# Opposition Brief — Crounse Corp. v. Interstate Commerce Commission > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385018_2251%3A2 ## Record - **Collection:** Supreme Court brief - **Document type:** Opposition Brief - **Published:** January 1, 1986 - **Citation:** 479 U.S. 890 ## Text : hee ae. ) af SEP 16 19F Nos. 85-2133 and 86-134 IN THE Supreme Court of the United States OCTOBER TERM, 1986 CROUNSE CORPORATION, et al., Petitioners, Vv. INTERSTATE COMMERCE COMMISSION, et al., Respondents. On Petition for a Writ of Certiorari to the United States Court of Appeals for the Sixth Circuit BRIEF FOR RESPONDENTS CSX CORPORATION AND AMERICAN COMMERCIAL LINES, INC. IN OPPOSITION MARK G. ARON R. EDEN MARTIN ALAN A. RUDNICK (Counsel of Record) CSX Corporation G. PAUL MOATES _ One James Center CARTER G. PHILLIPS Richmond, Virginia 23219 VINCENT F. PRADA MICHAEL L. HARRIS SIDLEY & AUSTIN MICHAEL A. KHOURI 1722 Eye Street, N.W. American Commercial Washington, D.C. 20006 Lines, Inc. (202) 429-4000 1701 East Market Street Jeffersonville, Indiana 47130 Counsel for Respondents CSX Corporation and American Commercial Lines, Inc. September 16, 1986 WILSON - Eres Printinc Co., Inc. - 789-0096 - WASHINGTON, D.C. 20001 QUESTIONS PRESENTED 1. Whether the Court of Appeals correctly held that the Panama Canal Act authorizes the Interstate Com- merce Commission (“ICC”) to approve a railroad’s ac- quisition of a competing barge carrier when it concludes, after a full hearing and on the basis of extensive evi- dence, that the transaction will not reduce competition on affected water routes or enable the merged carrier to increase rates or exclude competitors. 2. Whether the Court of Appeals correctly held that the ICC’s factual findings and legal conclusions relating to the competitive effects of a proposed rail-barge con- solidation were consistent with the Panama Canal Act and supported by substantial evidence. (i) TABLE OF CONTENTS Page gE | ce i Ne sicansnainnnniucndigsnonammacanece 2 EE 2 I cas sncncnenenenonsente 2 ee 4 D. The Court of Appeals Decision ......0000.......020002.... i) E. The Annual Oversight Proceeding ..................... 11 lp SS 11 SEC 22 APPENDIX A: STATEMENT REQUIRED BY gE la APPENDIX B: DECISIONS OF THE INTER- STATE COMMERCE COMMIS- SION APPROVING RAILROAD INTERESTS IN WATER CAR- RIERS PURSUANT TO 49 U.S.C. I ic sectiintonnisenciochinetisncesneniosinin' 2a (iii) iv TABLE OF AUTHORITIES | Cases: Page American Waterways Operators, Inc. v. United States, 386 F. Supp. 799 (D.D.C. 1974) (three- judge court), aff'd sub nom. Water Transport Association Vv. United States, 421 U.S. 1006 eo | RR ee ey, | eer ere 12,14 Application of Missouri Pacific Railroad Co., 245 Bn RC os 14 Application of Southern Pacific Co., 32 I1.C.C. 690 reseed Bike 14 Crounse Corp. v. ICC, No. 84-3743, et al. (6th Cir. Na sited mdaianioks 9 Finance Docket No. 30300, CSX pn Control—American Commercial Lines, Ine. Co Be een ere 11 Illinois Central Railroad Co.—Control—John I. Hay Co., ST LOG. SB (i508) ........x.................... 5,18 ICC v. Railway Labor Association, 315 U.S. 373 (NRRL Seti? Rivas. utente omen 22 Investigation of Seatrain Lines, Inc., 206 I.C.C. 328 RN It ee 2 a oS DS 14 Lake Line Applications, 33 I.C.C. 699 (1915), ap- peal dismissed sub nom. Lehigh Valley Ratiroad Co. v. United States, 234 Fed. 682 (E.D. Pa. 1916), aff'd, 243 U.S. 412 (1917) -....02 14 United States v. Lowden, 308 U.S. 225 (1939)........ 22 Water Transport Association—FPetition for a Declaratory Order, 367 I.C.C. 559, aff’d sub nom. Water Transport Association v. ICC, 715 F.2d 581 (D.C. Cir. 1983), cert. denied, 465 U.S. 1006 I a ads 3 Water Transport Association. v. ICC, 715 F.2d 581 (D.C. Cir. 1983), cert. denied, 465 U.S. 1006 (ERR RR AR EL, A Os OTE ee RE: 3, 9, 12, 13, 14 Statutes and Regulations: Panama Canal Act of 1912, Ch. 390, 37 Stat. 560 (1912) (presently codified at 49 U.S.C. MINI scaccciibsalsicactonidgussliicclol't, talbdlacaeticieiaesesclgcbiaainiacapibakaineel passim Vv TABLE OF AUTHORITIES—Continued Page Transportation Act of 1940, Pub. L. No. 785, 54 kaa ae Renee ene nro ECE 13 8) TIRES RONEN eae ae DRE 21 I ie caeiee 22 Oe Te IN cece acs cconchenententncen 2, 4, 8, 10, 21, 22 SE dE Re NON TE ETS Ee eR 9 ee RES Rect ere IT Le eae 3 Legislative Materials: H.R. Rep. No. 423, 62d Cong., 2d Sess. (1912) -......... 13 BE le es I FEI cpiccccodcccnsanstctccsicennisieconssoicneasaane 13 cscs cachenccdegdeeceneinen 14 Fe” SF: |) ene nee eee 14 GD Ce, TE, Be CPD ance trekeneneeceenes 14 Be STs I OD iciiciiccnneckdecenccicinscatcncenosoces 14 Ge GE, TR, TIE CID ences eciisenenisinceceeencccasccenvesacs 14 a i ls Ie I i oaieic nce chcnsdicecsncesnncecoemnn 14 ee Ss is UN RID eckcekccecssmstitessssvinocniinnoniantnne 14 IN THE Suprenve Court of the United States OCTOBER TERM, 1986 Nos. 85-2133 and 86-134 CROUNSE CORPORATION, et al., Petitioners, We INTERSTATE COMMERCE COMMISSION, et al., Respondents. On Petition for a Writ of Certiorari to the United States Court of Appeals for the Sixth Circuit BRIEF FOR RESPONDENTS CSX CORPORATION AND AMERICAN COMMERCIAL LINES, INC. IN OPPOSITION CSX Corporation (“CSX”) and American Commercial Lines, Inc. (“ACL”) oppose the petition of Crounse Cor- poration, et al. (in No. 85-2133) and the cross-petition of Patrick W. Simmons (in No. 86-134) for a writ of certiorari to review the judgment of the United States Court of Appeals for the Sixth Circuit in this case.? 1In accordance with Rule 28.1 of the Rules of this Court, the subsidiaries and affiliates of CSX and ACL are set forth at page la of the Appendix hereto. 9 _ STATEMENT A. The Panama Canal Act The Panama Canal Act of 1912, Ch. 390, 37 Stat. 560, 566 (1912) (presently codified at 49 U.S.C. § 11321 and referred to hereinafter as the “Act”) imposes certain restrictions on railroad ownership of water carriers. Sec- tion 11321(a) provides generally that a railroad may not own an interest in or control a “water common carrier” with which the railroad “does or may compete for traf- fic.” Section 11321(b), however, expressly authorizes the ICC to approve such a rail interest in a competing water carrier when it finds, after a full hearing, that the com- mon ownership (1) “will still allow competition, without reduction, on the water route in question,” and (2) will still allow the water carrier “to be operated in the public interest advantageously to interstate commerce.” * The Act delegates to the ICC exclusive authority to decide “questions of fact related to competition.” B. Initial Proceedings This case involves CSX’s acquisition of ACL as part of CSX’s acquisition in 1983 of Texas Gas Resources Corporation (“Texas Gas’), ACL’s parent company. CSX is a holding company that operates a railroad sys- tem, while ACL controls American Commercial Barge Line Company (“ACBL”), a certificated barge carrier. Because the transaction would bring under common con- trol a railroad and a water carrier, it required an ICC determination under the Panama Canal Act.® 2The ICC does not have authority under Section 11321(b) to approve a railroad’s interest in a competing water carrier if it provides service through the Panama Canal. This absolute prohibi- tion is not involved in the instant case. % Because ACBL is an ICC-regulated water carrier, CSX’s acquisi- tion of ACL also required ICC approval under 49 U.S.C. § 11344(d). Under this provision the ICC is required to approve a transaction involving the merger, consolidation or control of at least two regu- 3 In order to prevent CSX from exercising control of ACL prior to ICC review of the consolidation, CSX and Texas Gas agreed to deposit the stock of ACL in an in- dependent voting trust pursuant to ICC regulations. 49 C.F.R. § 1013. The ICC rejected a challenge brought by the Water Transport Association (a petitioner herein) to the voting trust arrangement.* In sustaining the ICC’s voting trust decision, the D.C. Circuit examined at length the legislative history and purposes of the Act. The court rejected the claim that the Act embodies a strict prohibition of rail-barge combinations, and specif- ically held that “Congress clearly expected rail carriers to be able, with ICC approval, to acquire competing water carriers.” 715 F.2d at 590. On November 4, 1983, CSX and ACL filed a joint application seeking ICC approval of the transaction. The ten-volume application presented detailed evidence Je n- onstrating that the proposed CSX/ACL consolidation would offer many significant operating and marketing benefits and would have no adverse effects on competition. The case was assigned to an administrative law judge, who held lengthy evidentiary hearings on the application. In all, the proceeding generated an extensive 15,000-page record, including over 200 verified statements of wit- nesses, 5,800 transcript pages and hundreds of written comments and letters by interested parties. In the course of these proceedings, the CSX/ACL application attracted lated carriers (other than two class I railroads) unless the ICC finds that (1) “as a result of the transaction, there is likely to be a substantial lessening of competition, creation of a monopoly, or restraint of trade in freight surface transportation in any region of the United States,” and (2) “the anticompetitive effects of the transaction outweigh the public interest in meeting significant transportation needs.” 4 Water Transport Association—Petition for a Declaratory Or- der, 367 I.C.C. 559, aff'd sub nom. Water Transport Association v. ICC, 715 F.2d 581 (D.C. Cir. 1983), cert. denied, 465 U.S. 1006 (1984). 4 the support of over 260 private and public organizations (Pet. App. 63a-66a, 160a-162a). In addition, the pro- posed transaction was actively supported by the U.S. Department of Transportation.° C. The ICC’s Final Decision The ICC unanimously approved the CSX/ACL consoli- dation in a decision served September 7, 1984 (Pet. App. 47a-210a). In a lengthy opinion, the ICC concluded that the transaction satisfied the requirements of the Act and of Section 11344(d) because it would result in no harm to, or reduction in, competition and would yield signifi- cant benefits to the shipping public. 1. Section 11321(b): Competition. The ICC first ad- dressed the competition standard of the Panama Canal Act. The ICC found that, although CSX and ACL com- peted with one another sufficiently to bring the transac- tion within the provisions of Section 11321(a) (Pet. App. 91a-93a),° the consolidation of the two carriers would not violate the Act because, under Section 11321(b), the transaction would result in no reduction in competi- tion “on the water route in question” (Pet. App. 93a- 121la). The ICC determined that the appropriate inquiry un- der the “competition, without reduction” standard in Sec- * The U.S. Department of Justice, which also participated in the ICC proceedings, took no position with respect to the merits of the specific CSX/ACL transaction but proposed in its written com- ments the framework ultimately adopted by the ICC for analyzing the competition issues under the Act (Pet. App. 70a). * The ICC based its finding that CSX and ACL competed on the fact that the two carriers could physically serve a number of com- mon points, and on evidence that the two carriers had competed head-to-head for several specific movements. The ICC found, how- ever, that this competition between CSX ind ACL was “modest,” due to the significant cost advantage that bargelines (including ACL) enjoy over railroads for traffic originating or terminating within an area stretching from 25 to 200 miles inland from the navigable rivers (Pet. App. 102a). 5 tion 11321(b) was whether the CSX/ACL consolidation would impair competition by creating or enhancing op- portunities for the merged entity to exercise market power, defined as the ability to raise rates above com- petitive levels or to exclude competitors (Pet. App. 86a- 87a). The ICC concluded that this analytical approach, which was endorsed by the Department of Justice (Pet. App. 175a-177a), fully vindicated the policy of the Act, which was designed “to protect shippers from actions that result in non-competitive prices for transportation services, not to protect individual barge competitors” (Pet. App. 94a).? Applying this analytical framework, the ICC decided to “focus” on barge transportation in assessing the poten- tial competitive effects of the CSX/ACL consolidation (Pet. App. 89a). The ICC found that this focus was required by the Act, which instructs the ICC to examine the competitive effects of rail-barge combinations “on the water route in question,” and was also supported by the evidence, which revealed that competition between rail- roads and barges was generally limited due to the higher cost structure of the railroads (Pet. App. 87a-88a). Turning to an examination of the competitive struc- ture of the inland waterways market served by ACL, the ICC concluded that “the record amply demonstrates that the barge industry today is highly competitive” (Pet. App. 94a). The ICC noted that “literally hundreds” of independent firms operate on the inland waterways served by ACL, and no single firm accounted for more than seven percent of the barge traffic (Pet. App. 94a, 97a). ACL accounted for a mere 6.54 percent of the tonnage carried by inland barge carriers in 1981 (Pet. 7 The ICC disavowed language in one of its earlier decisions which suggested that the pre. 2rvation of competition in a particular mar- ket was synonymous with the preservation of the position of in- dividual competitors within such markets (Pet. App. 80a-8la). See Illinois Central Railroad Co.—Control—John I. Hay Co., 317 1.C.C. 39, 52 (1962). 6 App. 97a-98a). Based on these data and other measures of market concentration,* the ICC found that the barge industry was unconcentrated and “highly competitive” (Pet. App. 97a, 101a). In addition, the ICC found that the barge industry was characterized by ease of entry and exit, making potential competition an effective ad- ditional constraint on carrier action (Pet. App. 107a- 115a). No carrier, including ACL, could exercise market power given the intensity of existing and potential competition. The ICC concluded, moreover, that the CSX/ACL con- solidation would not reduce this intense competition or enable the combined CSX/ACL to exercise market power by raising rates or excluding competitors. In its analysis, the ICC addressed the two ways in which opponents of the CSX/ACL consolidation claimed that the transaction could harm competition (Pet. App. 10la). First, oppo- nents argued that, by eliminating ACL as an independent competitor of CSX, the merger could increase market concentration where the two carriers had previously com- peted. Second, opponents claimed that the consolidation might enable CSX/ACL to engage in predatory practices having the effect of eliminating other independent barge competitors, thereby permitting CSX/ACL to charge higher-than-competitive rates. The ICC fully examined each of these potent’ 1] adverse effects and found that nei- ther would occur. First, the ICC found that the elimination of ACL as an independent competitor of CSX (the reduction by one in the large number of competitors) would not reduce competition (Pet. App. 102a-103a). Although CSX and 8 The ICC employed the Herfindahl-Hirschman Index, a measure of market concentration used by the Department of Justice to evaluate the potential competitive effects of corporate mergers. The ICC found that the Index for the barge industry was 172, far below the Justice Department’s threshold of 1000 for mergers that pose even the possibility of anticompetitive effects (Pet. App. 99a). 7 ACL competed with one another to a limited extent, the ICC determined that the small increase in concentration resulting from their consolidation would not affect the vitality of competition because the transaction would “still leave hundreds of firms as active competitors,” well above the number needed to preserve effective competition and preclude the exercise of market power (Pet. App. 103a). Second, the ICC found that a combined CSX/ACL would not be able successfully to undertake predatory practices to eliminate independent barge competitors (Pet. App. 103a-120a). The ICC concluded that CSX/ ACL would have neither the ability nor the incentive to divert CSX-originated rail traffic from independent barge carriers to ACL unless CSX/ACL could offer shippers better service and lower rates (Pet. App. 104a-105a, 116a-119a). The ICC noted that the transaction could result in some efficiency-related traffic diversions, but such diversions would be small and in any event would not impair the ability of independent bargelines to op- erate effectively (Pet. App. 117a-119a).° The ICC also found that the competitive nature of the barge industry would prevent CSX and ACL from successfully undertak- ing a strategy of predatory pricing (Pet. App. 106a- 115a). The ICC explained that even if a combined CSX/ ACL were to reduce its rates below competitive levels in an attempt to drive competitors out of business, it could never successfully raise its rates to monopoly levels and recoup its losses because independent bargelines would always be ready and able to enter the market and prevent rates from rising above competitive levels..° The ICC also * Thus, petitioners’ statement that the ICC found that CSX/ACL would divert traffic from independent barge carriers is seriously misleading (Pet. 6). As the ICC made clear, such diversions could occur only if CSX/ACL were able to offer shippers better service and cheaper rates than its competitors—a result that is entirely pro-competitive and in the public interest (Pet. App. 119a). 10 In this connection the ICC found that the inland barge industry was characterized by relative ease of entry and exit, low economies 8 examined and rejected claims that a merged CSX/ACL could successfully pursue various types of rate manipula- tion designed to eliminate barge competitors (Pet. App. 115a-119a, 190a). In sum, the ICC made reasoned findings that the CSX/ ACL consolidation would not result in any reduction in competition “on the water route in question,” would not enable the merged system to exercise market power by raising rates above competitive levels and would not im- pair the ability of independent bargelines to compete. 2. Section 11321(b): Public Advantage. The ICC also concluded that the proposed CSX/ACL consolidation satis- fied the “public advantage” standard of Section 11321(b) (Pet. App. 120a-121a). The ICC observed that this test was “closely related” to the competition standard because the preservation of effective barge competition, and the rate and service advantages that such competition fosters, further the public interest and promote interstate com- merce. In any event, the ICC also found that the trans- action would affirmatively benefit the shipping public by enabling the merged carrier to provide expanded single- system service to shippers, achieve cost savings and effi- ciencies and initiate innovative marketing strategies, all of which would be pro-competitive (Pet. App. 121a, 143a- 145a) .™ 3. Oversight and Reporting Conditions. Even though the ICC expressed confidence that its “economic analyses ... are accurate” (Pet. App. 120a), and that the trans- of scale and high mobility and substitutability of equipment—con- ditions which would render attempted predatory pricing and other anticompetitive practices futile (Pet. App. 107a-115a). 11 The ICC also approved the proposed CSX/ACL consolidation under Section 11344(d). Citing the intense competition facing CSX and ACL both before and after their combination, the ICC concluded that the transaction would not substantially lessen com- petition, create a monopoly or restrain trade in freight surface transportation in any region of the United States (Pet. App. 122a-127a). 9 action would have no anticompetitive consequences, it took the extra precaution of imposing certain carefully tailored conditions, including reporting requirements and annual oversight hearings for five years, to permit the ICC to monitor the effects of the consolidation and to ailow in- terested parties to present any evidence of possible anti- competitive effects (Pet. App. 120a, 145a-147a, 208a- 210a). The ICC expressly retained jurisdiction “to take corrective action if adverse effects should materialize” (Pet. App. 120a) .¥* D. The Court of Appeals Decision A divided court of appeals affirmed the ICC’s decision (Pet. App. la-4la).%* The court found that the ICC’s approval of the CSX/ACL consolidation was based on a correct construction of the applicable statutes and fully supported by the record evidence. Consistent with the decision of the D.C. Circuit in Water Transport Association, 715 F.2d 581, the court be- low rejected petitioners’ claim that the Panama Canal Act embodies a “strict” prohibition of railroad owner- ship of barge carriers subject only to the “narrowest” of exceptions (Pet. App. 5a). Rather, the court held that the Act was intended to authorize the ICC to approve rail- barge common ownership when it finds that such owner- ship would not reduce competition (Pet. App. 6a-1la). 12 The ICC also imposed standard labor protection conditions in favor of CSX rail employees who might be adversely affected by the consolidation (Pet. App. 149a-15la). See 49 U.S.C. § 11347. Consistent with longstanding precedent, however, the ICC declined to extend such protection to employees of rail carriers not involved in the transaction (Pet. App. 149a-150a). 13 The CSX/ACL consolidation was consummated on October 11, 1984, when another panel of the court of appeals, following briefing and oral argument, declined to issue a stay of the ICC’s decision pending judicial review. Crounse Corp. Vv. ICC, No. 84-3743, et al. (6th Cir. October 11, 1984). Since that time ACL has been op- erated by CSX as a separate constituent unit of the CSX trans- portation network as authorized by the ICC’s order. 10 The court of appeals also rejected petitioners’ specific claims concerning the ICC’s interpretation and applica- tion of the Act in the circumstances of this case. The court held that it was permissible for the ICC to analyze the effects of the CSX/ACL consolidation on competition on “the water route in question” by focusing on barge competition, and it found no merit to petitioners’ conten- tion that the elimination of competition between CSX and ACL—“rail-barge competition”—itself required disap- proval of the application (Pet. App. 1la-13a). The court also rejected petitioners’ argument that the ICC improp- erly construed the Act to require a showing that a pro- posed rail-barge consolidation would actually eliminate barge competitors before it would be found to run afoul of the Act; the court held instead that the Act requires a showing that a particular consolidation would result in an actual reduction in competition through the elimina- tion of independent barge carriers, and not “simply harm to particular bargelines due to intensified competition” (Pet. App. 14a). Finally, the court of appeals denied petitioners’ various challenges to the ICC’s determinations of fact relating to the competitive effects of the CSX/ACL consolidation (Pet. App. 15a-21la). Exercising appropriate deference to the expert agency’s resolution of conflicting evidence, the court held that the ICC’s findings were “based on a reasoned and justifiable view of the evidence of record” (Pet. App. 21a). 14 The court of appeals similarly upheld the ICC’s approval of the transaction under Section 11344(d), and addressed several procedural issues (Pet. App. 22a-3la). In particular, the court sustained the ICC’s decision not to impose labor protection condi- tions for the benefit of non-CSX rail employees, and held that Sec- tion 11344(d) does not require the ICC to consider the interests of such employees in approving the transaction (Pet. App. 24a- 26a). 15 Judge Timbers dissented from the court of appeals’ decision. Although agreeing with the majority that the Act does not estab- 11 E. The Annual Oversight Proceeding Pursuant to the oversight and reporting conditions im- posed as part of its decision approving the CSX/ACL consolidation, the ICC recently completed its first formal proceeding to examine the competitive effects of the trans- action and CSX/ACL’s compliance with the Act. The ICC had invited interested members of the public to sub- mit comments on these issues. On the basis of these sub- missions, which included dozens of comments by shippers supporting the services offered by CSX/ACL (and not a single shipper comment in opposition), the ICC recently issued a report unanimously finding that the CSX/ACL consolidation has not diminished competition but in fact “has increased beneficial competition by allowing CSX and ACL to introduce new intermodal price and service options.” ** The ICC therefore concluded that there was no need to reopen the CSX/ACL consolidation proceeding. ARGUMENT The decision of the court of appeals is correct, does not conflict with any other decision by this Court or any other court, and raises no substantial question of federal law. Accordingly, review by this Court is not warranted. 1. At issue in this case is the proper interpretation and application of the Panama Canal Act of 1912, which lish an absolute prohibition of railroad ownership of bargelines, Judge Timbers believed that the ICC had misapplied the Act in the particular context of the CSX/ACL transaction (Pet. App. 33a). In particular, Judge Timbers disagreed with the ICC’s de- cision to focus its competitive analysis of the transaction on barge competition and, based on his own reweighing of the evidence and assessment of the record before the ICC, disagreed with the ICC’s finding that the CSX/ACL consolidation would not reduce competi- tion or result in the elimination of independent barge carriers. 16 Finance Docket No. 30300, CSX Corporation—Control—Ameri- can Commercial Lines, Inc., at 2 (served August 29, 1986). A copy of the oversight decision has been lodged with the clerk of this Court. 12 imposes certain restrictions on rail-barge common owner- ship. Since its enactment, the Act has seldom been inter- preted by any court. Indeed, during the past 60 years only one other court of appeals has construed this rela- tively obscure statute, and its decision arose out of an interlocutory proceeding involving the same transaction at issue in the instant case. Water Transport Associa- tion, 715 F.2d 581 (sustaining CSX/ACL voting trust against challenge based on Act). The decision below is fully consistent with this earlier decision, as the court of appeals noted (Pet. App. 10a).** 2. Review is also unwarranted because the decision below raises no substantial federal question warranting plenary review by this Court. Running throughout all of petitioners’ arguments before this Court is the claim that the Panama Canal Act embodies a “strict” prohibition of railroad ownership of barge carriers, subject only to the narrowest of exceptions (Pet. 7, 13, 17). The court of appeals’ rejection of this construction of the Act is demon- strably correct (Pet. App. 6a-lla). Congress in Section 11321(b) specifically authorized the ICC to allow rail- roads to own interests in water carriers with which they compete, if the ICC found that such interests pose no risks of the anticompetitive harms at which the Act was aimed. Thus, the plain language of the Act refutes peti- tioners’ suggestion that the Act embodies a “strict” pro- hibition of rail-barge interests."* In Water Transport As- 17 The only other judicial decision that has interpreted the sub- stantive provisions of the Act in the past six decades upheld an ICC decision authorizing railroad ownership of a barge carrier. American Waterways Operators, Inc. v. United States, 386 F. Supp. 799 (D.D.C. 1974) (three-judge court), aff'd sub nom. Water Transport Association v. United States, 421 U.S. 1006 (1975) (per curiam). 18 Moreover, the plain language of the Act also demonstrates that Congress knew how to impose a “strict” prohibition of rail- barge common ownership when it wanted to do so. As previously noted (note 2, supra), the Act establishes an absolute prohibition 13 sociation, 715 F.2d at 590, the D.C. Circuit, on the basis of a thorough review of the Act’s history, held that “Con- gress clearly expected rail carriers to be able, with ICC approval, to acquire competing water carriers.” *° The court of appeals’ holding that the Act authorizes the ICC to approve rail-barge acquisitions that will not harm or reduce competition is also supported by the pur- poses and history of the statute. As the court of appeals explained, the Act was passed in 1912 in response to concerns that some railroads were using their control of water carriers to drive out independent water carriers and divert traffic to their parallel rail lines, thereby de- priving the public of the rate and service advantages of water transportation (Pet. App. 7a). Congress was par- ticularly concerned with predatory pricing— the practice by which some railroads sought to eliminate competition from the then-embryonic and struggling barge industry by acquiring a competing water carrier, reducing its rates below cost in order to drive out independent water carriers, and then raising the rates of the railroad-owned water carrier to supracompetitive levels in order to pro- tect traffic on the railroad’s higher rated rail lines.” of railroad ownership of competing water carriers if (and only if) they provide service through the Panama Canal. For water carriers (such as ACL) that do not provide service through the Canal, Congress intended no such absolute ban on railroad ownership but instead expressly authorized the ICC to approve such joint rail- barge interests. 19 Contrary to petitioners’ suggestion (Pet. 21), the Transporta- tion Act of 1940, Pub. L. No. 785, 54 Stat. 898 (1940), reaffirmed the limited scope of the Act’s prohibition of rail-barge interests by amending the Act to make clear that the ICC has authority under Section 11321(b) to approve railroad acquisitions of competing water carriers and not simply authority to continue rail-barge interests that preceded the Act. See Pet. App. 10a; Water Trans- port Association, 715 F.2d at 589-90. 20 As the court below noted, the history of the Act is “replete” with references to this practice (Pet. App. 7a). See, e.g., H.R. Rep. No. 423, 62d Cong., 2d Sess. 12 (1912); 48 Cong. Rec. 6,591, 14 Petitioners suggest that the court of appeals erred in focusing on predatory pricing because some legislators in 1942 cited other types of predatory practices by rail- roads (Pet. 14). The relevant materials clearly show, however, that predatory pricing was Congress’ dominant concern. In any event, petitioners’ assertion misses the mark because the court of appeals’ point was simply that the Act was aimed at specific anticompetitive practices and was not intended as a strict prohibition of all rail- barge interests. The court of appeals’ interpretation of the Act is fur- ther supported by the ICC’s decisions applying the 1912 statute. Those decisions, as the court below observed (Pet. App. 9a-10a), have consistently given effect to Sec- tion 11321(b) and contradict the notion that the Act mandates strict separation of railroads and bargelines.” Thus, the court of appeals in this case correctly held that the Panama Canal Act does not embody a strict pro- hibition of rail-barge common ownership, but instead au- thorizes the ICC to approve such common ownership 6,715, 9,238, 10,283, 10,873, 10,461, 10,562, 10,575. See also Water Transport Association, 715 F.2d at 587, 596; American Waterways Operators, 386 F. Supp. at 803; Lake Line Applications, 33 I.C.C. 699, 7*S (1915), appeal dismissed sub nom. Lehigh Valley Railroad Co. v. United States, 234 Fed. 682 (E.D. Pa. 1916), aff’d, 242 U.S. 412 (1917). 21 Indeed, the ICC has exercised its authority under Section 11321(b) to approve rail interests in competing water carriers in at least 34 separate cases since 1912. These decisions are listed at pages 2a-4a of the appendix hereto. Many of these decisions involved railroad interests in substantial water carrier operations. See, e.g., Application of Missouri Pacific Railroad Co., 245 I.C.C. 143 (1941) (water service between New Jersey and Texas); /n- vestigation of Seatrain Lines, Inc., 206 I.C.C. 328 (1935) (water service between New Jersey and New Orleans); Application of Southern Pacific Co., 32 1.C.C. 690 (1915) (water service between San Francisco and Panama). Although most of the cases involved railroad applications to continue their ownership of water carriers which pre-dated the Act, the standard applied by the ICC was the same as that applied to the CSX/ACL transaction (Pet. App. 79a). 15 when, on the facts before it, it concludes that no reduc- tion in competition on affected water routes will result.” This holding, which is supported by the language, his- tory and judicial interpretation of the Act, plainly does not warrant reexamination by this Court. 3. In addition to their broad but erroneous contention that the Panama Canal Act imposes a strict prohibition of railroad ownership of bargelines, petitioners allege that the ICC made inadequate findings in the specific fac- tual context of the CSX/ACL consolidation and that the court of appeals erroneously sanctioned those findings. Petitioners’ claims—which are wholly dependent upon the particular factual record in this case—raise no important or recurring question of federal law and, in any event, are without merit. a. Contrary to petitioners’ sweeping assertions that the ICC and court of appeals decisions approving the CSX/ACL consolidation will radically transform the structure of surface transportation competition (Pet. 9-11), the actual effects of the transaction and the deci- sions approving it have been and will be quite modest. The transaction involves a single railroad and a barge carrier which accounts for less than seven percent of the traffic carried on the affected water routes (Pet. App. 97a-98a).**> The ICC found, and petitioners do not dis- pute, that the CSX/ACL consolidation will still leave “literally hundreds” of independent barge carriers pro- viding competitive water transportation services on the inland waterways served by ACL (Pet. App. 94a). In 22 This interpretation does not, as petitioners suggest (Pet. 23), render the Act meaningless. The Act itself requires the ICC to consider rail-barge interests on a case-by-case basis, a flexibility which the court of appeals correctly noted was deliberate (Pet. App. 10a-1la). 23 ACL’s operating revenues in 1982 (the most recent year for which the ICC had financial data) were only $193.1 million (Pet. App. 206a), a relatively modest amount by United States industria! standards. 16 addition, the ICC found that potential competition from new entrants would further constrain the actions of CSX/ACL. Moreover, the ICC determined, after a thorough review of the evidence, that the CSX/ACL con- solidation would not harm or reduce competition in any way and would not result in the elimination of competing barge carriers (Pet. App. 94a-120a). These factual find- ings are fully supported by the record, and the court of appeals therefore properly sustained them.” b. Petitioners contend that the court of appeals erred by upholding the ICC’s decision to “focus” (Pet. App. 89a) its competitive analysis of the CSX/ACL consolida- tion on the barge industry and on barge competition (Pet. 12-23). As the-court of appeals explained in reject- ing this claim, however, the plain language of the Act directs the ICC to consider whether the transaction will reduce competition “on the water route in question” (emphasis supplied), and “[b]arges, not trains, operate on water routes” (Pet. App. lla-13a). The ICC’s focus on barge competition in its evaluation of the competitive effects of the CSX/ACL consolidation also furthers the purposes of the Act. As explained above, Congress in 1912 was concerned with possible railroad domination of barge carriers and with the exploitation of railroad- owned vessels to drive independent water carriers out of business. See pages 13-14, supra; Pet. App. 18a; Pet. 15. Because the Act was thus clearly aimed at preserv- ing barge competition, it was reasonable for the ICC to focus its competitive analysis of the CSX/ACL consoli- dation on the barge industry. Moreover, the evidence and arguments presented to the ICC in this case also support the Commission’s deci- 24 Stripped to its essentials, the opinion of the dissenting judge in this case represents a simple disagreement with the ICC’s findings. The Act entrusts the determination of “facts relating to competition” to the ICC, however, not to reviewing courts. 17 sion to concentrate its competitive analysis under Sec- tion 11321(b) on barge competition.» No party, least of all petitioners, argued before the ICC that the CSX/ ACL consolidation would have an adverse impact on railroads or impair the ability of independent rail car- riers to compete. Instead, opponents of the transaction (including petitioners) alleged that the consolidation would reduce competition “on the water route in ques- tion” as a result of either (1) the elimination of ACL as an independent competitor of CSX or (2) the alleged ability of the combined CSX/ACL system to eliminate its independent barge competitors (see Pet. App. 187a- 191a). The ICC carefully examined both of these claims and found that neither one had merit, given the inten- sity of existing and potential competition on the inland waterways (Pet. App. 101a-120a). The court of appeals therefore properly sustained the ICC’s decision to “focus” on the barge industry, and petitioners’ continued asser- tions that the ICC’s findings are inadequate are entirely without merit. c. With respect to the first theory raised by opponents of the CSX/ACL consolidation—that the transaction would reduce competition on “the water route in ques- tion” by eliminating competition between CSX and ACL (whick petitioners characterize as “rail-barge competi- tion”)—petitioners claim that the ICC “ignored” the impact of the elimination of ACL as an independent com- petitor of CSX and that, had this impact been considered, the Act would have required disapproval of the CSX/ ACL consolidation (Pet. 20). Petitioners’ claim mis- states the ICC and court of appeals decisions and rests on a misguided reading of the Act. *> For example, the ICC determined that the relevant product market for purposes of competitive analysis was barge competition (Pet. App. 87a-90a). The court of appeals, noting that market defi- nition is a factual question to which courts owe the agency “the greatest deference,” sustained this finding (Pet. App. 16a-17a). Tr 18 The ICC did consider the loss of competition between CSX and ACL as part of its examination of the impact of the CSX/ACL consolidation on barge competition. The ICC explained that because CSX and ACL competed with . one another for some traffic, the transaction would neces- | sarily eliminate this competition and reduce by one the number of competitors in the areas where CSX and ACL competed. The ICC concluded, however, that “the mere consolidation of ACL and CSX will not reduce the num- ber of competitors sufficiently to create a reduction in | competition on the water route in question” because hun- . dreds of independent competitors would remain and pre- vent any exercise of market power by the merged CSX/ ACL system (Pet. App. 102a-103a) .” Petitioners’ claim that the ICC ignored rail-barge com- petition appears to rest on the proposition that the elimi- nation of the direct competition between the two con- solidating carriers itself required, as a matter of law, the disapproval of the merger under Section 11321(b) (Pet. 20). The ICC, however, correctly rejected this view of the statute, which it logically concluded would render Section 11321(b) “a nullity” (Pet. App. 188a).*7 If the elimination of competition between two consolidating car- riers were sufficient to require a finding of a reduction of competition under Section 11321(b), then no rail- —— 26 Petitioners thus fundamentally misstate the ICC’s decision when they assert that the ICC “does not at any point analyze the impact of the acquisition on competition between CSX and ACL” (Pet. 20). 27 Petitioners’ argument is based entirely on language from the ICC’s 1962 decision in John I. Hay Co., 317 1.C.C. 39 (Pet. 19-21). In rejecting petitioners’ interpretation of the Act, however, the ICC expressly overruled its earlier decision to the extent that it suggested that a reduction in competition between the merging railroad and water carrier itself required disapproval of the trans- action (Pet. App. 80a-81a). Apart from the language in the John 1. Hay Co. decision cited by petitioners, no other ICC decision sup- ports petitioners’ radical interpretation of the Act. 19 barge consolidation could ever be approved under that section because all such transactions by definition in- volve two carriers that the ICC has found under Section 11321(a) to be direct competitors for traffic. Because all rail-barge mergers necessarily eliminate the direct com- petition formerly existing between those two carriers, petitioners’ view of the Act would effectively nullify Sec- tion 11321(b), a result clearly contrary to Congress’ express intent to authorize some rail-barge mergers. The court of appeals, like the ICC, ruled that neither the degree of competition between CSX and ACL, nor the mere fact that the proposed transaction would eliminate this competition, was dispositive with respect to the ap- proval of the consolidation under the provisions of Sec- tion 11821(b). The court observed that “[a] reduction in competition, even a significant one, between a railroad and a bargeline does not automatically portend a reduc- tion in competition among the various bargelines” (Pet. App. 13a). Thus, consistent with the focus of the Act on preserving barge competition and not individual com- petitors (Pet. App. 80a-81a, 94a), the court of appeals reasonably held that what matters is not the reduction by one in the number of competitors but the effect of that reduction on barye competition. In this case, more- over, the ICC found that the elimination of ACL as an independent competitor of CSX would not reduce com- petition on the water route in question. Petitioners nonetheless place heavy reliance on a foot- note in the court of appeals’ decision, which they read as a concession by the court that an examination of rail- barge competition between CSX and ACL would have required disapproval of the CSX/ACL consolidation (Pet. 20; Pet. App. 5a n.2). That reliance is misplaced. The court of appeals simply noted that the ICC could not plausibly have based its Section 1132i(b) determination of no reduction in competition solely on a finding of “minimal” competition between CSX and ACL. As the 20 court recognized, however, the ICC did no such thing, but instead went on to examine in greater detail the effect of the transaction (and the elimination of compe- tition between CSX and ACL) on barge competition. Thus, there is no merit to petitioners’ claim that the elimination of competition between CSX and ACL re- quired disapproval of the consolidation under the Act. To the extent that petitioners’ argument rests on the proposition that the loss of competition between any two merging carriers requires an adverse finding regardless of the effect on barge competition generally, petitioners’ claim is based on a tortured reading of the Act properly rejected by the ICC and court of appeals. To the extent that petitioners are instead contesting the ICC’s findings with respect to the effects on barge competition of the loss of competition between these carriers, CSX and ACL, their claim represents nothing more than a dis- agreement with the ICC’s factual findings, which were upheld by the court of appeals. In either case, petition- ers’ claims do not warrant this Court’s attention, d. Petitioners also object to the ICC and court of appeals decisions with respect to the second theory ad- vanced by opponents of the CSX/ACL consolidation— that the transaction would enable a merged CSX/ACL to engage in predatory and other anticompetitive practices designed to eliminate its independent barge competitors. Specifically, petitioners argue that the court of appeals erroneously interpreted the Panama Canal Act to allow the ICC to approve the CSX/ACL consolidation so long as it would not drive independent barge carriers out of the market (Pet. 24). What petitioners ignore is that the Act was intended to preserve barge competition and not to insulate indi- vidual water carriers from the burden of competing with railroad-owned barges. The ICC and court 0° appeals therefore reasonably construed the Act to require dis- 21 approval of the rail-barge consolidation only when the transaction would result in actual harm to competition, and not when the transaction simply causes particular competitors to experience the routine discomforts associ- ated with intensified competition (Pet. App. 14a). The ICC found in this case that the CSX/ACL consolidation would not injure competition and, in fact, would result in more efficient and competitive transportation services (Pet. App. 148a-145a). Petitioners’ protectionist argu- ments, which merely seek to avoid such enhanced com- petition, are contrary to the fundamental purposes of the Act. e. The ICC’s decision to retain jurisdiction over the CSX/ACL consolidation and to conduct an annual review of the competitive effects of the transaction further demon- strates that review by this Court is not appropriate. The ICC recently completed its first annual oversight pro- ceeding, and found no basis for doubting the validity of its original conclusions concerning the competitive effects of the consolidation. The ICC’s continued monitoring of the instant transaction, as well as its review of any fu- ture rail-barge consolidations on a case-by-case basis as contemplated by the Act, eliminate any need for inter- vention by this Court.” % Denial of review also would not result in a “gap” in antitrust enforcement as petitioners contend ‘Pet. 17). The Department of Justice, which is responsible for eiiorcement of federal antitrust laws, participated in the ICC proceedings and proposed a method- ology, adopted by the ICC, for assessing the competitive effects of the CSX/ACL consolidation (Pet. App. 70a). Moreover, the CSX/ACL consolidation is exempt from the antitrust laws because of the ICC’s findings under Section 11344(d)—the interpretation and application of which petitioners have not challenged in this Court. See 49 U.S.C. § 11341(a). 22 CONCLUSION The petition for a writ of certiorari in No. 85-2133 and the cross-petition for a writ of certiorari in No. 86- 134 should be denied.” Respectfully submitted, MARK G. ARON R. EDEN MARTIN ALAN A. RUDNICK (Counsel of Record) CSX Corporation G. PAUL MOATES One James Center CARTER G. PHILLIPS Richmond, Virginia 23219 VINCENT F’. PRADA SIDLEY & AUSTIN MICHAEL L. HARRIS American Commercial Washington, D.C. 20006 Lines, Inc. (202) 429-4000 1701 East Market Street Jeffersonville, Indiana 47130 Counsel for Respondents CsX Corporation and American Commercial Lines, Inc. September 16, 1986 29In No. 86-134, “Cross-Petitioner’ Simmons seeks review of the court of appeals’ decision upholding the ICC’s failure to con- sider the impact of the CSX/ACL transaction on employees of non- CSX railroads. The short answer to Simmons’ argument is that Section 11344(d), on which he bases his claim, contains no require- ment that the ICC consider the impact of a carrier merger transac- tion on rail employees, much less employees of railroads not even involved in the transaction. Cf. 49 U.S.C. §11344(b) (considera- tion of labor impact required in transactions involving merger of two or more class I railruads). Simmons relies on ICC v. Railway Labor Association, 315 U.S. 373 (1942), and United States v. Lowden, 308 U.S. 225 (1939), but neither case involved Section 11344(d) and neither involved consideration of the interests of employees not directly affected by the transaction. Accordingly, the issue raised in the cross-petition is utterly without merit. APPENDICES la APPENDIX A STATEMENT REQUIRED BY RULE 238.1 Listed below are all parent companies, subsidiaries (ex- cept wholly-owned subsidiaries) and affiliates of CSX Cor- poration and American Commercial Lines, Inc.: Allegheny and Western Railway Company The Baltimore and Cumberland Valley Rail Road Extension Co. The Baltimore and Ohio Railroad Company The Baltimore and Philadelphia Railroad Company The Cincinnati Inter-Terminal Railroad Company Clearfield and Mahoning Railway Company The Cleveland Terminal and Valley Railroad Company Dayton and Michigan Railroad Company Dayton and Union Railroad Company The Home Avenue Railroad Company Mid-Allegheny Corporation New Gauley Coal Corporation Richmond, Fredericksburg & Potomac Railroad Company Richmond-Washington Company Sea-Land Corporation * The Winchester and Potomac Railroad Company *CSX’s stock interest in Sea-Land Corporation is presently held in an independent voting trust administered by Midlantic National Bank as trustee. 10. Za APPENDIX B DECISIONS OF THE INTERSTATE COMMERCE COMMISSION APPROVING RAILROAD INTERESTS IN WATER CARRIERS PURSUANT TO 49 U.S.C. § 11321(b) Finance Docket No. 30300, CSX Corporation—Con- trol—_ American Commercial Lines, Inc. (served Sep- tember 7, 1984), aff'd sub nom. Crounse Corp. V. ICC, 781 F.2d 1176 (6th Cir. 1986) Southern Railway Section 5(15) Application, 342 1.C.C. 416 (1972), aff'd sub nom. American Water- ways Operators, Inc. v. United States, 386 F. Supp. 799 (D.D.C. 1974) (three-judge court), aff'd sub nom. Water Transport Association v. United States, 421 U.S. 1006 (1975) (per curiam) Application of Missouri Pacific Railroad Co. and Texas & Pacific Railway Co., 245 I.C.C. 143 (1941) Application of Canadian Pacific Railway Co., 225 1.C.C. 81 (1937) Southern Pacific Company’s Ownership of Atlantic Steamship Lines, 206 I.C.C. 427 (1935) Investigation of Seatrain Lines, Inc., 206 1.C.C. 328 (1935) Peninsular & Occidental Steamship Co., 204 I.C.C. 142 (1934) Application of Union Lumber Co., National Steam- ship Co., and California Western Railroad & Naviga- tion Co., 157 1.C.C. 376 (1929) New York Harbor Water Facilities Applications, 100 I.C.C. 383 (1925) Southern Pacific Company’s Ownership of Atlantic Steamship Lines, 77 I.C.C. 124 (1923) ta. 12. 13. 14, 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. 26. 27. 3a Steamer Lines on Long Island Sound, 50 I.C.C. 634 (1918) Direct Navigation Co., 46 I.C.C. 378 (1917) Southern Pacific Company’s Ownership of Atlantic Steamship Lines, 43 I.C.C. 168 (1917) Steamer Lines from Norfolk to Baltimore, New York, and Richmond, 41 I.C.C. 285 (1916) Central Vermont Boat Lines, 40 I.C.C. 589 (1916) Boston & Maine Boat Lines, 40 I.C.C. 565 (1916) Maine Central Boat Lines, 40 I.C.C. 272 (1916) Ashtabula-Port Maitland Car-Ferry Service, 40 I.C.C. 143 (1916) The Boat “H. B. Plant’, 37 1.C.C. 453 (1915) Peninsular & Occidental Steamship Co., 37 1.C.C. 482 (1915) Ocean Steamship Co., 37 1.C.C. 422 (1915) Southern Pacific Company’s Ownership of Stock in Sacramento Transportation Co., 34 I.C.C. 648 (1915) Application of the Duluth, South Shore & Atlantic Railway Co., Grand Rapids & Indiana Railway Co., and the Michigan Central Railroad Co., 34 I.C.C. 229 (1915) Application of the Chicago & Erie Railroad Co., 34 I.C.C. 218 (1915) Southern Pacific Company’s Steamboats on the Sac- ramento River, 34 I.C.C. 174 (1915) Oregon-Washington Railroad & Navigation Com- pany’s Ownership of the San Francisco & Portland Steamship Co., 34 1.C.C. 165 (1915) Application of the Pere Marquette and Bessemer & Lake Erie Railroad Companies, 34 I.C.C. 86 (1915) 28. 29. 33. 34. 4a Application of the Ann Arbor Railroad Co., 34 I.C.C. 83 (1915) Application of Grand Trunk Western Railway Co., 34 I.C.C. 54 (1915) . Application of the Buffalo, Rochester & Pittsburgh Ratiway Co., 34 1.C.C. 62 (1915) . Application of the Grand Trunk Railway Co. of Canada, 34 I.C.C. 49 (1915) . Oregon-Washington Railway & Navigation Compa- ny’s Ownership of Steamboats, 33 1.C.C. 658 (1915) Lake Tahoe Railway & Transportation Company’s Ownership of a Boat Line on Lake Tahoe, 33 I.C.C. 426 (1915) Avplication of Southern Pacific Co. in Connection with Operation of the Pacific Mail Steamship Co., 32 I.C.C. 690 (1915) --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385018_2251%3A2. Public record. Not legal advice.