Petition for Writ of Certiorari — Crounse Corp. v. Interstate Commerce Commission

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| FILED. |

35-2138 JUN 26 088

No. - JOSEPH F. SPANIOL, JR.

CLERK

In the

Supreme Court of the United States

OcroBer TERM, 1985

CROUNSE CORPORATION, et AL.,

PETITIONERS

INTERSTATE COMMERCE COMMISSION, er Av.

RESPONDENTS

PETITION FOR WRIT OF CERTIORARI TO

THE UNITED STATES COURT OF APPEALS

FOR THE SIXTH CIRCUIT

RicHarp A. ZELLNER WituaM L. Patron

Mark E. Srais Counsel of Record

SmitH R. Britrincuas, III Tuomas H. HANNIGAN, JR.

HAHN Loeser & Parks Ropes & Gray

800 National City E. 6th Bldg. 225 Franklin Street

Cleveland, Ohio 44114 Boston, MA 02110

(617) 423-6100

A. DuNCAN Wuirakenr, P.C.

ALAN M. WISEMAN WituiaM E. Hynan

Rosert M. Bruskin Perer A. GABAUER

Howrey & SIMON 1130 17th St., N.W.

1730 Pennsylvania Ave., N.W. Washington, D.C. 20036

Washington, D.C. 20006

NicHo.as J. SPAETH

JAMes F. BROMLEY Lynn L. SCHLOESSER

BroMLey, Brown & WALSH Mary ANN JOHNSON

1625 Eye St., N.W. State Capital

Washington, °.C. 20006 Bismark, N. Dakota 58505

Counsel for Petitioners

Blanchard Press, Inc., Boston, Mass. — Law Printers (617) 426-6690

QUESTIONS PRESENTED

Section 11321 of the Interstate Commerce Act, 49 U.S.C.

§ 11321 (originally enacted as section 11 of the Panama Canal

Act of 1912 and referenced hereinafter as the Act”) prohibits

a railroad from acquiring any interest in a water carrier with

which it does or may compete for traffic that moves on a water

route served by the water carrier unless the railroad establishes

that the acquisition will not reduce such competition. In this

case the Interstate Commerce Commission (“ICC”) has ap-

proved the acquisition of the nation’s largest barge line by the

nation’s second largest railroad, although finding that they

directly competed for traffic. The Court of Appeals sustained

the ICC’s approval, holding that the ICC was not required to

analyze the acquisition’s effect on rail-barge competition. The

Court of Appeals also held that competition among barge car-

riers would not be reduced within the meaning of the Act un-

less barge lines would be completely driven from the water

route. In this context, the questions presented are:

1. Whether the Court of Appeals erred by holding that

under the Act, which precludes railroad acquisitions of

competing water carriers unless competition will not be

reduced, the ICC can ignore the impact on rail-barge

competition in determining whether to approve the ac-

quisition.

2. Whether the Court of Appeals erred by holding that

under the Act a railroad acquisition of a competing water

carrier does not reduce competition unless other water

carriers will be driven completely out of the market.

(1)

PARTIES

The seventeen petitioners consist of shippers (Tampa Elec-

tric Company and Gatliff Coal Company); associations repre-

senting shippers (National Coal Association, The National

Grange, and The National Association of Wheat Growers);

water carriers (Crounse Corporation, The Ohio River Com-

pany, M/G Transport Services, Inc., Canal Barge Company,

Inc., Dixie Carriers, Inc., The Valley Line Company, S.C.

Loveland Company, Inc., SCNO Barge Lines, Inc., and

TECO Transport & Trade Corporation); associations repre-

senting water carriers (The Water Transport Association, and

The American Waterways Operators, Inc.); and the State of

North Dakota.' These petitioners were either petitioners or

intervenors urging reversal of the ICC’s decision in the Court

of Appeals.* The respondents and intervening parties urging

affirmance of the ICC’s decision in the Court of Appeals con-

sisted of the ICC, the United States, CSX Corporation and

American Commercial Lines, Inc.

' Information concerning petitioners required by Rule 28.1 of the Rules of

the Supreme Court is set forth in Appendix G to this petition, 219a. The ap-

pendix to this petition has been separately bound and filed in this Court.

? Other petitioners or intervenors below who urged reversal were PPG

Industries, Inc., Interstate Power Co., Tennessee Valley Authority, Patrick

W. Simmons (Illinois Legislative Director for United Transportation Union),

the National Marine Service, Inc., and the Mining and Reclamation Council

of America.

(II)

TABLE OF CONTENTS

QUESTIONS PRESENTED.............. Eee aces

PARTIES

TABLE OF AUTHORITIES.................-------

See

1. sec sey ies ese eee

STATUTES INVOLVED...................-..5-5-

STATEMENT OF THE CASE...............-.-----

REASONS FOR GRANTING THE WRIT..........--

I. THe Court Or Appeacs Errep IN RuLING THAT

Tue ICC Was Nor Reguirep To Consiper THE

Impacr Or THE ACQUISITION ON RalIL-BARGE

eg ong. anh Hack we bw

A. The Court Of Appeals’ Decision Is Con-

trary To The Language, Structure, And

Pumas Gl ee Act............--....-

B. The Court Of Appeals’ Decision Is Con-

trary To The Established Interpretation

And Application Of The Act............

C. Congressional Action Concerning The Act

Confirms The Error Of The Court Of

Sheik naa 6 os ene esses

D. The Court Of Appeals Disregarded The

Competitive Realities And Ignored The

Practical Implications Of Its Decision... .

Il. THe Court Or Appeacs Errep IN Rutinc THAT

Competition Wou.p Not Be Repucep UNLEss

Water Carriers Were DrivEN COMPLETELY

SESE EE

eg eg vay ek aoe we wee we

(IIT)

TABLE OF AUTHORITIES

CASES

American Waierways Operators, Inc. v. United

States, 386 F. Supp. 799 (D.D.C. 1974), aff'd

sub. nom. Water Transport Ass'n v. United

States, 454 UD. WOOO CR shee eve cecans

Arrow Transportation Co. v. United States, 176 F.

Supp. 411 (N.D. Ala. 1959), affd sub nom.

State Corp. Comm’n v. Arrow Transportation

Cth; Gee Ad ee OE AOE i ea erin ote ees

CSX Corp., 363 1.C.C. 518 (1980)...............

Dixie Carriers, Inc. v. United States, 351 U.S. 56

oa es sa ok de ae hee eee Oe

Federal Deposit Insurance Corp. v. Philadelphia

Gear Corp., 54 U.S.L.W. 4525 (U.S. May 27,

RAR a reesei REN tee SI erm Perr oe ace Sant eats i

ICC v. Mechling, 330 U.S. 567 (1947)............

Iliinois Central Railroad Co.—Control—John I.

Sime Co., SUF TAL. SCOR. «= onc ccsece

Investigation of Railroad Freight Rate Struc-

ture—Grain and Grain Products, 345 1.C.C. 2977

SS a eh ee eee ee ee Ce ore.

Lake Line Applications Under Panama Canal Act,

33 1.C.C. 699 (1915), affd sub nom. Lehigh

Valley R. Co. v. United States, 243 F. 682 (E.D.

Pa. 1916), aff'd, 234 U.S. 412 (1917)...........

(IV)

Page

14, 16,

19 n.i2,

12 n.10

3 n.4,

iz, &&

12 n.10

19, 20,

17, 18,

Lehigh Valley R. Co. v. United States, 234 F. 682

(E.D. Pa. 1916), aff'd, 243 U.S. 412 (1917)......

Missouri Pacific Railroad, 245 1.C.C. 143 (1941)...

Nicholson Universal Steamship Co., 248 1.C.C. 43

Ne ere Pe erent ata

NLRB vy. Bell Aerospace Co., 416 U.S. 267 (1974). .

Penn-Central Merger Cases, 389 U.S. 486 (1968). . .

Square D Co. v. Niagara Frontier Tariff Bureau,

Inc., 54 U.S.L.W. 4520 (U.S. May 27, 1986)... .

Water Transport Association—Petition for Declara-

tory Order—American Commercial Lines Voting

Trust, 367 I.C.C. 559 (1983), aff'd sub nom.

Water Transport Association v. ICC, 715 F.2d

581 (D.C. Cir. 1983), cert. denied, 465 U.S. 1006

eS PO eR aan pude AA Reet Pat

Water Transport Association v. ICC, 715 F.2d 581

(D.C. Cir. 1983), cert. denied, 465 U.S. 1006

STATUTES AND REGULATIONS

Clayton Act, Section 7, 15 U.S.C. § 18 (1982)......

Denison Act, Pub. L. No. 70-601, § 2, 47 Stat. 978

(pA i eR sg Ry gt Nh Pei a oh ee

Judicial Code, 28 U.S.C. § 1254 (1982)...........

28 U.S.C. $2502 (1068)... .. 265.5.

National Transportation Policy, 49 U.S.C.

Te ae aes ea

Panama Canal Act of 1912, Ch. 390, § 11, 37 Stat.

566, codified as amended at 49 U.S.C. § 11321

ES oy chs es ete ee RG aR Ch es aoe

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

Sale soa ede ee ls ey ables aa ous aiceen

49 C.F.R. § 1180. 1(c)(2)(i) (1985).......0..0.0..

(V)

Page

16, 17

17, 21

4, 16,

20 n.14

LEGISLATIVE MATERIALS

Page

48 Cong. Rec. (1912) ......................... 5n.6, 15

86 Cong. Rec. (1940) ......................... 21, 22

48 Fed. Reg. 59,608-09 (1978)................... 21

H.R. Rep. No. 423, 62d Cong., 2d Sess. (1912)..... 13, 14&

n.11

H.R. Rep. No. 1197, 62d Cong., 2d Sess. (1912)... . 5 n.6

H.R. 4862, 76th Cong., Ist Sess. (1939)........... 21

H.R. Rep. No. 1395, 95th Cong., 2d Sess. (1978). .. 2n.3

H.R. Rep. No. 1035, 96th Cong., 2d Sess. (1980)... 22

H. Conf. Rep. No. 1430, 96th Cong., 2d Sess. (1980) 22

S. 1355, 86th Cong., Ist Sess. (1959).............. 21

S. Rep. No. 470, 96th Cong., Ist Sess. (1979)...... 10 n.9,

S. 48, 98th Gong., Ist Sess. (1983).......000.0.... 21 n.15

MISCELLANEOUS

American Academy of Political and Social Science,

Government Regulation of Water Transportation

—The Annals Volume LV at App. II, 253-55 (E.

Johnson, ed. 1914)..............,........... 15

I.C.C. Ann. Rep. pp. 63, 65 (1916).............. 21 n.15

P. Mapes, Competition Between Railroads and

Water Carriers: A Comparison of the Regulatory

and Anti-trust Approaches and a Proposal for

Reform, 39 U. Pitt. L. Rev. 653 (1978)......... 12 n.10

(VD

Ln the

Supreme Court of the United States

Ocroser TERM, 1985

No.

CROUNSE CORPORATION, Er AL.,

PETITIONERS

INTERSTATE COMMERCE COMMISSION, Et AL.

RESPONDENTS

PETITION FOR WRIT OF CERTIORARI TO

THE UNITED STATES COURT OF APPEALS

FOR THE SIXTH CIRCUIT

Petitioners seek a writ of certiorari to review the judgment

of the United States Court of Appeals for the Sixth Circuit in

this case.

OPINIONS BELOW

The opinion of the Court of Appeals majority (App. A,

la-3la) and the dissenting opinion of Judge Timbers (App. A,

32a-4la) are officially reported at 781 F.2d 1176. The dissent-

ing opinions of Judges Merritt and Jones from the denial of

rehearing en banc (App. D, 44a-46a) are officially reported at

787 F.2d 1031. The decision of the Interstate Commerce Com-

mission (App. E, 47a-210a) is not yet reported.

JURISDICTION

The judgment of the Court of Appeals (App. B, 42a) was

entered on January 23, 1986. A petition for rehearing with

suggestion for rehearing en banc was denied in an order

entered March 28, 1986 (App. C, 43a). This order was amended

on April 11, 1986 to include a four-page dissent by Judge Mer-

ritt, joined by Judges Keith, Martin, and Jones, and a separate

dissent by Judge Jones (App. D, 44a-46a). The jurisdiction of

this Court is invoked under 28 U.S.C. § 1254.

STATUTES INVOLVED

Section 11 of the Panama Canal Act of 1912, Ch. 390, § 11,

37 Stat. 566, currently codified at 49 U.S.C. § 11321 (1982),

provides in pertinent part:°

(a)(1) Notwithstanding sections 11343 and 11344 of

this title, a carrier, or a person controlling, controlled by,

or under common control with a rail, express, sleeping

car, or pipeline carrier providing transportation subject

to the jurisdiction of the Interstate Commerce Commis-

sion under subchapter I of chapter 105 of this title may

not own, operate, control, or have an interest in a water

common carrier or vessel carrying property or passengers

on a water route with which it does or may compete for

traffic.

x* * * *

3 In 1978 Congress restated and codified the entire Interstate Commerce

Act without making any substantive change. Act of Oct. 17, 1978, Pub. L.

No. 95-473, § 3, 92 Stat. 1337, 1446. Prior to codification section 11 of the

Panama Canal Act was located at 49 U.S.C. § 5(15)-(17) (1976). This provi-

sion is substantially the same as the text of the Act as originally adopted and

contains the governing language and meaning of the statute as embodied in

section 11321. See H.R. Rep. No. 1395, 95th Cong., 2d Sess. 4 (1978). The

full text of the original Act as well as the Act before and after the 1978 codifi-

cation is reproduced in Appendix F, 21la-218a.

(b) Notwithstanding subsection (a) of this section, the

Commission may authorize a carrier providing transpor-

tation subject to the jurisdiction of the Commission under

that subchapter to own, operate, control, or have an in-

terest in a water common carrier or vessel that is not

uperated through the Panama Canal and with which the

| carrier does or may compete for traffic when the Com-

mission finds that ownership, operation, control, or in-

terest will still allow that water common carrier or vessel

to be operated in the public interest advantageously to in-

terstate commerce and that it will stil! allow competition,

without reduction, on the water route in question... .

STATEMENT

This case involves the acquisition of American Commercial

Lines, Inc. (“ACL”), which owns the nation’s largest barge

line, by CSX Corporation (“CSX”), the nation’s second largest

railroad and the largest rail carrier east of the Mississippi.‘

The acquisition of ACL by CSX was a by-product of events in-

volving a hostile tender offer in 1983 by Coastal Corp. to

acquire the stock of Texas Gas Transmission Company (“Texas

Gas’), a natural resources company which is the parent corpo-

ration of ACL. Texas Gas sought a so-called “white knight,”

and on June 9, 1983, CSX made a tender offer for the stock of

Texas Gas as part of an agreement and plan of merger between

CSX and Texas Gas which would result in CSX ownership and

control of ACL.

Since CSX’s acquisition of ACL required ICC approval and

since no application for approval had been filed, CSX and

Texas Gas agreed to place the ACL stock in a voting trust

which was submitted to the ICC on June 10, 1983, and, after

* CSX is a railroad holding company resulting from the merger of the

Chessie System Railroads, the Seaboard System Railroad, and the Rich-

mond, Fredericksburg and Potomac Railroad. CSX Corp., 363 I1.C.C. 518

(1980).

modification, again on June 14, 1983. Litigation then ensued

before the ICC and subsequently in the District Court and the

Court of Appeals for the District of Columbia Circuit chal-

lenging the use of the voting trust device. See Water Transport

Association v. ICC, 715 F.2d 581 (D.C. Cir. 1983), cert.

denied, 465 U.S. 1006 (1984). The Court of Appeals, Judge

Greene dissenting, sustained the ICC’s use of the voting trust

device without addressing the merits of the underlying acquisi-

ticn.

On November 4, 1983, CSX applied to the ICC under the

Panama Canal Act, 49 U.S.C. § 11321 (1982), for approval to

acquire ACL. Numerous shippers, states, utilities, water car-

riers and labor organizations opposed the application.* Some

shippers and states supported the application (App. A, 3a).

Hearings were held before an administrative law judge, but he

made no findings of fact and rendered no recommended deci-

sion.

The ICC approved CSX’s acquisition of ACL on August 27,

1984. The approval marks the first time in the seventy-four

year history of the Act that the ICC has approved the acquisi-

tion by a railroad of a competing water carrier. In approving

the acquisition, the ICC overruled its longstanding interpreta-

tion of the Act and ignored the impact of the acquisition on

rail-barge competition between CSX and ACL.*

* (App. A, 3a). The acquisition was opposed by a broad spectrum of the

shipping public, including the Tennessee Valley Authority, the United States

Department of Agriculture, the states of West Virginia, Minnesota,

Oklahoma, and North Dakota, the leading agricultural trade groups, ship-

pers representing utilities, chemical manufacturers, firms engaged in the iron

and steel business, and the bulk of the nation’s coal producers through the

Mining and Reclamation Council and The National Coal Association. (App.

E, 66a-69a, 162a-164a).

* In approving the acquisition, the ICC purported to impose so-called

“reporting and oversight conditions” which, according to the ICC, would

permit it “to take corrective action, if necessary to deal with any anti-

competitive effects” which might manifest themselves after the merger (App.

E, 146a). There is no statutory authorization for the imposition of conditions

CSX and ACL are giants in their respective industries. The

vast scope of their operations was aptly summarized in the dis-

senting opinion of Circuit Judge Timbers in the Sixth Circuit:

CSX and its rail subsidiaries operate over 27,000 miles

of track. CSX is the leading carrier of solid buik commod-

ities by any mode. In 1981, for example, CSX moved 541

million tons of traffic. This constituted one-half of all

coal and chemical shipments and nearly one-third of all

agricultural products shipped by rail in the eastern

United States. Most importantly, CSX controls primary

access to one-half of all the rail/barge coal-loading capac-

ity on the Ohio River system, including all of the termi-

nals along one important 300 mile stretch of the Ohio

River. CSX and two other railroads account for 86% of

all eastern Class I rail revenues. Revenues for 1982 totalled

nearly $5 billion, with net income for that year amount-

ing to $338,400,000.

ACL operates its barge lines over 7,500 miles of the

15,000 miles of inland waterways. ACL is the nation’s

largest line-haul bargeline. ACL is one of the top three

for-hire bargelines in the transport of coal, chemicals and

agricultural products on the inland waterways. ACL and

five other carriers transport 70% of all eastern coal ship-

ments to utilities along water routes. ACL’s revenues for

1982 totalled $295,000,000 with net income for that year

amounting to $21,000,000.

(App. A, 33a-34a).

in a Panama Canal Act case. Moreover, the notion that rail-barge ownership

should be allowed, subject to ICC regulation, is an approach that was

specifically rejected by Congress when the Bourne amendment was defeated

in the course of passage of the Act. Instead, Congress deliberately chose to

declare common ownership unlawful and adopted the broadly worded

general prohibition contained in the Act. See 48 Cong. Rec. 10586 (1912);

H.R. Rep. 1197, 62d Cong. 2d Sess. 6-7 (1912).

Prior to the acquisition, CSX and ACL competed directly

for the transport of bulk commodities, including coal, grain,

and liquid chemicals. CSX tracks intersect and parallel the

waterways served by ACL, as shown in the map following

page 25. As noted by Judge Timbers (App. A, 34a), CSX and

ACL competed directly for customers in 12 states and 59

metropolitan areas (including Chicago, Cincinnati, Louis-

ville, Memphis, Mobile, New Orleans and Pittsburgh). Thirty

utility plants, including those operated by the Tennessee

Valley Authority, have the capacity to be serviced by either

CSX or ACL. These two carriers competed for shipments to

and from 163 points along the inland waterway system and to

and from points within a band extending from 25 to 200 miles

on either side of the water route. As a result of the acquisition,

all head-to-head, or horizontal, competition between CSX and

ACL has been eliminated.

The acquisition also reduced competition for traffic moving

in part by rail and in part by water. Even the ICC conceded

that CSX has the “interest and ability” to divert to ACL, and

away from independent water carriers, traffic it delivers to the

river for onward water movement (App. E, 117a). And, as

Judge Merritt observed in his dissent from the denial of rehear-

ing en banc:

[CSX] controls 50% of the barge terminals on the river

system in question, and all of the terminals on large

stretches thereof. If, after buying [ACL] the railroad

restricts the use of its terminals to [ACL], it will eliminate

competition among barge lines that haul coal and other

commodities to and from those terminals. Given the

number of terminals involved, it is inconceivable that the

merger in question will not result in a reduction of com-

petition on the water routes in question.

(App. D, 45a).

In reviewing the transaction under the Act, the ICC was

first required to determine if CSX and ACL compete for traf-

fic. The ICC necessarily answered that question in the affir-

mative: “CSX and [ACL] do actively compete for the same traf-

fic for the same shippers.” (App. E, 93a). The ICC then pro-

ceeded to determine whether the acquisition satisfied the nar-

row exception to the general prohibition against rail-barge

mergers contained in the Act. That exception required that the

railroad satisfy two stringent tests: first, that the acquisition of

ownership “will still allow that water common carrier or vessel

to be operated in the public interest advantageously to inter-

state commerce”; and second, “that it will still allow competi-

tion, without reduction, on the water route in question.” The

ICC concluded “that, due to the highly competitive nature of

the barge industry and the relative ease of entry associated with

it, no reduction in competition will occur.” (App. E, 52a).’ In

making that determination, the ICC for the first time in the

history of the Act failed to analyze the overall reduction of rail-

barge competition resulting from the merger and looked only to

the impact of the acquisition on barge-barge competition.

Review was sought in the United States Court of Appeals for

the Sixth Circuit pursuant to 28 U.S.C. § 2342 (1982). On

January 23, 1986, the Court of Appeals, in a two-to-one deci-

sion, affirmed the ICC’s approval of the acquisition. The

majority held that the Act was merely “meant to remedy a

particular evil which frequently accompanied railroad

acquisition of bargelines” — namely, the evil of predatory pric-

ing (App. A, 7a). The majority recognized that if Congress in-

tended to do more than simply remedy the evil of predatory

pricing, it would be “difficult to interpret a narrow statutory

exception to encompass a merger between companies the size

of CSX and ACL.” (Id., 6a-7a, 10a). The majority proceeded,

however, to do precisely that.

Having determined that the purpose of the Act was the nar-

row one of preventing predatory pricing, the majority then

ruled that the ICC had properly construed the Act to require

7 The ICC also found that the public interest test was satisfied but in so do-

ing it erroneously attributed no independent substance to the requirement,

indicating that in its view the public interest test “is closely related to the

competition test.” (App. E, 12l1a).

only analysis of harm to competition among barge lines and

not to competition between barge lines and railroads (App. A,

13a). The majority also held that barge-barge competition

would not be reduced unless the impact of the acquisition was

to drive independent barge carriers completely out of business.

(Id., 8a, 14a).

Circuit Judge Timbers dissented:

[1]n my view the ICC has erroneously interpreted and ap-

plied the Panama Canal Act, 49 U.S.C. § 11321 (1982)

(the “Act’’), so as to approve for the first time during the

seventy-three year history of the Act the acquisition by a

railroad of a bargeline. Today’s decision by our Court is

one of first impression among the courts of the United

States, for no court has ever approved such an acquisi-

tion. The acquisition in question is one of enormous im-

portance; it concerns the acquisition by the nation’s sec-

ond largest railroad (CSX Corporation) of American

Commercial Lines, Inc. (ACL), which owns the nation’s

largest bargeline. In approving the acquisition, the ICC

rejected and overruled its own prior controlling decisions.

(App. A, 32a). According to Judge Timbers, the “essential,

and fatal, error upon which the ICC’s decision is based, is its

utter failure to consider the effect of this acquisition on com-

petition between railroads and bargelines.” (Id., 33a). He

characterized the ICC’s failure to consider rail-barge competi-

tion as “curious” and “result oriented,” and stated that the

“ICC’s convenient manipulation of the facts and the law to

reach the result it did in the instant case strikes me as nothing

short of astounding.” (Id., 33a, 35a).

A petition for rehearing with suggestion of rehearing en

banc was denied by the Sixth Circuit in an order entered on

March 28, 1986 (App. C, 43a). Circuit Judge Merritt, joined

by judges Keith, Martin, and Jones, issued a four-page dissen-

ting opinion. Judge Merritt stated, inter alia, that:

I believe that we should have granted rehearing en

banc in this important antitrust case. Congress has

enacted a law flatly prohibiting a merger between a rail-

road and a barge line if that merger results in any reduc-

tion in competition. Never before has a railroad been per-

mitted to merge with a competing barge line, regardless

of the political cast or regulatory philosophy of the Com-

mission or the antitrust philosopy of the courts. Yet in this

case the Interstate Commerce Commission has refused to

look at what effect the merger of the largest railroad east

of the Mississippi with the largest barge line in the nation

will have on rail-barge competition, and at whether the

lessening of rail-barge competition will lead to a lessening

of competition among barge lines. As Judge Timbers cor-

rectly observes in his dissent, such refusal is an “abdica-

tion of responsibility on the part of the ICC” that “makes

a mockery of its regulatory functions.” Slip Op. at 40. We

do not perform our judicial function when we uphold it.

(App. D, 44a-45a).

REASONS FOR GRANTING THE WRIT

The Court of Appeals’ decision sustaining the acquisition of

the nation’s largest barge line by the nation’s second largest

railroad is, as Judge Timbers stated, “one of first impression

among the courts of the United States” and concerns an acqui-

sition “of enormous importance” (App. A, 32a). The approval

of the CSX-ACL acquisition is significant not only because of

its magnitude standing alone, but also because of what it

portends. The Sixth Circuit effectively conceded that approval

of this acquisition will “allow almost any rail-barge merger.”

(Id., 10a). If permitted to stand, the decision will fundamen-

tally alter the structure of surface transportation competition

in the United States with profound economic and legal impli-

cations that Congress affirmatively sought to prohibit.

The economic impact of this case is national in scope. Surface

transportation in the United States has been characterized in re-

cent years by two notable events. First, successive rail mergers

have left the nation with only three major railroads in the eastern

United States, each basically serving separate regions of the

country.* The result has been to curtail competition among

railroads, and most shippers (over 85% in the case of coal) have

become captive to a single railroad (See App. A, 37a). Second,

Congress has removed rail ratemaking from close regulatory

scrutiny and the railroads have obtained new freedom from rate

regulation. As these developments have occurred, intermodal

competition has become even move important, in lieu of regula-

tion, to safeguard against railroad abuse of market power.

Independent barge transportation is the primary, and only

direct, source of competition faced by rail carriers for the long

haul of bulk commodities such as coal, grain, ores, and chemi-

cals—vital raw materials that underpin the national economy.

The competitive position of independent barge transportation

has provided the public with a low cost alternative to rail service

and, as a result, has stimulated rate competition, product inno-

vation, and service efficiencies, all inuring to the benefit of ship-

pers and the public which they ultimately serve.* As Judge Mer-

ritt observed in dissenting from the denial of rehearing en banc:

5 In contrast, in 1958, there were 57 Class I line haul railroads in the East.

The same situation exists west of the Mississippi, where there are now only four

primary railroads: the Burlington Northern, Union Pacific, Santa Fe and

Southern Pacific. The proposed consolidation of the latter two railroads is now

pending before the ICC.

® In the legislative history of the Staggers Rail Act, Pub. L. No. 96-448, 94

Stat. 1895 (1980), Congress explicitly recognized these benefits from indepen-

dent water carrier competition. The Senate Committee Report explained:

Throughout the Interstate Commerce Act there are numerous provi-

sions which illustrate prior congressional recognition of the importance of

[the] rail-water competitive relationship. We believe that the benefit to

the public of rail-water competition and coordination is hundreds of

millions of dollars in freight rate savings which are passed through to the

consumer. Moreover, pressures of competition improve the efficiency of

both rail and water modes... . Practices which undermine such healthy

competition are contrary to this congressional recognition.

S. Rep. No. 470, 96th Cong., ist Sess. 30 (1979).

“In terms of its economic impact, this case is significant. Our

decision will affect the price of coal, grain, and other com-

modities for many years in the Ohio and Tennessee Valleys

and beyond.” (App. D, 45a).

The legal implications of the Court of Appeals’ decision are

equally significant. This acquisition was approved by the ICC

under the Panama Canal Act, a specialized antitrust statute

embodying a basic policy generally prohibiting common own-

ership of competing rail and water carriers. Although the pres-

ervation of rail-barge competition is the focus of the Act, the

Court of Appeals has ruled that the ICC need not consider the

impact of a rail-barge consolidation on rail-barge competition.

The Court of Appeals further ruled that in analyzing the im-

pact of the acquisition on water carriers, the acquisition may

be approved unless it will result in the complete destruction of

other water carriers. The decision of the Court of Appeals is

manifestly contrary to the purpose and language of the Act as

it has been understood and applied by the ICC and the Courts

in the seventy-four year history of the statute. Unless the deci-

sion is reversed, the intent of Congress will have been nullified

and the ICC allowed to arrogate to itself the functions of the

legislative branch.

Finally, the decision is contrary to the National Transporta-

tion Policy as it has evolved at the hand of Congress. 49 U.S.C.

§§ 10101, 10101la (1982). Congress has redefined the National

Transportation Policy from time to time, adopting differing

statutory approaches to accomplish its objectives. However,

although Congress has repeatedly revisited the matter, it has

left the Panama Canal Act’s general prohibition of common

ownership of competing rail and water carriers unchanged.

This has not been inadvertent. Thus, while Congress has

moved to encourage rail-rail consolidations, it has repeatedly

refused to change the Act and has consistently relied on the

competition provided by the independent barge carriers as an

important means of constraining railroad market power. Like-

wise, this Court and the ICC have recognized that indepen-

dent barge competition was an important factor which has

permitted the ICC to approve rail-rail consolidations. Penn-

Central Merger Cases, 389 U.S. 486, 501 (1968); CSX Corp.,

363 I.C.C. 518, 568-69, 573 (1980). Furthermore, when Con-

gress adopted the Staggers Act, it chose to rely on independent

barge competition, in lieu of regulation, as a predicate for

deregulating rail rate making. See pp. 22-23, infra.

This case presents important federal questions concerning

the Act and its relationship to the National Transportation

Policy which should be settled by the Court. '°

I. THe Court Or APPEALS ErRRED IN RULING THAT THE ICC

Was Not REQuIRED To CONSIDER THE IMPACT OF THE

ACQUISITION ON RAIL-BARGE COMPETITION

A. The Court Of Appeals’ Decision Is Contrary To The

Language, Structure, And Purpose Of The Act

The Court of Appeals fundamentally misconstrued the Act

by holding that the ICC was not required to consider the effect

of the acquisition on rail-barge competition and could limit its

analysis to competition among barge lines (App. A, 13a). The

Court of Appeals’ decision contradicts the language and inter-

nal logic of the statute, violates Congress’ intent, and disregards

the competitive realities inherent in this case.

Congress expressly prohibited railroad control and required

railroad divestiture of water carriers with which the railroad

'0 This is not the first time the Supreme Court has been asked to correct an

ICC misconstruction of a statute designed to protect water carriers from

anticompetitive and abusive practices by competing railroads. E.g., ICC v.

Mechling, 330 U.S. 567 (1947); Dixie Carriers, Inc. v. United States, 351

U.S. 56 (1956); Arrow Transportation Co. v. United States, 176 F. Supp. 411

(N.D. Ala. 1959), aff'd sub nom. State Corp. Comm'n v. Arrow Transporta-

tion Co., 361 U.S. 353 (1960). See also P. Mapes, Competition Between

Railroads and Water Carriers: A Comparison of the Regulatory and Anti-

trust Approaches and a Proposal for Reform, 39 U. Pitt. L. Rev. 653, 764-77

(1978).

does or may compete for traffic, subject only to a narrowly

defined exception. The Act is manifestly concerned with the

structural objective of precluding common ownership. Unlike

many trade regulation statutes, it does not purport to regulate

specific anticompetitive practices; rather it is designed to pro-

hibit the condition, i.e., common ownership, in which such

practices might thrive, and thereby to assure the benefits of

competition between rail and water carriers.

The exception to the general prohibition of common owner-

ship requires, inter alia, that the ICC find that the acquisition

“will still allow competition, without reduction, on the water

route in question.” (Emphasis added). The Court of Appeals

prefaced its construction of this provision by noting that

“[bJarges, not trains, operate on water routes.” (App. A, 13a).

While descriptively accurate, this simplistic observation does

not contribute to analysis of the question at hand. It disregards

the fact that the Act is triggered by a finding of rail-barge

competition, and that Congress was concerned with preserv-

ing competition between rail and water carriers for traffic

moving along parallel routes. See H.R. Rep. No. 423, 62d

Cong., 2d Sess. 12 (1912). It is illogical to conclude that Con-

gress, motivated by a desire to preserve rail-water competi-

tion, and using the existence of such competition to trigger the

statute, intended the ICC to then ignore such competition in

deciding to approve or disapprove an acquisition between

competing rail and water carriers.

The Act had its genesis in Congress’ recognition that rail-

barge competition had been destroyed as a result of common

ownership. The opening of the Panama Canal presented the

need for prompt legislative action. But Congress’ concern was

not limited to the Canal, and the Act was intentionally drafted

to encompass coastwise and inland waterway traffic. See H.R.

No. 423, 62d Cong., 2d Sess. 12 (1912). The legislation did not

occur in a vacuum. A pattern of railroads eliminating compe-

tition through acquisitions of water carriers had developed

which Congress sought both to prohibit and to remedy. See

American Waterways Operators, Inc. v. United States, 386

F.Supp. 799, 803 (D.D.C. 1974), aff'd sub nom. Water Trans-

port Ass'n v. United States, 421 U.S. 1006 (1975)."

The Court of Appeals sought to buttress its ruling that the

ICC could ignore rail-barge competition by holding, contrary

to all prior understanding of the Act, that the Act was directed

solely at the evil of predatory pricing by railroad-owned barge

lines (App. A, 7a, 10a, 13a). This interpretation of the statu-

tory purpose is manifestly incorrect; yet it is critical to the

Court’s decision because the majority in the Sixth Circuit con-

ceded that if it had misconceived the purpose of the Act, it

would be difficult to approve an acquisition of the magnitude

of the one at bar (App. A, 6a-7a).

To be sure, Congress was aware of, and sought to prevent,

several specific anticompetitive practices in which railroads

had engaged, one of which was predatory pricing. Congress

was aware of other anticompetitive practices as well: refusing

'! The House Report to the Panama Canal bill referred to the history of

railroad abuse:

The apprehension of railroad-owned vessels driving competition from

the canal may or may not be exaggerated, but it is certain that the evil,

which is only anticipated there, already exists in the coastwise trade on

both coasts, as well as on our lakes and rivers. The evil is prevalent,

recognized, and complained of. The proper function of a railroad

corporation is to operate trains on its tracks, not to occupy the waters

with ships in mock competition with itself, which in reality operate to

the extinction of all genuine competition. In answering demands for

the exclusion of railroad-owned ships from the canal. . . the committee

thinks it wise, just, and opportune to broaden the amendment so as to

serve the higher, wider, more pressing, and more necessary purposes of

excluding the railroads from operating vessels in competition with

their tracks anywhere in the coastwise trade generally or in the lake

[sic] and rivers.

H.R. Rep. No. 423, 62d Cong., 2d Sess. 12 (1912).

to grant independent water carriers access to railroad con-

trolled docks or allowing access only upon payment of unrea-

sonable fees; providing poor quality service when a shipper used

an independent water carrier; steering traffic to the railroad

controlled water carrier and away from independent water

carriers; and entering into exclusive contracts with shippers to

use only the railroad controlled water carrier. See 48 Cong.

Rec. 6594-95, 6642, 6690, 6760-61, 6929, 10372-73, 10464-66,

10556-57, 10562, 10567 (1912); American Academy of Politi-

cal and Social Science, Government Regulation of Water

Transportation— The Annals Volume LV at App. II, 253-55

(E. Johnson, ed. 1914). The legislative history reflects the fact

that railroads, using these various anticompetitive practices

(not just predatory pricing) had driven water carriers off the

waters across the country.

These practices, however, were manifestations of—and were

made possible by —the underlying evil of common ownership.

Congress’ overriding purpose was to promote the indepen-

dence of water transport competition in order to insure the

benefits of rail-water competition to shippers and the public

ultimately served. Arguments that common ownership was

more efficient and thus should be permitted subject to ICC

regulation (e.g., 48 Cong. Rec. 9234, 10463, 10561-62 (1912) )

were rejected because Congress determined that competition

from independent water carriers would effectively constrain

rail rates. For example, ICC Chairman Prouty, urging adop-

tion of the Act, stated: “While the Interstate Commerce Com-

mission might, if vested with authority, prevent to some extent

the injurious effect of allowing a common ownership over

these competing carriers, still the limitations under which we

act are such that we do not believe we could secure the same

favorable rates which would result from unrestrained com-

petition.” 48 Cong. Rec. 10463 (1912); see also 48 Cong. Rec.

9238 (1912) (Sen. Townsend: “Water transportation, if kept

free... will reduce rail rates and keep them reasonable. . .”).

The courts that have interpreted the Act have uniformly

recognized the broad purpose underlying its enactment. The

only other Court of Appeals to consider the congressional pur-

pose was the District of Columbia Circuit in its decision ap-

proving the voting trust used by CSX to hold ACL stock pend-

ing ICC review under the Act. Water Transport Association v.

ICC, 715 F.2d 581 (D.C. Cir. 1983), cert. denied, 465 U.S.

1006 (1984). The Court expressly held the Act was designed

“to preserve rail-water competition by barring railroads from

owning or controlling competing water carriers.” Id. at 587.

Other courts have similarly interpreted the congressional pur-

pose, American Waterways Operators, Inc. v. United States,

386 F. Supp. 799, 803 (D.D.C. 1974), aff'd sub. nom. Water

Transport Ass'n v. United States, 421 U.S. 1006 (1975), and

have recognized the narrow scope of the Act’s exception,

Lehigh Valley R. Co. v. United States, 234 F. 682, 698-99

(E.D. Pa. 1916), aff'd, 243 U.S. 412 (1917). No court prior to

the Sixth Circuit’s decision in this case had held or even sug-

gested that the sole purpose of the Act was merely to preclude

predatory pricing or that the effect of the acquisition on rail-

barge competition could be ignored in considering whether

there had been a reduction in competition.

The Act is a specialized antitrust statute designed to preserve

rail-barge competition by implementing the structural objec-

tive of generally prohibiting common ownership. Its focus on

structure mirrors Section 7 of the Clayton Act, 15 U.S.C.§ 18,

passed in 1914, which governs mergers and acquisitions in the

general economy. The Act, however, is more stringent than its

Clayton Act analogue—the Act prohibits a rail-barge acquisi-

tion unless the railroad can establish that the acquisition will

still allow competition “without reduction,” while Section 7 of

the Clayton Act prohibits only those acquisitions whose effect

may be “substantially to lessen competition, or tend to create a

monopoly.”

Approval of the acquisition under the Act immunizes the

transaction from antitrust scrutiny (App. A, 39a). Thus, the

Sixth Circuit's decision upholding the ICC’s sanction of the ac-

quisition, and particularly its ruling that the ICC need not

analyze rail-barge competition, means that the acquisition

will never be subjected to an analysis of competition factors.

The result is to create a gap in antitrust enforcement, contrary

to Congress’ unambiguous mandate.

B. The Court Of Appeals’ Decision Is Contrary To The

Established Interpretation And Application Of The

Act

From the very beginning, the ICC has consistently held that

the essential purpose of the Act is to promote unrestricted com-

petition between railroads and water carriers serving a par-

ticular water route by ensuring that the water carriers existed

under separate ownership free from railroad domination and

control. Lake Line Applications Under Panama Canal Act, 33

I.C.C. 699, 706, 710, 712-13 (1915) (“Congress has decreed

that there shall be a restoration of conditions which prevailed

when railroads had no interest in and exercised no control over

the boat lines plying the country’s water routes.”), aff'd sub

nom. Lehigh Valley R. Co. v. United States, 234 F. 682 (E.D.

Pa. 1916), aff'd, 243 U.S. 412 (1917); Nicholson Universal

Steamship Co., 248 1.C.C. 43, 67 (1941) (the congressional

purpose behind the Act is “to eaforce a complete separation

between railroads and competing water carriers”). The ICC’s

own precedents belie that the Act was directed solely at the

evil of predatory pricing. Missouri Pacific Railroad, 245

1.C.C. 143, 148 (1941) (Act “directed primarily to interests by

railroad comnanies in competing water lines, which was the

evil to be brought under control....”). Indeed, the ICC

stated as recently as 1983, in an earlier decision involving this

very acquisition, that the fundamental purpose behind the Act

was to preserve rail-water competition:

The debates...in the House and Senate also clearly

demonstrate that Congress had in mind relationships

potentially adversely affecting rail-water competi-

tion... . In sum, the test of whether an interest is prohib-

ited. . .is whether the relationship enables the railroad to

adversely affect competition from water carriers... .

Water Transport Association - Petition for Declaratory Order -

American Commercial Lines Voting Trust, 367 1.C.C. 559,

565-66 (1983), aff'd sub nom. Water Transport Association v.

ICC, 715 F.2d 581 (D.C. Cir. 1983), cert. denied, 465 U.S.

1006 (1984).

Consistent with its recognition of the broad legislative pur-

pose to preserve rail-water competition, the ICC has, until

now, given the exception contained in the Act a properly nar-

row construction:

For any case to be within the spirit of this proviso it is

necessary to show a situation in which are present all the

elements which prevail, ur would prevail, were the water

service independently operated. On a watercourse where

the boats and boat lines are free from domination or con-

trol by the railroads, and where they are left to survive as

their merit or the ingenuity of their owners makes possi-

ble, there will be, and always is, a healthy rivalry and

striving between such boat lines themselves and with

paralleling railroads for all suitable and available traffic.

There is competition.

Lake Line, supra, 33 1.C.C. at 712. In Lake Line, the ICC re-

quired divestiture by the railroads of the captive water carriers

because it found that under separate ownership the water car-

rier would “become a competitor of every other boat line and

of every paralleling railroad for all traffic which moves. . . or

which might move over that route. ..,” id. at 715, a situation

which could not exist under common ownership. '?

The ICC reaffirmed its strict interpretation of the Act in

lilinois Central Railroad Co.—Control—John I. Hay Co..,

317 I.C.C. 39 (1962). In that case, the ICC refused to approve

the acquisition of a water carrier by two railroads because it

found that competition would be reduced between the acquir-

ing railroads and the water carrier, whose operations were

substantially competitive to and parallel with the lines of the

railroads (317 I.C.C. at 52):

The question is whether the transaction would elimi-

nate, diminish, forestall, hinder, or frustrate competition

on the route by water in any manner and to any material

degree; as, for example: between Hay and the controlling

rail carriers; between Hay and the competing water car-

riers; or between the competitive water carriers. To

decide this question in applicants’ favor it would be

necessary to conclude that Hay’s competitive status under

the control of the railroads would compare favorably

with its present status as an independently operated

water carrier.... However, such a finding cannot be

made on this record and would be improbable in any event

in view of the directly competitive nature of the water car-

rier operations of Hay and the rail operations of the rail-

'? The ICC, implementing the congressional mandate, see note 6 supra,

specifically rejected arguments (1) that projected efficiencies and lower costs

from joint ownership provided a basis for approving the continued owner-

ship, and (2) that ICC oversight was a sufficient check to anticompetitive

conduct normally resulting from joint ownership. Id. at 711, 714-15. In the

case at bar, the ICC embraced these very arguments, and thus rejected the

views of ICC members involved with the drafting and passage of the Act. See

American Waterways Operators, Inc. v. United States, supra, 386 F. Supp.

at 804 & n.14 (views of ICC administrators who participated in drafting of

Panama Canal Act entitled to “higher significance” than current administra-

tion views.)

road applicants.... The transaction would reduce com-

petition between Hay and the railroads.

317 I.C.C. at 54 (emphasis added) .'*

The ICC in the present case expressly overruled its decision

in Hay to the extent Hay required a finding that the water car-

rier’s competitive status in relation to the acquiring railroad

after acquisition would compare favorably with its competitive

status as an independent carrier (App. E, 80a-81a). If the only

import of the overruling of Hay were the rejection of a doctrine

of automatic bar of acquisitions between competing carriers no

matter how minimal the competition between them, it would

be unremarkable. But it cannot justify refusing even to analyze

the impact of the acquisition on rail-barge competition.

Congress intended to prohibit acquisitions between rail and

barge lines unless they will not reduce competition to any

material degree. The ICC has no authority to nullify that

mandate. But that is what the ICC has done. Its decision does

not at any point analyze the impact of the acquisition on com-

petition between CSX and ACL, and the Sixth Circuit has

held that it need not do so.

Plainly, under the ICC’s prior and correct interpretation of

the Act, the acquisition of ACL by CSX would have been

disapproved. In order to approve that acquisition, the ICC

would have been required to find that the rail-barge competi-

tion between CSX and ACL would not be diminished “to any

material degree,” a finding which even the Sixth Circuit

majority agreed would be arbitrary and capricious (App. A, 5a

n.2).'4

‘3 In addition to finding there would be a reduction of competition bet-

ween Hay and the acquiring railroads, the ICC also found that the alliance

of Hay with two strong railroads would give Hay a “substantial” competitive

advantage over independent water carriers that would ultimately reduce

competition. Id. at 54-55.

‘4 In the voting trust decision by the District of Columbia Circuit, Judge

Greene in his dissenting opinion stated that CSX’s acquisition of ACL must

ultimately be disapproved by the ICC on the merits when examined under

the Panama Canal Act, “unless the ICC should at that time again apply its

own policy rather than the congressional view of the proper relationships in

the rail-water market.” Water Transport Association v. ICC, supra, 715

F.2d at 601 & n.25.

C. Congressional Action Concerning The Act Confirms

The Error Of The Court Of Appeals

Congressional action since the passage of the Panama Canal

Act has underscored its continued commitment to the preser-

vation of vigorous competition between independent water

carriers and the railroads. Since the inception of the Act

railroads and the ICC itself have repeatedly sought to alter or

even repeal the Act and on every occasion Congress has de-

clined to do so. In 1939 and 1959 railroad efforts to repeal the

Act were unsuccessful. H.R. 4862, 76th Cong., Ist Sess.

(1939); S. 1355, 86th Cong., Ist Sess. (1959). And, as recently

as 1978, the ICC’s recommendation that the Act be repealed

was not accepted by Congress. See 48 Fed. Reg. 59,608-09

(1978).'5

In 1940, Congress reenacted the Panama Canal Act as part

of the Transportation Act of 1940. No substantive changes

were made in the statute. Hay, 317 I.C.C. at 51; Missouri

Pacific Railroad, 245 1.C.C. 143, 147-48 (1941); 86 Cong.

Rec. 11270, 11766 (1940). It is weli settied that “[w]hen the

statute giving rise to the longstanding interpretation has been

re-enacted without pertinent change, the ‘congressional

failure to revise or repeal the agency’s interpretation is per-

suasive evidence that the interpretation is the one intended by

Congress.’ ” Federal Deposit Insurance Corp. v. Philadelphia

Gear Corp., 54 U.S.L.W. 4525, 4528 (U.S. May 27, 1986),

quoting NLRB v. Bell Aerospace Co., 416 U.S. 267, 274-75

(1974). One court has specifically held that the effect of the

'® Efforts to weaken the Act began shortly after its passage and have con-

tinued. In 1916 the ICC requested that the Act be amended to permit

acquisitions that might be deemed in the public interest. See 1916 ICC Ann.

Rep. pp. 63, 65. Congress, however, took no action. In 1928 Congress re-

affirmed its concern with independent competition between transportation

modes by prohibiting the sale of the government owned and operated barge

line to any rail carrier. Denison Act, Pub. L. Ne. 70-601, § 2, 47 Stat. 978,

979 (1928). In 1983, a bill to adopt a “public interest” standard in lieu of the

prohibition and narrow exception failed to gain congressional support. S. 48,

98th Cong., Ist Sess. (1983).

reenactment of the Panama Canal Act in 1940 without perti-

nent change was to approve the ICC’s longstanding inter-

pretations of the Act and to give them the “effect of law.”

American Waterways Operators, Inc. v. United States, supra,

386 F. Supp. at 804 n.17. The confirmatory effect of this

reenactment is especially great because Congress expressly

referred to and approved the ICC’s decision in Lake Line in

the course of the 1940 reenactment. 86 Cong. Rec. 11766-67

(1940). See Square D Co. v. Niagara Frontier Tariff Bureau,

Inc., 54 U.S.L.W. 4520, 4523 (U.S. May 27, 1986) (where

legislative history of statute’s reenactment reveals “clear con-

gressional awareness” of existing interpretation, the fact Con-

gress left the interpretation “undisturbed lends powerful sup-

port to [its] continued viability”).

Finally, in 1980, when Congress passed the Staggers Rail

Act deregulating the railroads, it recognized and reaffirmed

the importance of preserving competition between rail and

water carriers. See Pub. L. No. 96-448, §§ 101(a)(4), (5), 707,

94 Stat. 1897, 1965-66 (1980); S. Rep. No. 470, 96th Cong..,

Ist Sess. 30 (1979); H.R. Rep. No. 1035, 96th Cong., 2d Sess.

39 (1980); H. Conf. Rep. No. 1430, 96th Cong., 2d Sess.

142-43 (1980). Moreover, in passing the Staggers Act, Con-

gress expressly acknowledged the critical function of the

Panama Canal Act: “[I]t prohibited railroads from owning

water carriers in competition with rail routes. The Act suc-

cessfully headed off transportation companies.” H.R. Rep.

No. 1035, 96th Cong., 2d Sess. 82 (1980). Congress obviously

expected that water carriers would serve as an important

check on the deregulated railroads and that the independence

of those water carriers would be ensured by the Panama Canal

Act. Indeed, the ICC itself has repeatedly recognized and

relied on the eonstraint which water rates exert on rail

rates to justify rail mergers and rate decisions, includ-

ing the ICC’s decision approving the railroad merger forming

CSX. CSX Corp., 363 1.C.C. 518, 569, 573 (1980); 49 C.F.R.

§ 1180. 1(c)(2)(i) (1985); Investigation of Railroad Freight Rate

Structure—Grain and Grain Products, 345 1.C.C. 2977, 3010,

3020 (1979). The ICC’s decision in this case will have the in-

evitable effect of removing one of the cornerstones of deregula-

tion and permitting formation of the very transportation com-

panies Congress intended to prohibit.

D. The Court Of Appeals Disregarded The Competitive

Realities And Ignored The Practical Implications Of

Its Decision

The Court of Appeals simply disregarded the competitive

realities in this case and was blind to the practical implications

of its decision. Under the Act, approval of an acquisition is an

exception to a general prohibition, but the Court of Appeals

has transformed the exception into an open door. If the

acquisition of the nation’s largest barge line by the nation’s

second largest railroad, with which it can and does compete,

can be approved, no acquisition will be denied, and the Sixth

Circuit has essentially conceded that this is so (App. A, 10a).

Common sense dictates that Congress did not intend this

result, and analysis of the statute and legislative history

demonstrates that it certainly did not. Unless this decision is

reversed the Act will have been effectively repealed.'®

'6 Of the four Commissioners voting on the CSX/ACL transaction, two

acknowledged their approval would effectively nullify the Act:

Chairman Taylor: “This is about as tough a case as we could

have,...the biggest eastern coal carrier in the rail business, [and]

either [the] first or second [largest]... barge line, and the fact of the

matter is that if we grant this one, I don’t know how you deny any

others... .” Open Conf. Tr. 59.

Commissioner Sterrett: “If we grant this application, how do we

breathe any vitality into the Panama Canal Act at all?.. .[RJeally, as

of 11:20 this morning, any other applicant here would have to be

granted as well, presumably.” Open Conf. Tr. 58-59.

Commissioner Andre approved the acquisition because there was a “willing

buyer and a willing seller” and the “urge to merge.” Open Conf. Tr. 73.

Il. THe Court Or APPEALS ERRED IN RULING THAT COMPETI-

TION WouLpD Not BE REDUCED UNLESS WATER CARRIERS

WERE DRIVEN COMPLETELY OuT OF BUSINESS.

Even assuming the Court of Appeals is correct in holding

that the Act’s exception is concerned only with barge-barge

competition, the Court has fundamentally misconstrued the

standard for assessing the impact of an acquisition on that

competition. The Court of Appeals held that a railroad ac-

quisition of a competing water carrier does not reduce com-

petition within the meaning of the Act so long as its effect is

not “to drive other bargelines completely out of the market.”

(App. A, 14a). The Court has adopted, in effect, a standard

keyed to a destruction of the independent barge competitors of

ACL. Such a standard is patently inconsistent with the

language of the Act and is erroneous as a matter of law.

In order to approve an acquisition under the Act, the ICC

must find that it “will still allow competition, without reduc-

tion, on the water route in question.” (Emphasis added). As

the ICC itself has conceded, the standard is a stringent one.

Any lessening of competition invalidates the acquisition (App.

E, 77a). The Court of Appeals has effectively substituted the

word “destruction” for “reduction” in the language of the

Act’s exception. This interpretation of the Act simply cannot

be sustained on any basis.

CONCLUSION

The case presents important questions concerning the Act

which should be settled by this Court. If the Sixth Circuit’s

decision is allowed to stand, the Act will have been effectively

repealed by the ICC, acting in direct contravention of Con-

gress’ intent to preserve rail-barge competition. Unless this

Court intervenes, the nature of this country’s surface transpor-

tation industry will be fundamentally and irrevocably altered.

The petition for writ of certiorari should be granted.

Respectfully submitted,

RicHarD A. ZELLNER WituaM L. Patron

Mark E. Srais Counsel of Record

Smit R. BarttincHaM, III Tuomas H. Hannican, Jr.

HAHN Loeser & Parks Ropes & Gray

800 National City E. 6th Bldg. 225 Franklin Street

Cleveland, Ohio 44114 Boston, MA 02110

(617) 423-6100

A. DuNcCAN Wuirakenr, P.C.

ALAN M. WISEMAN WituiaM E. Hynan

Rosert M. Bruskin Peter A. GABAUER

Howrey & SIMON 1130 17th St., N.W.

1730 Pennsylvania Ave., N.W. Washington, D.C. 20036

Washington, D.C. 20006

NICHOLAS J. SPAETH

James F. BroMLey LYNN L. SCHLOESSER

BroMLey, Brown & WALSH Mary ANN JOHNSON

1625 Eye St., N.W. State Capital

Washington, D.C. 20006 Bismark, N. Dakota 58505

Counsel for Petitioners

June 26. 1986

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