF CERTIORARI TO THE UNITED STATES

COURT OF APPEALS FOR THE SECOND CIRCUIT

BRIEF FOR THE UNITED STATES

AS AMICUS CURIAE SUPPORTING PETITIONERS

CHARLES FRIED

Solicitor General

DOUGLAS H. GINSBURG

Assistant Attorney General

LAWRENCE G. WALLACE

Deputy Solicitor General

W. STEPHEN CANNON

Deputy Assistant

Attorney General

JERROLD J. GANZFRIED

Assistant to the

Solicitor General

ROBERT B. NICHOLSON

STEPHEN MAC ISAAC

ROBERT S. BURK

General Counsel

HENRI F. RUSH

Deputy General Counsel

TiMM L. ABENDROTH

om Attorneys

Interstate Commerce

Commission Department of Justice

Washington, D.C. 20423 Washington, D.C. 20530

(202) 633-2217

Jim J. MARQUEZ

General Counsel

ROSALIND A. KNAPP

Deputy General Counsel

Department of Transportation

Washington, D.C. 20590

“BEST AVAILABLE COPY

QUESTION PRESENTED

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

(1922), should compel dismissal of a claim for damages

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

by shippers alleging that carriers engaged in conduct that

clearly violated a rate bureau agreement approved by the

Interstate Commerce Commission.

(1)

TABLE OF CONTENTS

Page

I I cca ccecccceccscccccecesees l

ccc as cote wtccscbccsecosceeeceoes l

ee he enc eebeereccerececeees 5

Argument:

1. Keogh is inconsistent with subsequent decisions of this

Court and is no longer necessary to accomimodate the

Sherman Act and the Interstate Commerce Act ........ 6

A. Post-Keogh developments establish that none of the

factors relied on in Keogh is persuasive today ...... 7

B. Damage suits for price-fixing in violation of an ICC-

approved ratemaking agreement would not interfere

with the operation of the Interstate Commerce Act

or the ICC’s regulatory authority ................ 15

Il. Private damage actions would further the regulatory ob-

jectives of the Interstate Commerce Act as well as recent

congressional efforts to promote competition in the

i kes te dco Gebedeeccdeecccces 21

EES RS PY EP rt er err ee ee eee 27

TABLE OF AUTHORITIES

Cases: Page

American Pipe & Construction Co. v. Utah, 414U.S. 538... = 13

Arkansas Louisiana Gas Co. v. Hall, 453 U.S. 571 ......... 26

Bell Potato Chip Co. v. Aberdeen Truck Line, 43 M.C.C.

a a ids cee ressecscesee 13, 14

Bigelow v. RKO Radio Pictures, Inc., 327 U.S. 251 ........ 15

Board of Trade v. ICC, 646 F.2d 1187 ...............4... 20, 22

California v. FPC, 369 U.S. 482 .... 0... ccc cece eee 10, 16

Cantor v. Detroit Edison Co., 428 U.S. 579 .... 2.2... 62... 19

Carnation Co. v. Pacific Westbound Conference, 383 U.S.

EEE EE a re 9, 11, 17, 19

Chevron, U.S.A. Inc. v. Natural Resources Defense Coun-

cil, Inc., No. 82-1005 (June 25, 1984) .................. 12

Chicago Mercantile Exchange v. Deaktor, 414U.S.113 ..... 13

Christopher v. Brusselback, 302 U.S. 500 ................. 12

City of Lafayette v. Louisiana Power & Light Co., 435 U.S.

ee EE. cence veoceccce 17

Clark v. Uebersee-Finanz-Korp., 332 U.S. 480 ............ 27

(ill)

IV

Cases — Continued: Page

Continental Ore Co. v. Union Carbide & Carbon Corp.,

THe. ik tus cod cetehhnankhecmeaeudenadiie 15

Eastman Kodak Co. v. Southern Photo Materials Co., 273

PPT Sawn cnt cecaueweasebsceuceceeueahihde cede 15

FMC v. Seatrain Line, Inc., 411 U.S. 726 ................ 16, 18

Far East Conference v. United States, 342 U.S. 570 ........ 17

General American Tank Car Corp. v. El Dorado Terminal

ee ie ee eee ie a eked oot 13

Georgia v. Pennsylvania R.R., 324 U.S. 439 ............ 8, 9, 23

Glama Dress Co. v. Mid-South Transports, Inc., 335 1.C.C.

asi iake Wend bs Cadena an aad hanes Te bbesecace ces 13, 18

Goldfarb v. Virginia State Bar, 421 U.S. 773 .............. 15-16

Hanover Shoe, Inc. vy. United Shoe Machinery Corp., 392

GREE tegen 9 hn oo ee ea 3-4, 14

Hawaii v. Standard Oil Co., 405 U.S. 251 ..............44.. 4,8

Hewitt-Robins Inc. v. Eastern Freight-Ways, Inc., 371 U.S.

DE née thin bsiédsdecbenatereanetetanesridennsets th 13, 14

Household Goods Rates of A.D. Rymers & Sons, 12 M.C.C.

Se cunkaswbbetenwacedss ob shaskeuke dears tanwkeeees 18

Household Goods Rates of Jacob’s Van Line, 17 M.C.C.

ici bin eek iach dn dd de sagchnedaneebeienen 18

SS Fy He Sk bk. GO bah cMbARK cccetccecccs 5

ICC v. American Trucking Associations, Inc., No. 82-1643

ERNE Se nT 10, 19, 22

Illinois Brick Co. v. Illinois, 431 U.S. 720 .... 2.2.06. 60 645. 4,14

Iron & Steel Articles— Eastern Common Carriers, 305 1.C.C.

GED vvewésGicdcpvencedevcesenece eters SeCcesTTTirrrs 20

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

Litton Systems, Inc. v. AT & T, 700 F.2d 785, cert. denied,

Ses GP: GU DOU Vic cceviccccvecdedeceveece 26

MCI Communications Corp. v. AT & T, 708 F.2d 1081, cert.

SG er re eS ee 10, 19

Mandeville Island Farms, Inc. v. American Crystal Sugar

LDS 6ebecc es 6sveuesctnctssicebensee 17

McLain v. Real Estate Board of New Orleans, Inc., 444 U.S

BEE SNS eno veeb Wabi are ches be Csaba cebacav beds 8

Middlewest Motor Freight Bureau v. United States, 433 F.2d

ye LD a OPP eee ee 14

Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc.,

ey EE ts ED boise vee cwsnesevontcweredse 25

National Gerimedical Hospital & Gerontology Center v. Blue

EE eae ena ens okie ebehereibeess 16

Niagara Frontier Tariff Bureau, Inc.—Agreement, 297

DINERS decuncecissheune sCegbesscknateidabe 2

Vv

Page

Northern Pacific R.R. v. United States, 356 U.S.1......... 25

Oilfield Equipment, Materials, Supplies to & Between the

pl oll. EE 20

Otter Tail Power Co. v. United States, 410 U.S. 366 ..9, 15, 18-19

Pennsylvania R.R. v. United States, 363 U.S. 202 .......... 13

Petition for Declaratory Order —Lawfulness of Volume Dis-

count Rates by Motor Common Carrier of Property,

EE bi LeCs bh nah beksks bb édebeserseccane 12

Phonetele, Inc. v. AT & T, 664 F.2d 716, cert. denied, 459

ee ek ee acca seseeceseeeneme 10

Rate Bureau Investigation, 349 1.C.C. 811 ..... 20... .. 6605. 21

Reiter v. Sonotone Corp., 442 U.S. 330 .. 2.0... ccc cee 25

Ricci v. Chicago Mercantile Exchange, 409 U.S. 289 ........ 8, 13

Rules to Govern the Asseimbling & Presenting of Cost

I, SA NS SoS U Sic wee Sdac cis kcccccces 18

Silver v. New York Stock Exchange, 373 U.S. 357 .......... 9, 15

Southern Motor Carriers Rate Conference v. United States,

EE, SO Eo ccd ck ceccocccececcecseece 17

Southern Pacific v. Darnell-Taenzer Lumber Co., 245

eile See de. | ae. cdeie Se cece on 14

Story Parchment Co. v. Paterson Parchment Paper Co.,

REE ai bere Ae ip ale te bone ER aaa ae Eo 15

Straus v. Victor Talking Machine Co., 297 F. 791 .......... 15

Strobl v. New York Mercantile Exchange, 768 F.2d 22 ...... 10

T.1.M.E. Inc. v. United States, 359 U.S. 464 ............. 13, 14

Trans-Continental Freight Bureau, In re, 77 1.C.C. 252 ..... 9

Union Labor Life Insurance Co. v. Pireno, 458 U.S.119.... 16

United States v. Borden Co., 308 U.S. 188 ............... 10, 16

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

DMG Ei ATi arab Uhe Sckntnetetanes Ouaeeeecs hehe t's 18

United States v. Consolidated Freightways Corp., 340 1.C.C.

ass iene eee es be eee hee ices anes 13

United States v. Joint-Traffic Association, 171 U.S. 505 .... 8

United States v. National Association of Securities Dealers,

NT ee ee tapes 17

United States v. Niagara Frontier Tariff Bureau, Inc., 1984-2

ER a il 2

United States v. Philadelphia National Bank, 374 U.S.

EE SN a 5 Ee ES ee 9, 10, 15, 16

Cries Seates V. BCA, SEB U.S. S06 2... ccc cccccccccess 10

United States v. Shimer, 367 U.S. 374 ... 2... oe 12

United States v. Topco Associates, Inc., 405 U.S. 596 ...... 25

vi

Cases — Continued: Page

United States v. Trans-Missouri Freight Association, 166

et ie kee tse edhe ee cemadeat nee see.e 4 8

United States v. Western Pac. R.R., 352 U.S. 59 ........... 13

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

SULT Vandcacadandbasceath clceenaerenavesaetecss 17

Weinberger v. Hynson, Westcott & Dunning, Inc., 412 U.S.

Sn dhecescavadc canes ubsaiisuasas tadeceendeeureks 27

Zenith Radio Corp. v. Hazeltine Research, Inc., 395 U.S.

DE ahdustdacktbes Tat hceeSnapodtendstetbaneuaenkat 15

Statutes and rule:

Airline Deregulation Act of 1978, Pub. L. No. 95-504, 92

id in nae id tian kokdg geedbekes anes 25

i MUD... cscs ccceceesssescetaceeces 25

Motor Carrier Act, 1935, ch. 498, 49 Stat. 543 ef seg. ....... 9

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

OE ated on tenenhssanahkd<nedseneseevenns ser oaene 23

§ 3(a), 94 Stat. 793, 49 U.S.C. 10101 note ............. 23-24, 25

Railroad Revitalization and Regulatory Reform Act of 1976,

Pub. L. No. 94-210, 90 Stat. 31 ef seg. ... 2.6.2.6 ccc eeee 24

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

ee en occu weesehe ses oe 2

§ Sa(1)(B)(6), 62 Stat. 473 .. 2... cee eee 3, 22

Sherman Act, 15 U.S.C. 1] ef seg. ... 2... ce cee 2

Shipping Act, 1916, 46 U.S.C. App. (Supp. I) 801 ef seq.:

§ 15, 46 U.S.C. App. (Supp. I) 814 .................. 11

§ 17, 46 U.S.C. App. (Supp. I) 816 ................5. 11

Staggers Rail Act of 1980, Pub. L. No. 96-448, 94 Stat. 1895

Ca ib id nitiintinnte 00m enan0nsens 006490098 408.8+ 24

ec ac eens eaeendens ase ee 26

49 U.S.C. (IDO Od.) BOG 2... ccc ccc cece cccccccees 14

nn oan is ov en ves wescusoeecees 25

Nese. occas sonendegsapneeds 2

49 U.S.C. 10706(aX(3)(ANMiii) .. ee ee ee 24

49 U.S.C. 10706(b)(3)(D) ... 2... cee eens 24

CE Ei 22

Fed. R. Civ. P.:

ee Nii d cee vednas 6a tek smh e he 12, 13

Vil

Miscellaneous: Page

1 P. Areeda & D. Turner, Antitrust Law (1978) ............ y

R. Bork, The Antitrust Paradox (1978) .............6.0005- 22

Bureau of the Census, U.S. Dep’t of Commerce, Statistical

Abstract oj the United States—1985 ............662045. 23

Z. Chafee, Some Problems of Equity (1950) .............. 13

93 Cong. Rec. app. at A3969 (1947) ................0044.. 22

94 Cong. Rec. app. at A3926 (1948) ...................5.. 21

H.R. Rep. 96-1069, 96th Cong., 2d Sess. (1980) ........... 23

EE 19, 24

es ccs coco sessecesouseeenset 9

1980 ICC Ann. Rep. (1981)... 2.2.6... ee cc cee eee 24

1983 ICC Ann. Rep. (1984) .... 2.0... 0 ccc eens 19

Motor Carrier Ratemaking Study Commission, Collective

Ratemaking in the Trucking Industry (1983) ............ 23

L. Sullivan, Handbook of the Law of Antitrust (1977) ...... 14

C. Wright & A. Miller, Federal Practice and Procedure

(1972):

MP da cad hUPE obs asd tebadneCedcedecaticdnetes 13

Pe OG Cash bic oc eok's vals hadusWesdubeeecs Shecen 12

D. Wyckoff & D. Maister, The Motor Carrier Industry (1977) 23

In the Supreme Court of the Anited States

OCTOBER TERM, 1985

No. 85-21

SQUARE D COMPANY, ET AL., PETITIONERS

v.

NIAGARA FRONTIER TARIFF BUREAU, INC., ET AL.

ON WRIT OF CERTIORARI TO THE UNITED STATES

COURT OF APPEALS FOR THE SECOND CIRCUIT

BRIEF FOR THE UNITED STATES

AS AMICUS CURIAE SUPPORTING PETITIONERS

INTEREST OF THE UNITED STATES

The issue in this case is whether this Court’s decision in

Keogh v. Chicago & N.W. Ry., 260 U.S. 156 (1922),

should be applied to bar an antitrust damage action based

on conduct that, absent the implied immunity created in

Keogh, would violate the Sherman Act. The United States

has primary responsibility 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 congressional

regulatory objectives and only to the extent intended by

Congress.

STATEMENT

1. Petitioners are two corporations that purchased

trucking services from respondent motor carriers. The car-

riers 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). Under the Agreement, respondents

may set rates collectively and, if they comply with various

(1)

2

notice and hearing and record-keeping requirements set

forth in the Agreement and ICC regulations, the Reed-

Bulwinkle Act immunizes their conduct from challenge

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 Sher-

man Act, 15 U.S.C. | et seq., by conspiring during a fif-

teen year period to “ ‘fix, raise and maintain prices and to

inhibit or eliminate competition * * * without complying

with the terms of the Ni ~+ [A]greement and by otherwise

engag[iJng in conduct that either was not or could not be

approved by the ICC.’ ” Pet. App. 39a (emphasis and cita-

tion omitted). Specifically, the complaints alleged that the

tariffs filed by respondents through the NFTB were set by

a clandestine “Principals Committee” in violation of the

Agreement. Petitioners also claimed that respondents

resorted to “threats, coercion and retaliation” to prevent

' 49 U.S.C. 10706, as amended, codifies Section 5a of the Reed-

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

approved agreement among carriers “may be * * * carried out under

its terms and under the conditions required by the [ICC], and the

Sherman Act * * * dofes} not apply to parties and other persons with

respect to making and carrying out the agreement.” The Agreement in

this case was approved by the ICC in Niagara Frontier Tariff Bureau,

Inc. — Agreement, 297 1.C.C. 494 (1955).

? The complaints, originally filed in the United States District 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, coercing,

or threatening in any way any motor carrier to withdraw, forbear

from filing, or modify in any way said carrier’s planned or actual in-

dependent rates.” United States v. Niagara Frontier Tariff Bureau,

Inc., 1984-2 Trade Cas. (CCH) 4 66, 167, at 66,533 (W.D.N.Y. 1984).

3

carriers from exercising their statutory right to file tariffs

independently.? Pet. 3. Petitioners sought monetary and

injunctive relief.

Respondents moved for judgment on the pleadiigs,

arguing that petitioners’ damages claims were barred by

Keogh v. Chicago & N.W. Ry., 260 U.S. 156 (1922). The

district court found Keogh controlling and dismissed the

complaints in their entirety. Pet. App. 43a-50a.‘

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

ly, affirmed in part, and reversed in part. Pet. App.

la-4la.

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

four factors that formed the basis for the holding in Keogh

“do not seem so compelling today as they did in 1922.” Pet.

App. 9a. First, in response to the concern expressed in

Keogh (260 U.S. at 163) that antitrust damages might

operate as a rebate, creating forbidden discrimination

among shippers, the court of appeals observed that such

fear was “scarcely applicable to class actions” that provide

more uniform relief. Pet. App. 10a. Second, Keogh re-

ferred to the difficulty of determining whether the [CC

would have approved a “hypothetical lower rate” proposed

as the benchmark for assessing antitrust damages. Pet.

App. lla. The court of appeals noted (ibid.) that this con-

cern was answered by “many later cases” referring “similar

issues to the ICC.” Ibid. The third factor in the Keogh ra-

tionale was the burden of 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

3 Under Section 5a(1)(B)(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.

4 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

Shoe Machinery Corp., 392 U.S. 481, 491 n.8 (1968)), and

recent decisions of this Court appear to reject that ra-

tionale altogether. See J/linois Brick Co. v. Illinois, 431

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.

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 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 prevailed under free competition.”

Ibid. Moreover, the court noted (ibid. (citation omitted))

that post-Keogh precedent had firmly established that “im-

plied exemptions to antitrust 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 concluded (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 regula-

tion 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 * * * outdated,” 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. Moreover, the court of appeals noted

that Keogh could not be distinguished because its holding

was not limited to situations where “rates had been in-

vestigated and approved by the ICC,” but precluded private

antitrust actions “whenever tariffs have been filed.”

5

Id. at 6a-7a. Accordingly, the district court’s order was af-

firmed insofar as it dismissed damage claims based on the

respondents’ rate-fixing activities. °

SUMMARY OF ARGUMENT

The complaints in this case alleged that respondents

engaged in conduct that is illegal per se under the antitrust

laws and outside the scope of their 1CC-approved Agree-

ment.* The court of appeals, despite its serious doubts

about the continued soundness of Keogh, concluded that

it had no choice but to affirm the district court’s dismissal

of the rate-related portions of the complaints. The ques-

tion before this Court is whether, on the facts of this case,

Keogh continues properly to accommodate the objectives

of the antitrust laws and the Interstate Commerce Act. We

submit that it does not.

Developments in antitrust and other areas of the law

have substantially eroded the foundations of Keogh. In

the 63 years since Keogh was decided, this Court has

specifically addressed each of the reasons advanced in that

case for barring antitrust damage actions. These post-

Keogh precedents clearly establish that none of the factors

relied on in Keogh is either controlling or persuasive to-

day.

Keogh’s categorical prohibition of antitrust damage ac-

tions is also inconsistent with this Court’s repeated

holdings that implied antitrust immunity is disfavored and

should be granted only if there is a “plain repugnancy” be-

tween the antitrust laws and a regulatory statute. There is

5 As to petitioners’ claims for injunctive relief, however, the court

of appeals reversed. It 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.

¢ Because the complaints were dismissed on the pleadings, peti-

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

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

6

no repugnancy here between the Sherman Act and the

Interstate Commerce Act. Congress has provided express

statutory immunity for collective ratemaking undertaken

in conformity with an ICC-approved agreement; rate-

making outside the scope of such an agreement is naked

price fixing. Thus, the conduct alleged in the complaints

subverts both the objectives of the antitrust laws and the

regulatory scheme. Allowing private damage actions in a

case such as this would not subject carriers to duplicative

or inconsistent standards, frustrate the operation of the

Interstate Commerce Act, or interfere with the ICC’s exer-

cise of its regulatory authority.

The availability of private damage actions would in fact

further the regulatory objectives of both the Sherman Act

and the Interstate Commerce Act. Their availability would

serve as a powerful incentive for carriers to comply strictly

with the requirements imposed by Congress for express

statutory immunity. Where carriers fail to comply with

those requirements, damage actions would further the

fundamental national policies underlying the antitrust

laws. The availability of this antitrust remedy is especially

important now, for in this and several other once-

pervasively regulated areas, Congress has determined that

competition rather than regulation will best serve con-

sumer welfare. The continued application of Keogh’s

categorical ban on private antitrust enforcement would

frustrate this legislative policy.

ARGUMENT

I. KEOGH IS INCONSISTENT WITH SUBSEQUENT DECI-

SIONS OF THIS COURT AND IS NO LONGER NECESSARY

TO ACCOMMODATE THE SHERMAN ACT AND THE IN-

TERSTATE COMMERCE ACT

Keogh is an early example of this Court’s pragmatic ef-

forts to harmonize congressional objectives in the Sher-

man Act with those of a regulatory statute. Thus, Keogh

SN

7

was in fact, if not in name, an “implied antitrust immuni-

ty” case. Since 1922, however, this Court has shaped many

contours of antitrust and regulatory law that were vague

and uncertain when Keogh was decided, and class action

remedies have been developed. As a result, the difficulties

perceived in Keogh as warranting implied prohibition of a

damage action in a case such as this have been resolved or

deemed irrelevant. Over the same period of time, more-

over, this Court has concluded that implied antitrust im-

munity should be conferred only upon the clearest show-

ing of a conflict between the Sherman Act and another

federal statute. These parallel developments undercut the

rationale relied on in Keogh, and render that decision ob-

solete and its continued application anomalous.

A. Post-Keogh Developments Establish That None Of The Fac-

tors Relied On In Keogh Is Persuasive Today

1. In Keogh, a shipper brought an antitrust action alleg-

ing that various railroads had violated the Sherman Act by

conspiring to fix tariffs that were filed with and ultimately

approved by the ICC.’ This Court held that a shipper

could not maintain a private antitrust damage action for

rates filed with the ICC. Four reasons were advanced for

this conclusion. First, because the Interstate Commerce

Act provided shippers with an opportunity to challenge

rates as “unreasonably high or discriminatory,” Congress

could not have “intended to provide the shipper, from

whom illegal rates have been exacted, with an additional

remedy under the Anti-Trust” laws. 260 U.S. at 162. Sec-

ond, antitrust damage awards would, “like a rebate,

operate to give” an individual shipper “a preference over

his trade competitors,” and thereby contravene the Inter-

state Commerce Act’s objective of “prevent[ing] * * *

unjust discrimination” among shippers. /d. at 163. Third,

’ Keogh had challenged the tariffs at issue in several proceedings

before the ICC (260 U.S. at 160-161), and the Commission had, “after

extensive hearings * * * approved” the rates. /d. at 160.

8

because there was “no conceivable proceeding” whereby

the ICC could pass on the validity of a rate posited for the

purpose of calculating antitrust damages (id. at 164), the

shipper would be unable to sustain its burden of proof as

to damages. Finally, the shipper’s damages were “purely

speculative” (ibid.), because the benefit of a lower rate

“might have gone to [its] customers or conceivably, the

ultimate consumer.” Jd. at 165.

2. This Court, though it has had no occasion explicitly

to reconsider Keogh,* has in various cases subsequent to

Keogh considered every one of the factors relied on in that

decision. These precedents, taken together with interven-

ing procedural and administrative developments, under-

mine the rationale of Keogh.

a. Keogh’s first premise—that because Congress pro-

vided a regulatory remedy it could not have intended also

to provide an antitrust remedy—is not tenable today.

Whatever the merit of such a view in 1922, when federal

regulation was limited and the applicability of the antitrust

laws to regulated conduct was unclear,’ in today’s era of

* Keogh has been cited in passing in various recent decisions of this

Court, but in none of these cases was Keogh controlling. See McLain

v. Real Estate Board of New Orleans, Inc., 444 U.S. 232, 243 (1980)

(noting that “inability to prove * * * legally cognizable damages” may

limit relief available in an antitrust action, but does not divest court of

jurisdiction; citing Keogh); Ricci v. Chicago Mercantile Exchange,

409 U.S. 289, 299-300 & n.12 (1973) (noting that conduct is often sub-

ject to both antitrust laws and regulatory scheme; citing Keogh along

with ten other implied immunity cases); Hawaii v. Standard Oil Co.,

405 U.S. 251, 260 (1972) (citing Keogh in the course of explaining the

holding in Georgia v. Pennsylvania R.R., 324 U.S. 439 (1945)).

* Although United States v. Trans-Missouri Freight Association,

166 U.S. 290 (1897), and United States v. Joint-Traffic Association,

171 U.S. 505 (1898) had held that private agreements among railroads

to fix rate levels and divide revenues were subject to government en-

forcement actions, the legality of industry-wide, collective ratemaking

was uncertain in 1922. Indeed, at the time Keogh was decided the ICC

9

extensive federal administrative regulation'® this approach

would vitiate the “fundamental national policies” em-

bodied in the antitrust laws. Otter Tail Power Co. v.

United States, 410 U.S. 366, 374 (1973).

Thus, in numerous cases decided since Keogh, this

Court has consistently rejected the notion that the availa-

bility of an administrative remedy, standing alone, evinces

a congressional intent to deny relief under the antitrust

laws. See, e.g., Carnation Co. v. Pacific Westbound Con-

ference, 383 U.S. 213, 224 (1966) (availability of repara-

tions under the Shipping Act does not preclude damage

award in antitrust suit); Otter Tail Power Co. v. United

States, 410 U.S. 366, 373-375 (1973) (agency’s authority to

compel interconnection does not preclude court from

ordering same relief in an antitrust action); United States

v. Philadelphia National Bank, 374 U.S. 321, 351-352

(1963) (banking agency’s approval of merger does not bar

Clayton Act challenge); Silver v. New York Stock Ex-

change, 373 U.S. 341 (1963) (neither the Securities Ex-

was, at the direction of Congress, investigating the competitive impact

of collective ratemaking by one of the largest rate bureaus of the time.

The ICC ultimately concluded that the bureau’s operation was con-

sistent with the regulatory objectives of the Interstate Commerce Act.

See In re Trans-Continental Freight Bureau, 77 1.C.C. 252, 279

(1923). With the ICC’s approval, motor carriers adopted the collective

ratemaking practices of the railroads after the passage of the Motor

Carrier Act, 1935, ch. 498, 49 Stat. 543 ef seq.. See 1936 ICC Ann.

Rep. 74.

‘The legality under the antitrust laws of collective ratemaking thus

remained unclear until 1945, when this Court held in Georgia v. Penn-

sylvania R.R., 324 U.S. 439, 458 (1945), that collective ratemaking re-

sulting in “discriminat[ion] against a State or a region * * * [or]

coercion in the fixing of rates” could be enjoined under the Sherman

Act. As will be discussed more fully (pages 21-22, infra), Congress

responded to Georgia by passing the Reed-Bulwinkle Act, which pro-

vided express statutory immunity for authorized collective ratemaking

activities.

'© See 1 P. Areeda & D. Turner, Antitrust Law { 224f, at 157

(1978).

10

change Act nor stock exchange rules posed a legal barrier to

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

(Clayton Act not displaced by the Natural Gas Act); United

States v. RCA, 358 U.S. 334, 344 (1959) (FCC approval of

license exchange does not preclude antitrust suit); United

States v. Borden Co., 308 U.S. 188, 195-199, 205-206

(1939) (neither the Agricultural Adjustment Act nor the

Capper-Volstead Act displaced the Sherman Act).!!

b. Similarly, this Court’s more recent decisions, coupled

with other changes in the law, have effectively allayed the

concern expressed in Keogh that antitrust damages are in-

imical to a regulatory scheme aimed at preventing discrim-

ination among shippers at the hands of carriers. In Keogh,

an individual shipper-plaintiff was challenging tariffs that

had been specifically approved by the ICC

'! In keeping with this Court’s teaching, lower courts have also re-

peatedly rejected arguments that a regulatory remedy precludes an-

titrust relief. See, e.g., Strobl vy. New York Mercantile Exchange, 768

F.2d 22, 29-30 (2d Cir. 1985); 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. 1981), cert.

denied, 459 U.S. 1145 (1983).

These decisions, of course, represent a complete about-face from

the presumption relied on in Keogh. It is now established that the

canon of construction that “ ‘{iJmmunity from the antitrust laws is not

lightly implied’ * * * reflects the felt indispensable role of antitrust

policy in the maintenance of a free econdmy.” Philadelphia National

Bank, 374 U.S. at 348 (quoting California v. FPC, 369 U.S. at 485).

Thus, absent an explicitly stated legislative intent to the contrary, an-

titrust and regulatory remedies are not mutually exclusive. Indeed,

this Court recently described a regulatory landscape in which both ad-

ministrative and antitrust damages would be available to motor car-

riers under the circumstances presented here. JCC v. American Truck-

ing Associations, Inc., No. 82-1643 (June 5, 1984), slip op. 6

(upholding ICC’s authority to nullify retroactively motor carrier

tariffs filed in violation of an ICC-approved Agreement, noting that

“[wjhenever the Commission finds an effective tariff unlawful, in-

jured parties can recover both damages under [the Interstate Com-

merce Act] and whatever additional amounts the antitrust laws allow”

(see also slip op. 7 (O’Connor, J., dissenting)).

after “extensive hearings” (260 U.S. at 160) and it was in

this context that the Court expressed the view that anti-

trust damages might amount to a “rebate” or “preference.”

But in Carnation Co. v. Pacific Westbound Conference,

383 U.S. 213 (1966), the Court squarely and unanimously

rejected the notion that antitrust damages would do

violence to a statutory scheme aimed at preventing dis-

crimination among shippers. In Carnation, as here, the

rates did not have specific agency approval, and had been

fixed in a manner that did not qualify for express statutory

immunity.'? In holding that shippers were entitled to seek

antitrust damages despite the Shipping Act’s ban on

discrimination,'} the Court concluded that “Congress was

concerned with assuring equality of treatment by

{carriers}, not with equality of treatment by juries in col-

lateral proceedings.” 383 U.S. at 219 n.3. Thus, Carnation

expressly rejected the assumption, implicit in Keogh, that

“Congress would want to deprive all shippers of their right

to treble damages merely to assure that some shippers do

not obtain more generous awards than others” (ibid.).'4

Carnation’s conclusion that it would be unfair to allow

carriers to shield their wrongdoing by invoking a statutory

provision designed to protect shippers is, moreover, con-

'2 Section 15 of the Shipping Act, 1916, 46 U.S.C. App. (Supp. I)

814, like the Reed-Bulwinkle Act, immunizes collective ratemaking

undertaken pursuant to an Agreement approved by the regulatory

agency.

'3 See § 17, 46 U.S.C. App. (Supp. I) 816.

'¢ Although Carnation did not “overrule” Keogh, it clearly rejected

Keogh’s suggestion that antitrust damages were unavailable in all cases

where a regulatory scheme prohibited discrimination. Keogh was cited

throughout the briefs in Carnation, and the respondent in Carnation

explicitly argued that Keogh was controlling in this regard. See Resp.

Br. at 48, 59-60, Carnation Co. v. Pacific Westbound Conference,

supra.

12

sistent with the ICC’s longstanding view that the Interstate

Commerce Act’s prohibition of discrimination is intended

solely for the benefit of shippers.'*

Moreover, the availability of class actions under Fed. R.

Civ. P. 23 has eliminated the possibility that antitrust

damage actions might advantage one shipper over others,

as the court of appeals correctly recognized (Pet. App.

10a-11a).'6 Rule 23 was designed to address the problem

that troubled this Court in Keogh: the possibility that

similarly situated plaintiffs would receive varying treat-

ment at the hands of different factfinders. See Fed. R.

Civ. P. 23(b)(1MA) advisory committee note (1966

Amendment) (class action available where “[a]ctions by or

against a class provide a ready and fair means of achieving

unitary adjudication”); 7A C. Wright & A. Miller, Federal

Practice and Procedure § 1773, at 10 (1972) (“[t]}his por-

tion of the rule * * * clearly embraces cases in which the

party is obliged by law to treat the class members alike”).

There is therefore no longer a reasonable basis to fear that

piecemeal litigation will result in lack of uniformity and,

ultimately, in discrimination among shippers.

c. Time has also rendered obsolete Keogh’s concern

that, because there was “no conceivable proceeding” in

which the ICC could pass on the validity of a hypothetical

rate, a shipper-plaintiff would be unable to prove that a

1S See Petition for Declaratory Order — Lawfulness of Volume Dis-

count Rates by Motor Common Carrier of Property, 365 1.C.C. 711,

715 n.6 (1982) (citing cases). Indeed, the ICC has expressed doubt

whether carriers even have standing to challenge a tariff on the ground

that it might, as a theoretical matter, result in discrimination. /bid.

The ICC’s interpretation of the “statutory scheme it is entrusted to ad-

minister,” is of course entitled to “considerable weight.” Chevron,

U.S.A. Inc. v. Natural Resources Defense Council, Inc., No. 82-1005

(June 25, 1984), slip op. 6 (footnote omitted); see also United States v.

Shimer, 367 U.S. 374, 382 (1961).

'6 Although class actions or “representative suits” were not un-

known prior to the adoption of Rule 23 in 1938, see, e.g., Christopher

v. Brusselback, 302 U.S. 500 (1938), they were not common, and they

eer

—_ ———*

13

lower rate posited for the purpose of calculating antitrust

damages would have been lawful under the Interstate

Commerce Act (260 U.S. at 164). As the court of appeals

observed, since Keogh was decided this Court itself has in

“many * * * cases * * * directed the suspension of judicial

proceedings pending the referral of similar issues to the

ICC” (Pet. App. 11a).'’ It is now well settled that the ICC

can pass on the reasonableness of tariffs in response to a

reference from a pending judicial proceeding. See, e.g.,

United States v. Consolidated Freightways Corp., 340

1.C.C. 208 (1971); Glama Dress Co. v. Mid-South Trans-

ports, Inc., 335 1.C.C. 586 (1969). See generally Bell

Potato Chip Co. v. Aberdeen Truck Line, 43 M.C.C. 337,

340-342 (1944).'8

were generally limited to equitable rather than legal causes of action.

See Z. Chafee, Some Problems of Equity 199 (1950); 7 C. Wright & A.

Miller, supra, § 1751, at 506. But the possibility that a class action of

sorts might have been maintained in 1922 did not render Keogh’s fear

of inconsistent verdicts groundless; the res judicata effect of class ac-

tion judgments was unclear for quite some time even under Rule 23. 7

C. Wright & A. Miller, supra, § 1751, at 509-510. Indeed, prior to the

extensive amendments to Rule 23 in 1966, a class action suit “ ‘was

merely an invitation to joinder—an invitation to become a fellow

traveler in the litigation which might or might not be accepted.’ ”

American Pipe & Construction Co. v. Utah, 414 U.S. 538, 546 (1974)

(citation omitted). The 1966 amendments were designed, in part, “to

assure that members of the class would be * * * bound by all * * *

orders and judgments.” 414 U.S. at 547 (footnote omitted).

'? See, e.g., Hewitt-Robins Inc. v. Eastern Freight-Ways, Inc., 371

U.S. 84 (1962); Pennsylvania R.R. v. United States, 363 U.S. 202,

203-206 (1960); United States v. Western Pac. R.R., 352 U.S. 59,

62-70 (1956); General American Tank Car Corp. v. El Dorado Ter-

minal Co., 308 U.S. 422 (1940). See also Chicago Mercantile Ex-

change v. Deaktor, 414 U.S. 113 (1973); Ricci v. Chicago Mercantile

Exchange, 409 U.S. 289 (1973) (antitrust action stayed pending ad-

ministrative determination of validity of defendant’s conduct under

regulatory statute).

'S Although this Court held in 7./.M.E. Inc. v. United States, 359

U.S. 464 (1959), that reparations were unavailable to shippers under

either the Motor Carrier Act or at common law, 7./.M.E. did not in-

14

d. Finally, Keogh’s supposition that a shipper’s damages

were “purely speculative” (260 U.S. at 164), because a

lower rate might have been “passed on” to its customers

has subsequently been rejected by this Court. In Hanover

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

491 n.8 (1968), the Court characterized that statement in

Keogh as “dictum.” And this Court’s decision in //linois

Brick Co. v. Illinois, 431 U.S. 720, 723-726 (1977),

established that on/y those parties who, like petitioners,

purchase services directly from a defendant can recover

antitrust damages.'? Moreover, in numerous cases decided

after Keogh, this Court has emphasized that an antitrust

plaintiff is not required to demonstrate the amount of its

validate the reference procedure outlined in Bell Potato Chip and

earlier ICC cases. See Hewitt-Robins Inc. v. Eastern Freight-Ways,

Inc., 371 U.S. at 89 (citing Bell Potato Chip with approval in case

where reasonableness of routing practice was referred to ICC for

determination pursuant to district court action).

In response to 7./.M.E., Congress amended the Motor Carrier Act

in 1965 to authorize reparations for shippers. See 49 U.S.C. (1970 ed.)

304a; Middlewest Motor Freight Bureau v. United States, 433 F.2d

212, 232-233 (8th Cir. 1970), cert. denied, 402 U.S. 999 (1971). The

ICC, however, still has no authority under the Motor Carrier Act to

award reparations; such suits must be brought in a district court, and

the issue of reasonableness is then referred to the ICC to be resolved in

an administrative proceeding, in accordance with the doctrine an-

nounced in Bell Potato Chip.

'9 Keogh’s reliance on a “pass-on” rationale to deny damages ig-

nored the fact that “[e]ven if a buyer prices for resale simply by mark-

ing up the purchase price, the higher price at which it must resell may

. duce its volume of sales, and hence its profit.” L. Sullivan, Hand-

book of the Law of Antitrust § 252, at 789 (1977). Indeed, four years

before Keogh was decided the Court had explicitly rejected the conten-

tion that railroad shippers were not entitled to reparations because

they were able to “pass-on” unreasonable rates to their customers.

Southern Pacific v. Darnell-Taenzer Lumber Co., 245 U.S. 531, 533

(1918). Keogh distinguished Southern Pacific on the ground that the

ICC had declared in that case what rate would have been

“reasonable.” 260 U.S. at 165.

Oh en So

15

damages with “mathematic precision.”?° As the Court

noted in Story Parchment Co. v. Paterson Parchment

Paper Co., 282 U.S. 555, 565-566 (1931), quoting Straus

v. Victor Talking Machine Co., 297 F. 791, 802 (2d Cir.

1924), “ ‘[t]he constant tendency of the courts is to find

some way in which damages can be awarded where a

wrong has been done. Difficulty of ascertainment is no

longer confused with right of recovery.’ ”

B. Damage Suits For Price-Fixing In Violation Of An ICC-

Approved Ratemaking Agreement Would Not Interfere With

The Operation Of The Interstate Commerce Act Or The ICC’s

Regulatory Authority

Because Keogh’s stated rationale no longer justifies its

bar against antitrust damage actions by shippers, Keogh

.can retain vitality only if its holding conforms to this

Court’s prevailing standards governing the recognition of

implied antitrust immunity. The application of those

standards to the statutory scheme at issue here compels the

conclusion that respondents are not entitled to implied im-

munity from Sherman Act damage actions.

1. Because the antitrust laws embody “fundamentai na-

tional policies” favoring competition (Otter Tail Po ms

Co. v. United States, 410 U.S. at 374), implied immunity

is appropriate only where there is a “plain repugnaricy be-

tween the antitrust and regulatory provisions” (United

States v. Philadelphia National Bank, 374 U.S. at 350-351

(footnote 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

20 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).

16

Bar, 421 U.S. 773, 787 (1975), “our cases have repeatedly

established that there is a heavy presumption against im-

plicit exemptions.” See also Union Labor Life Insurance

Co. v. Pireno, 458 U.S. 119, 126 (1982); National

Gerimedical Hospital & Gerontology Center v. Blue

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

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

This presumption against implied antitrust immunity

“reflects the felt indispensable role of antitrust policy in

the maintenance of a free economy” (Philadelphia Na-

tiona! Bank, 374 U.S. at 348), and is particularly compel-

ling where, as here, Congress has crafted a regulatory

scheme that provides for express antitrust immunity. In

such circumstances the scope of immunity should not ex-

tend beyond the limits laid down by statute, because “[i]f

Congress had desired to grant any further immunity, Con-

gress doubtless would have said so.” United States v.

Borden Co., 308 U.S. at 201. See also California v. FPC,

369 U.S. at 485. It strains credulity to suggest that, in

granting express immunity in the Reed-Bulwinkle Act for

collective ratemaking undertaken in conformity with an

ICC-approved agreement, Congress also intended to im-

munize at the same time conduct not in conformity with

such an agreement, which subverts both the Reed-

Bulwinkle Act and the Sherman Act. While we agree with

the court of appeals that Congress did not overrule Keogh

in passing the Reed-Bulwinkle Act (see Pet. App. 25a),

there is conversely no indication that it intended to fix by

legisiative fiat the balance this Court struck in 1922 be-

tween the Interstate Commerce Act and the antitrust

laws.?' Thus, as in any case where Congress had provided <

for express statutory immunity, conduct outside the scope

of congressional authorization is presumptively not en-

titled to antitrust immunity.

2! In passing the Reed-Bulwinkle Act, Congress delineated with

precision the forms of collective ratemaking that are immune from an-

titrust challenge. For that reason, the various references in that Act’s

,

= A A A A I Ee et

17

2. This case satisfies none of the criteria that this Court

has recognized as warranting implied immunity. There is

no “clear repugnancy” between damage actions and the In-

terstate Commerce Act, and no possibjity that antitrust

damage actions would interfere with the operation of the

regulatory scheme, or subject respondents to “duplicative

and inconsistent standards.” See United States v. National

Association of Securities Dealers, Inc. 422 U.S. 694, 735

(1975).

a. An antitrust damage award premised on a rate lower

than that filed by a carrier would not necessarily pose even

a theoretical inconsistency with the ICC’s regulatory

authority. As the court of appeals correctly noted (Pet.

App. 14a n.3),?? the fact that a particular tariff filed in

Violation of an ICC-approved agreement may be

legislative history to then-prevailing antitrust law amount to no more

than a confirmation that conduct outside the scope of express im-

munity would be subject to antitrust scrutiny. The issue here is

whether Keogh’s judicially-crafted immunity remains necessary to ac-

commodate the Sherman Act and the Interstate Commerce Act, and

there is therefore no reason to assume that Reed-Bulwinkle “cast in

bronze” the rule announced in Keogh. City of Lafayette v. Louisiana

Power & Light Co., 435 U.S. 389, 421 n.2 (1978) (Burger, C.J., con-

curring). Such an assumption would be particularly inappropriate

given the long tradition of dialogue between the judicial and legislative

branches that has served to perfect and preserve the vitality of the an-

titrust laws. See, e.g., Mandeville Island Farms, Inc. v. American

Crystal Sugar Co., 334 U.S. 219, 229-235 (1948). Compare Carnation,

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).

22 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 con-

siderations of comity that informed the Court’s decision in Southern

Motor Carriers.

18

“reasonable” does not establish that a lower tariff is

unreasonable. There is a “zone of reasonableness * * * be-

tween maxima and minima within which a carrier is or-

dinarily free to adjust its charges.” United States v.

Chicago, M., Si. P. & Pac. R.R., 294 U.S. 499, 506

(1935). Because there is a range within which rates may fall

and still satisfy the controlling statutory criteria,?? the

calculation of antitrust damages based on rates different

from those filed with the ICC but still within this range

would not violate the rate structure or infringe upon the

ICC’s authority.

Moreover, the ICC has long taken the position (Rules to

Govern the Assembling & Presenting of Cost Evidence,

337 I.C.C. 298, 378 (1970)) that its

statutory scheme of ratemaking still generally leaves

the initiative to the carriers. Indeed, it is their respon-

sibility, in the first instance, to set appropriate rates

and they are free to initiate such changes as they deem

proper in their managerial discretion. The Commis-

sion is not, and was never meant to be, the manager

of the operations of regulated carriers.

Because “the initial decision to publish a rate is, ordinari-

ly, made by a carrier pursuant to its managerial discretion”

(id. at 306), application of the antitrust laws would in no

way usurp the regulatory prerogatives of the ICC. See,

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

23 A tariff is not unreasonable simply because it is higher or lower

than a tariff filed by another carrier or carriers involving the same

transportation. See, e.g., Household# Goods Rates of Jacob’s Van

Line, 17 M.C.C. 293 (1939); Household Goods Rates of A.D. Rymers

& Sons, 12 M.C.C. 541 (1936). Differences among tariffs are also in-

sufficient, standing alone, to support an inference that there has been

an impermissible “preference or prejudice.” See, e.g., Clama Dress

Co., 335 1.C.C. at 596 (“Commission has frequently »eld that

preference and prejudice are not prohibited unless they are undue or

unreasonab!e. To be undue they must be shown to be a source of ad-

vantage to the parties or traffic alleged to be favored.”).

19

374 (where challenged conduct results from the exercise of

“business judgment and not regulatory coercion, courts

must be hesitant to conclude that Congress intended to

override” the antitrust laws); FMC v. Seatrain Lines, Inc.,

411 U.S. 726, 737 (1973).

b. It is extremely unlikely that damage actions would

result in any actual interference with the ICC’s exercise of

its regulatory authority. Obviously, an “award of treble

damages for past and completed conduct which clearly

violated” an 1CC-approved agreement would “certainly

not interfere with any future action of the Commission.”

Carnation, 383 U.S. at 222. And it is plain that there is lit-

tle or no danger that antitrust suits would conflict with any

prior ICC determinations, because, as this Court noted in

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

82-1643 (June 5, 1984), slip op. 6 n.4, the ICC is currently

capable of reviewing only an insignificant fraction of the

total tariffs filed.24 There may, of course, be cases where

the ICC has reached a specific determination that would

foreclose certain issues in an antitrust action.25 When that

24 In 1983 the ICC examined 188 tariffs out of 1.2 million filed, and

suspended 11 (Pet. App. 14a n.3; see 1983 ICC Ann. Rep., Tables 6,

9, at 113-114 (1984)). By contrast, at the time Keogh was decided the

total number of tariffs filed annually was approximately 8% of what

it is today. See 1923 ICC Ann. Rep. 37 (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 par-

ticular tariff surely cannot be regarded as tantamount to regulatory

approval. See, e.g., MCI Communications Corp. v. AT & T, 708 F.2d

at 1104-1105 (where agency is able to investigate only a “small percent-

age” of 1,371 tariffs filed annually, tariff that agency has neither “dic-

tated nor approved” is not immune from antitrust challenge). See also

Cantor v. Detroit Edison Co., 428 U.S. 579, 593-594 (1976).

25 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 to contest whether their con-

duct in fact violated the ICC-approved Agreement, that issue might be

20

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

suitable to the circumstances.?¢ But the fact that the relief

sought in an antitrust damage action might in a particular

case conflict with a specific ICC determination does not

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

antitrust damage actions should be permitted.

c. Because damage actions would not, as a theoretical or

practical matter, interfere with the ICC’s administration

of the Interstate Commerce Act, the imposition of an-

titrust damage liability would not subject carriers to

“duplicative and inconsistent” standards. As noted above,

the primary initiative for setting rates rests with the car-

riers—not with the ICC. And as long as carriers comply

with an ICC-approved agreement, they may collectively

exercise the wide ratemaking discretion they have under

the Interstate Commerce Act. But collective ratemaking

referred to the ICC for determination ‘n the first instance. See Board

of Trade v. ICC, 646 F.2d 1187, 1193 (7th Cir. 1981). Similarly, if the

ICC had in an administrative proceeding defined the lower bounds of

reasonableness for a particular tariff (see, e.g., Jron & Steel Articles —

Eastern Common Carriers, 305 1.C.C. 369, 398 (1959) (prescribing a

minimum tariff in order “to elevate such rates as are clearly below a

compensatory level * * * thus ending destructive competition”), that

finding would govern in an antitrust suit.

26 The claim most likely to arise in an antitrust action that would re-

quire administrative resolution by the ICC is that the rate used for

calculating antitrust damages would have been disallowed as

“unreasonably” low. In cases where this argument seems plausible (cf.

Oilfield Equipment, Materials, & Supplies to & Between the

Southwest, 313 1.C.C. 577, 602 (1961) (“Our policy, stated in too

many decisions to require citation here, is that our power to prescribe

minimum rates should be sparingly exercised.”)), bifurcation of the

antitrust action into separate liability and damage proceedings will

provide the ICC with an opportunity to exercise appropriate discre-

tion. In many cases, of course, it may be entirely unnecessary to refer

any damage-related issues to the ICC. Certainly no reference would be

necessary if a plaintiff failed to establish liability, and in many cases

the parties might find it advantageous to stipulate the appropriate

range of reasonable rates in light of prior [CC determinations.

ed

21

outside the scope of Reed-Bulwinkle immunity is naked

price-fixing, condemned by both the Reed-Bulwinkle Act

and the Sherman Act.?’ In this case, petitioners allege that

the respondents have engaged in conduct that was not ap-

proved, and could not be approved, by the ICC. Accord-

ingly, there is no merit to the argument that the imposition

of antitrust liability would place carriers in a position

where they cannot comply with the dictates of one statute

without violating another.

li. PRIVATE DAMAGE ACTIONS WOULD FURTHER THE

REGULATORY OBJECTIVES OF THE INTERSTATE

COMMERCE ACT AS WELL AS RECENT CONGRES-

SIONAL EFFORTS TO PROMOTE COMPETITION IN THE

TRANSPORTATION INDUSTRY

__ 1. As the facts of this case demonstrate, carriers armed

with Keogh immunity have a strong incentive to form

cartels to engage in conduct that far exceeds the intent of

Congress in conferring limited express immunity in the

Reed-Bulwinkle Act. Because, as the court of appeals

noted, Keogh shields even the most egregious violations of

an ICC-approved Agreement from damage liability, it

rewards carriers for violating both the Reed-Bulwinkle Act

and the antitrust laws. Hence, the overruling of Keogh

would foster compliance with both the antitrust laws and

the Reed-Bulwinkle Act.

Congress was well aware of the potential evils of collec-

tive ratemaking. The legislative history of the Reed-

Bulwinkle Act shows that Congress did not intend that

carriers would be allowed to “go ahead and do as they

please” under the Act (94 Cong. Rec. app. at A3926

(1948)). Instead, the Act sought to protect the public in-

terest by opening the ratemaking process to participation

27 The ICC itself has taken the position that “relief from the an-

titrust laws * * * obtains only where the approved agreement is carried

out strictly in conformity with its provisions and within the terms and

conditions prescribed by this Commission.” Rate Bureau Investiga-

tion, 349 1.C.C. 811, 824 (1975).

22

by shippers and the public.2* At the same time, the Act

guaranteed each carrier the right to take “independent ac-

tion either before or after any determination arrived at”

collectively (§ Sa(1)(B)(6), 62 Stat. 473; see also 49 U.S.C.

10706(d)(2)(C)). In providing open ratemaking procedures

and protecting the individual carrier’s right to take in-

dependent action, of course, Congress sought to protect

the public interest. These two features were the quid pro

quo for the antitrust immunity Congress conferred upon

Carriers.

The respondents in this case allegedly violated these two

fundamental requirements of the Act by setting rates in a

secret “Principals Committee” and by resorting to

“threats, coercion and retaliation” to prevent carriers from

exercising their statutory right to act independently. Ob-

viously, if these allegations are true, respondents have also

engaged in conduct that is illegal per se under the Sherman

Act. 29 Allowing shippers to maintain antitrust damage ac-

tions in such circumstances would provide an effective in-

centive for carriers to comply with their ICC-approved

agreements and thus would materially further the pur-

poses of the Interstate Commerce Act. See JCC v.

American Trucking Associations, Inc., slip op. 13 (ICC

overcharge remedy encourages “carriers to limit their col-

lective activities to the areas that Congress described in the

28 As Representative Bulwinkle explained, the “bill provides for

complete publicity at every conference to protect the rights of the

public” (93 Cong. Rec. app. at A3969 (1947)). In keeping with con-

gressional intent, ICC approval of collective ratemaking agreements

has always been conditioned upon various procedural requirements

designed to safeguard shipper interests. See, e.g., Board of Trade v.

ICC, 646 F.2d 1187, 1192 (7th Cir. 1981).

29 See R. Bork, The Antitrust Paradox 263 (1978) (“The subject of

cartels lies at the center of antitrust policy. The law’s oldest and, prop-

erly qualified, most valuable rule states that it is illegal per se for com-

petitors to agree to limit rivalry among themselves.”).

23

statutory guidelines”); Georgia v. Pennsylvania R.R., 234

U.S. 439, 460-461 (1945) (“If the rate-making function is

freed from the unlawful restraints of the alleged con-

spiracy, the rates of the future will then be fixed in the

manner envisioned by Congress.”).

2. Private damage actions would also further recent

congressional efforts to promote competition in the essen-

tial domestic transportation industry. The size and impor-

tance of the industry are obvious: expenditures on

domestic freight and passenger transportation consistently

“account for approximately 20 percent of the Gross Na-

tional Product” (D. Wyckoff & D. Maister, The Motor

Carrier Industry, Table I-1, at xxv (1977)),3° and the pric-

ing of transportation services affects the price of virtually

all other goods and services. Recent legislation affecting

rail and motor carriers expresses a congressional deter-

mination that consumer welfare would be better served if

carriers were subject, to a much greater extent than in the

past, to the free play of competitive forces. In the Motor

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

seq., Congress substantially reduced regulation of motor

carriers, based on its conclusion that “protective regula-

tion” had resulted in both “operating inefficiencies” and

“anticompetitive pricing” (§ 3(a), 94 Stat. 793, 49 U.S.C.

3® 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 re-

laxed entry standards under the Motor Carrier Act of 1980. In 1982,

total revenues in the domestic motor carrier industry (i.e., ICC-

regulated carriers and others) amounted to $178 billion, and motor

carrier services accounted for 24% of tctal domestic transport ton-

miles. Total revenues in the rail sector in 1982 amounted to $27.1

billion, and rail carrier services accounted for 36% of total domestic

transport ton-miles. See Bureau of the Census, U.S. Dep’t of Com-

merce, Statistical Abstract of the United States— 1985, at 587 (Table

No. 1016); id. at 589 (Table No. 1022). Taken together, motor carrier

and rail expenditures comprise approximately 90% of total domestic

freight transportation expenditures. Jd. at 587 (Table No. 1016);

Motor Carrier Ratemaking Study Commission, Collective Ratemak-

ing in the Trucking Industry 72 (1983).

24

10101 note (Congressional Findings and Declaration of

Policy)).3! Similarly, in both the Railroad Revitalization

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

90 Stat. 31 ef seqg., and the Staggers Rail Act of 1980, Pub.

L. No. 96-448, 94 Stat. 1895 et seq., Congress circum-

scribed the ICC’s authority over rail rates. Most impor-

tantly, in both recent motor carrier and rail acts, Congress

narrowed the scope of Reed-Bulwinkle immunity for col-

lective ratemaking. For example, Congress has stripped

carriers of immunity for joint setting of single-line rates,

which are by far the most competitively significant rates.3?

Thus, Congress’s intent with respect to both motor and

3! Although the conduct forming the basis for the complaints here

occurred largely if not entirely before the effective date of the 1980

Motor Carrier Act, the rule announced by the court of appeals ap-

pears broad enough to permit carriers to argue that post-1980 conduct

is immunized as well. Moreover, petitioners’ discovery prior to

dismissal was limited primarily to jurisdictional matters; further

discovery may reveal post-1980 conduct by respondents that violated

both the ICC-approved Agreement and the antitrust laws. In any

event, in the Motor Carrier Act of 1980 Congress determined that the

regulatory scheme applicable prior to 1980 was deficient precisely

because it resulted in anticompetitive pricing. This finding, and the

legislative attention it prompted, undermine any argument that allow-

ing an antitrust damage action for pre-1980 conduct outside the scope

of express immunity under the Reed-Bulwinkle Act would frustrate

congressional intent. Additionally, as demonstrated above, the deci-

sional premises on which Keogh was based had been markedly

superseded well before the 1980 legislation, and the practical limits of

the ICC’s regulatory oversight had been strained by the burgeoning

number of tariff filings. Compare 1980 ICC Ann. Rep., Table 7, at

113 (1981) (605,538 tariffs filed in 1980), with 1923 ICC Ann. Rep. 37

(94,780 tariffs filed in 1923).

32 See 49 U.S.C. 10706(aX(3)(A)iii) (rate bureau may not “permit a

rail carrier to discuss, to participate in agreements related to, or to

vote on single line rates proposed by another rail carrier”); 49 U.S.C.

10706(b)(3)(D) (members of motor carrier rate bureau may not

“discuss[ ] or vote upon single-line rates * * * July 1, 1984”).

25

rail carriers—and especially their ratemaking—could not

be clearer: competition rather than regulation is the order

of the day.3

It would be consistent with that premise for this Court

to remove the remaining judicially-crafted impediment to

competition — Keogh’s prohibition of antitrust damage ac-

tions. The antitrust laws serve to protect competition in

the American economy, and vigorous enforcement of

those laws is essential. See, e.g., United States v. Topco

Associates, Inc., 405 U.S. 596, 610 (1972); Northern

Pacific R.R. v. United States, 356 U.S. 1, 8 (1958).

Moreover, while the United States has primary respon-

sibility for antitrust enforcement, its resources for the

detection of illegal conspiracies are limited. Reiter v.

Sonotone Corp., 442 U.S. 330, 344 (1979). As the Court

stated only last Term, “[t]he treble-damages provision

wielded by the private litigant is a chief tool in the antitrust

enforcement scheme, posing a crucial deterrent to poten-

tial violators.” Mitsubishi Motors Corp. v. Soler Chrysler-

Plymouth, Inc., No. 83-1569 (July 2, 1985), slip op. 20.

Petitioners, of course, are particularly well-placed to en-

force the antitrust laws effectively, for they are intimately

familiar with the industry. At present, Keogh bars this im-

portant and beneficial private enforcement of the Sher-

man Act against a secret carrier cartel.

33 See, e.g., 49 U.S.C. 10101a(1) (in public interest “to allow, to the

maximum extent possible, competition and the demand for services to

establish reasonable rates for transportation by rail”); § 3(a), 94 Stat.

793, 49 U.S.C. 10101 note (Congressional Findings and Declaration

of Policy) (“The Congress hereby finds that a safe, sound, com-

petitive, and fuel efficient motor carrier system is vital to the * * * na-

tional economy.”). See also Airline Deregulation Act of 1978, Pub. L.

No. 95-504, 92 Stat. 1705 ef seq. (amending Federal Aviation Act of

1958 to “encourage, develop, and attain an air transportation system

which relies on competitive market forces to determine the quality,

variety, and price of air services”). Preamble, 92 Stat. 1705.

26

If, as the court of appeals observed (Pet. App. 6a-7a),

Keogh prohibits antitrust damage actions whenever the

cartel members have filed tariffs, there will in essence be

no private enforcement of the antitrust laws at all in this

crucial sector of the economy.34 Although Congress has

greatly limited the ICC’s authority over rates and decreed

that competition rather than regulation should largely

determine rates, it has not eliminated tariff filing re-

quirements.?5 Accordingly, unless Keogh’s ban on private

damage actions is lifted, congressional efforts to en-

courage competition will be anomalously thwarted: the

public will lose the important protections formerly af-

forded by the Reed-Bulwinkle Act and at the same time it

will be unable to rely on the potent incentive of private an-

titrust damage actions to ensure the competitive ratemak-

ing that Congress expected.3* Since Congress surely did

34 Shippers presumably have little interest in bringing an injunctive

action for past violations of an ICC-approved agreement that would

result in, at most, a judicial declaration that carriers should comply

with what remains of Reed-Bulwinkle’s express immunity provisions.

35 Allowing shippers to maintain antitrust damage actions would

not be at odds with the “filed rate” principle that a “federally regulated

[entity may not] charg[e] rates higher than those filed with the” rele-

vant regulatory agency. Arkansas Louisiana Gas Co. v. Hall, 453 U.S.

571, 573 (1981). Petitioners’ claim is that they have been injured in

their business or property as a result of a conspiracy among carriers

that violated both the Reed-Bulwinkle Act and the Sherman Act. See

15 U.S.C. 15. The fact that rates other than those filed with the ICC

pursuant to the conspiracy may be used to calculate the measure of an-

titrust injury does not transform an antitrust action into a collateral

proceeding aimed at securing “a retroactive rate” decrease (453 U.S. at

578). Moreover, this Court has explicitly reserved the question

whether the filed rate doctrine shields “affirmative misconduct” or

“fraudulent conduct” such as that alleged here (id. at 583 & n.13).

36 Cf. Litton Systems, Inc. v. AT & T, 700 F.2d 785, 806-807 & n.30

(2d Cir. 1983), cert. denied, No. 82-2128 (Jan. 16, 1984) (noting

various federal tariff filing requirements; rejecting contention that

mere filing of tariff provides antitrust immunity because “[i]f this

argument were accepted, a common regulatory practice designed to

protect consumers would instead shield from antitrust liability the

very entities the practice seeks to restrain and regulate”).

27

not intend “ ‘to paralyze with one hand what it sought to

promote with the other’” (Weinberger v. Hynson,

Westcott & Dunning, Inc., 412 U.S. 609 631 (1973),

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

489 (1947)), it is time for this Court to overrule Keogh.

CONCLUSION

The judgment of the court of appeals should be re-

versed, and the case remanded with directions that peti-

tioners’ complaints be reinstated in their entirety.

Respectfully submitted.

CHARLES FRIED

Solicitor General

DOUGLAS H. GINSBURG

Assistant Attorney General

LAWRENCE G. WALLACE

Deputy Solicitor General

W. STEPHEN CANNON

Deputy Assistant

Attorney General

JERROLD J. GANZFRIED

ROBERT S. BURK Assistant to the

General Counsel Solicitor General

HENRI F. RUSH ROBERT B. NICHOLSON

Deputy General Counsel STEPHEN MAC ISAAC

TiMM L. ABENDROTH seein

Altorney

Interstate Commerce

Commission

Jim J. MARQUEZ

General Counsel

ROSALIND A. KNAPP

Deputy General Counsel

Department of Transportation

NOVEMBER 1985