# Appendix to Petition for Writ of Certiorari — ABC Air Freight Co. v. Civil Aeronautics Board

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Appendix to Petition for Writ of Certiorari
- **Published:** January 1, 1970
- **Citation:** 397 U.S. 1006

## Text

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SUPREME COU | 1N THE

Supreme Court of the Brcited. Stutes

‘October Term, 1969

1105

4

Office: Supreme Court, US
FILED

JAN 22 1970

JOHN F. DAVIS, CLERK

owe aed

ABC AIR FREIGHT COMPANY, INC.; ADD AIRF REIGHT COR-
PORATION; AIRBORNE FREIGHT CORPORATION; AIR- , ‘

LAND FREIGHT CONSOLIDATORS, INC.; AIR-SE

A FOR-

WARDERS, INC.; AIRWAYS AIRFREIGHT: BARNETT AIR

CARGO, INC.;PETER A. BERNACKI, INC.; HENSEL,
MANN & LORBACHER, INC.; INTERNATIONAL C

BRUCK-
USTOMS

SERVICE, INC.; H. G. OLLENDORFF, INC.; PANALPINA

AIRF REIGHT, INC.; WTC AIR FREIGHT, and AIR F

FORWARDERS ASSOCIATION,

Petitioners,

against

CIVIL AERONAUTICS BOARD

and

CF AIR FREIGHT, INC.; CONSOLIDATED FREIGHTWA

‘REIGHT

bawrs s
iS Se haa

V5; IN.

P.L.E. AIR EREIGHT FORWARDING, INC.; PACIFIC INTER-

MOUNTAIN EXPRESS CO?: NAVAJO FREIGHT LIN
YELLOW FREIGHT SYSTEM, INC.; GLOBAL AIR
LTD.. GATEWAY TRANSPORTATION CO., INC., a
WAY AVIATION, INC.,

APPENDIX TO PETITION FOR WRIT OF C

ES, IN€.;
CARGO,
nd GATE-

Respondents.

ERTIOARI

TO THE UNITED STATES COURT. OF APPEALS

FOR THE SECOND CIRCUIT

LOUIS P, HAFFER
} 1730 Rhode Island
“/ ‘Washington, D.C.,

ROBERT N. MEISER
1730 Rhode Island
Washington, D.C.,

Avenue, N.W.
20036

Avenue, N.W.
20036

Attorneys for Petitioners

*

THE CASILLAS PRESS, INC. — 1717 K Street, N. W. — Washington, D. C. 20006

‘

*- °, . APPENDIX

t.
UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT.

" | No. 254—September Term, 1969.
(Argued September 16, 1969 Decided October 24, 1969.)
Docket No. 33623

ABC AIR FREIGHT COMPANY, INC.; ADD AIRFREIGHT COR-
PORATION; AIRBORNE FREIGHT CORPORATION; AIR-LAND

FREIGHT CONSOLIDATORS, INC:; AIR-SSEA FORWARDERS,

INC., AIRWAYS AIRFREIGHT; AMERICAN EXPRESS COM-

PANY; BARNETT AIR CARGO, INC.; PETER A. BERNACKI,

7 INC.; EMERY AIR FREIGHT CORPORATION; HENSEL, BRUCK-
: . MANN’ & LORBACHER,. INC.; INTERNATIONAL CUSTOMS
SERVICE, INC.; H. G. OLLENDORFF, INC.; PANALPINA AIR-

FREIGHT, INC.; PENSON FORWARDING CORPORATION: WIC

AIR FREIGHT; and AIR FREIGHT FORWARDING ASSOCIATION,

Petitioners,
hae
CIVIL AERONAUTICS BOARD,
Respondent,

and

CF AIR FREIGHT, INC.; CONSOLIDATED FREIGHTWAYS, INC.;
P.I.E. AIR FREIGHT FORWARDING, INC.; PACIFIC -INTER-
MOUNTAIN EXPRESS CO.; and NAVAJO FREIGHT LINES, INC.; °
YELLOW FREIGHT SYSTEM, INC.; GLOBAL AIR CARGO, LTD.;
GATEWAY TRANSPORTATION CO., INC. and GATEWAY AVIA-
TION, INC.,

Intervening Respondents.

‘e)

LUMBARD, Chief Judge,
[FRIENDLY and KAQMFMAN, Circuit Judges

}

~ Petition to review an order, 69-4-100, issued by the

- Civil Aeronautics Board after a remand from this court,
391 F.2d 295, which granted the applications of three
long-distance truckers or their subsidiaries to act as air
freight forwarders and related applications for acquisitions
of control, and to terminate a rule-making proceeding
with respect to the future authorizations of other long-
distance truckers or their affiliates. Petition denied in-
sofar as it. relates to the order and dismissed insofar as

it relates to the rule-making proceeding.

LOUIS P. HAFFER and ROBERT N. MEISER
(Andrew P. Goldstein, Washington, D. C., and
Paul Berger, New York, New York, of Coun-
sel), for Petitioners. |

O. D. OZMENT, Deputy General Counsel, Wash-
ington, D. C. (Warren L. Sharfman, Associate
General Counsel, Litigation and Research, J.
Michael Roach and James Keough, Attorneys,
Civil Aeronautics Board, Richard W. McLafen,
Assistant Attorney General, Howard E. Shapiro,
Attorney, Dept. of Justice, Joseph B. Gold-
man, General Counsel, Civil Aeronautics Board,

_ Washington, D. C., of Counsel), for Respondent.

JOHN N. WANNER and EUGENE T. LITPFERT
(Verner, Liipfert, Bernhard and McPherson,
Washington, D. C., of Counsel), RAYMOND
J. RASENBERGER (Zuckert, Scoutt & Rasen-
berger, Washington, D. C., of Counsel), and
ROBERT J. SISK (Hughes, Hubbard, Blair &

3
Reed, New York, New York, of Counsel),
for Intervening Respondents CF Air Freight,
Inc., Consolidated Freightways, Inc., PLE.
_ Air Freight Forwarding, Inc., Pacific Inter-

mountain Express Co., and Navajo Freight
Lines, Inc.

HOMER S. CARPENTER, Washington, D. C.,
for Intervening Respondents, Yellow Freight
System, Inc., Global Air Cargo, Ltd., Gate-
way Transportation Co., Inc., and Gateway ;
Aviation, Inc.

Friendly, Circuit Judge:

e In A. B. C. Air Freight Company vy. C. A. B.,:391 F.2d
295 (1968), this court vacated an order of the Civil Aero-
nautics Board dealing with applications of motor carriers
to operate as freight forwarders. The Board, with Vice.
Chairman Murphy dissenting, had granted applications of
three long-distance truckers or their subsidiaries to act

as air freight forwarders, along with related applications
for approval of acquisitions of control, and had indicated
an intention similarly to grant a fourth. We remanded
the cause for further corisistent proceedings. Having in-
vited the parties to file briefs directed to the action it
should take and having heard oral argument, the Board,
with Vice Chairman Murphy: again dissenting, rejected peti-
tioners’ contention that_it should dismiss the proceeding
or hold another evidentiary hearing. On the basis of fur-
ther findings it granted the applications of CF Air Freight,
Inc., and Navajo Freight Lines, Inc., to act as dbdmestic
and international air freight forwarders and of P. I. E.

Air Freight Forwarding, Inc. to act as a domestic air
freight forwarder for a period of five years: the Board
also granted related applications with respect to acquisi-
tions of ‘control. The authorizations and approvals were

4

made. subject to numerous conditions which are set out

in the margin.! The Board denied. the motions of seven

other motor carriers or their affiliates to intervene and

-have their applications consolidated. Instead it instituted

a rule-making proceeding with respect to the handling of °
applications fram these and other motor carriers and to
the making of reports, of which more hereafter. Peti-
tioners ask 11s to set aside the authorizations and to ter-
minate the rule-making proceeding as contrary to our man-
date and otherwise unlawful.

—
1 7. That the authorizations and approvals granted herein shall

be subject to the following conditions:

(a) The Board may revoke an authorization or approval, in
whole or in part, if it finds after hearing that (1) the holder is no
longer capable of performing the authorized air transportation or
of conforming to the Act or the regulations thereunder; (ii) the
holdér is no longer willing to conscientiously promote air cargo
and to benefit air transportation; or (iii) the holder’s operations,
alone or together with other similar carriers granted air freight for-
warding authority, will create a monopoly or monopolies and there-
by restrain competition or jeopardize another air carrier not a party
thereto, or will otherwise be inconsistent with the public interest.

(b) -If proceedings are instituted to revoke an authorization
or approval under paragraph 7(a), the Board may suspend or limit
such authorization or approval pending the outcome of the pro-
ceedings in accordance with the procedures specified by Sections
296.48 and 297.43 of the Board’s Economic Regulations.

‘ (c) CF Air Freight, Inc., Navajo Freight Lines, Inc., P.I.E.
Air Freight Forwarding, Inc., and National Air Freight Forwarding
Corporation shall file, in addition to the financial and satistical re-
ports prescribed by Part 244 of the Board’s Economic Regulatigns,
the following schedules in the format attached to this order: re
(i) The “Originating Air Station Data” schedule re.
flecting the source of air freight tonnage enplaned and
deplaned at originating air station (exclusive of.

ol

5

The “most serious deficiency” we found in the Board’s
original order was “the ambiguity whether the Board has

(Footnote -1 Continued)
-reconsolidations) and data on the miles of surface move-
ment of the air freight before and after its air trans-
portation.

(ii) The “Supplemental Operating Statistics’ schedule
reflecting the number and weight of those air freight
shipments handled by both the air freight forwarder and

~ the surface carrier who is its parent or affiliate or who
operates as a separate division within the same corporate
structure.

(iii) The “Analysis of Traffic by Weight Breaks”
schedule reflecting, by specified weight breaks, the
number and weight of shipments handled in air freight
forwarding operations and the revenues received for the
shipments.

(d) The persons named in paragraph 7(c) above shall also

file with the Board, within 45 days after the close of each calendar
year, a report showing as of December 31 of such year the loca-
tion of each specialized air freight forwarding station and of each
surface transport terminal at which air freight forwarding services
are offered. The statement shall indicate, for each station or ter-—
minal, the number of drivers, salesmen, and other personnel who
are assigned to promote air freight exclusively.

(e) Navajo Freight Lines, Inc., Pacific Intermountain Express
Co., and Consolidated Freightways, Inc., shall file with the Board’s
Bureau of Accounts and Statistics, not later than 45 days after the
end of each calendar quarter, the “Analysis of Traffic by Weight
Breaks” schedule, in the format attached to this: order, reflecting,
by specified weight breaks, the number and weight of shipments
handled in long-haul motor carrier operations and the revenues re-
ceived for the shipments.

(f) In addition, the persons named in paragraph 7(e) above
shall file the “‘Analysis of Traffic by Weight Breaks” schedule show- -
ing comparable data, to the extent available, for the corresponding
quarter of each of the preceding five years.

6

established a-policy of entry for all truckers who want

to act as air freight forwarders or has. merely granted the
four applications that Were before it, and the inadequacy
of its consideration of effect on the existing forwarders
if the former is the right interpretation as we strongly sus-
pect.” 391 F.2d at 298. In addition, after citing the
Board’s previous policy of granting air forwarding authority,
to,surface carriers “only after study Af the particularized
situation convinced it that the carrier’s conflict of interest
would not ‘result in material diversion of traffic from air
to surface transportation and deprive the applicants of
sufficient incentive to conscientiously promote and de-
velop airfreight forwarding’ ” Air Freight Forwarder Au-:
thority Case, Order E-21056, July 10, 1964 (mimeo, p. 4),
we expressed concern that the Board had not adequately
explicated what we considered to be a significant de- ,
parturé from that policy, 391 P.2d at 301-05. While we
pointed out what seemed to be still other weaknesses

in the Board’s opinion, 391 F.2d at 305-07, which rein-
forced our conclusion that further consideration was desir-
able, we nevertheless recognized that even the present
record might “be sufficient for the Board to initiate a
properly controlled experiment in the authorization of
truckers as air freight forwarders, with the limitation on
numbers and the reporting and other requirements an
experiment would be expected to entail” 391 F.2d at

. 307.

The opinion on remand, Motor Carrier-Air Freight For-
warder Investigation, No. 69-4-100, April 21, 1969, at-
tempted to deal with these objections. With respect to
tt\\number of authorizations, the Board emphasized “that
it is granting only the applications before it and not pass-
ing upon any others,” save for a declaration that it “should
not deem the size, geographical extent, or general com-
modity rights of a trucker’s surface operations or author-
ity—of themselves—as factors showing that.the trucker

7

should be barred from the air freight forwarding business.”
Id. (mimeo, pp. 3-4). The Board’ made clear, however,
that this declaration meant just what it said and no more:

But long-haul truckers of general commodities
will not be granted air forwarding licenses rou-
tinely. Instqdad, each trucker applicant will be
required to show that it will conscientiously pro-
mote air cargo and that its operations, either
alone or in combination with others already
licensed, ‘will be in the public interest.. The
Board will not be satisfied with .mere recitations;
it will scrutinize each application (and any ob-

° jection) to insure that these criteria are met.
And the Board will maintain a close watch, over,
the experiment through new and more detailed
reporting requirements. As a final safeguard, the
Board will reserve the power to suspend the
processing of new applications and, if necessary,
even to terminate outstanding licenses. This
policy is being codified in proposed regulations
issued. concurrently with this order. For long-
haul truckers who seek to become air forwarders.
the rule will not be free entry, but monitored
entry.

Turning to the matter of surface carrier participation, the
Board reiterated its position that the second proviso to
§408(b) of the Federal Aviation Act, 49 U.S.C. § 1378(b)
(1964), was inapplicable to air freight forwarding, not
merely in precise terms as we had agreed, 391 F.2d at *
302, but at all.? However, noting our recognition that

2 Some added support for the Board's position was furnished*
subsequent to its decision by Pub. L. 91-62 § 1(2). (Aug. 20,
1969), 83 Stat. 103, amending §408(a) (5) of the Federal Avia
tion Act, which authorizes the Board to exempt any acquisition of
a noncertificated carrier from the requirement of approval “to the ex-
tent and for such periods as may be in the public interest.”.

8
“the Board might conclude, after studying the proposals
of a particular surface carrier, that despite its conflicts of
interest, the applicant will conscientiously promote air
transport,” 391 F.2d at 304, it found, after detailed ex-
amination of the record, that “[t]he. three successful ap-
plicants have clearly met that test” and concluded that
“(t]he time has come . . . to test the conflicts hypothesis
in a controlled experiment.” This was to be made possible
by the detailed reporting requirements imposed on the
three successful applicants, similar requirements proposed
for imposition on other successful trucking aspirants, and
-new reporting requirements proposed for the independents.

The rule-making proceeding initiated simultaneously with
the order fell into two main parts. One part concerned
- applications of long-haul motor carriers of general com-
modities for air freight forwarding authority or for ap-
proval of control of air freight forwarders. The proposed
regulations provide that such authority or approval may
be granted,

on an individual application basis, with or with-
out hearing, upon a showing that (1) the ap-
plicant is capable of performing the proposed
ail air transportation and of conforming to the Act
and the regulations thereunder; (2) the applicant
will conscientiously promote air cargo and will
‘benefit air transportation; and (3) the applicant’s
operations, alone or together with thos¢ of other
similar carriers granted air forwarding authority,
will not result in creating a monopoly; or mono-
polies and thereby restrain competition, or jeo-
pardize another air carrier and will not other-
wise be inconsistent with the public interest ....

/ oo applicant must show:

(a) A plan to conscientiously promote air
cargo. This showing shall include, inter alia:

9

(1) A statement as to whether the long-
haul motor carrier plans to solicit existing sur-
face customers for air cargo and, if so, the ex-
tent of such plans;

(2) A traffic estimate showing what traffic
is newly-generated or presently shipped by sur-
face means;

(3) An estimate of what portion of the long-
haul motor carrier’s existing surface traffic is
subject to diversion to air;

(4) An estimate of beyond-terminal-area
traffic moving by surface transportation over
the routes of the long-haul motor carrier or
via interline agreements; and

(5S) A statement of the proposed air cargo
sales force and facilities. ; Ae

(b) A statement of the long-haul motor car-
rier’s authority from the Interstate Commerce
Commission or other regulatory agency, includ-
ing a description of surface transportation au-

thorized and offered at the stations at which air
forwarding operations are proposed. \ -

(c) ‘A statement of any other advantages which
would result from approval of the application. -

‘Authorizations are to continue until they expire by their

terms, the relevant regulations are terminated or revoked,

or the Board in revocation proceedings finds that con-

tinued Operation is contrary to the licensing criteria. The

other part related to reporting. Long-haul motor carrier YS
applicants who qualified in the future would be required

to file reports similar to those imposed:as conditions on ~

the three successful applicants, see fn. I In addifion, all

:

10

other air freight forwarders ‘would be required to make
additional reports, with the objective of placing the Board
in a position where it will be able to obtain a rather com-
plete statistical picture of the entire industry.

We find it unnecessary to deal with petitioners’ conten-
tions that since the Board failed to petition the Supreme
Court for review of this court’s decision, it wa$pbound to_
give our views with respect to the policy concefning sur-
face carrier participation in air freight forwarding greater
weight than it did. Apart from the problem. raised by
the agency’s likely inability to obtain certiorari to review
an order of remand, cf. F.7.C. v. Colgate-Palmolive Co.,
380 U.S. 374, 383 (1965), and the possible bearing of
Pub. L. No. 91-62, see fn. 2, we are satisfied that the
nuance of difference between the Board’s. views and those
intimated in our previous opinion did not affect its de-
cision. Fully recognizing its responsibility to develop air
transportation, the Board did not deny that it must con-
sider the bearing of a prospective air freight forwarder’s |
involvement in surface transportation; it said only that
this should not constitute a bar. Here it satisfied itself
that, # light of the plans of two of the applicants to
conduct their air freight forwarding through separate com-
panies and of the third to conduct its through a separate
division with a management team recruited from the
aviation industry and dedieated to air cargo’s promotion,
the applicants would not seek to divert potential air cargo
to surface transport but rather would zealously promote
it. Petitioners say the Board was too easily satisfied and
contend that the regulations proposed in the rule-making
proceeding demonstrate this. But the former issue was
for the Board to decide and we cannot’ take the Board’s
professions with respect to its future policy so lightly as
petitioners would have us, see F. C C: v. Schreiber, 381 :
U.S. 279, 296 (1965). While the proposed regulations
do not assure a heariiig, they do permit any interested

tae

1]

person to object to any new authorizations on the ground,
_ among others, of a belief “that the long-haul motor carrier
or its affiliate will not promote air cargo.” While it may
indeed be difficult to establish this at the start, the re-
ports to be filed by the three successful applicants and
other long-haul truckers that may receive authority in the
future will ultimately afford a basis for truly informed ,
decision on an issue that now lies in the realm of con-
jecture.

Similar considerations require us to reject petitioners’
contention that the Board’s avowed limitation on the
number of applications granted is simply a form of words.
When an independent regulatory agency says that “‘long-
haul truckers of general commodities will not be granted
air forwarding licenses routinely” and that its policy to-
ward them “will not be free entry, but monitored entry,”
a reviewing court must assume the agency means what it
says, unless and until experience should indicate the con-
trary. We will expect-the Board to be selective in ac-
cordance with its. word. We would assume, for, example,'
in light of the Board’s expressed concern that-the nation’s
three rage cg are now responsible for more than half
of all air ff visits. forwarder tonnage and the 10 leading
cities for over three-quarters, whereas 101 of the 131 cities.
reported produced less than 5%, that it would prefer long-
haul trucker applicants with well laid plans to develop the
lesser markets, in contrast, e.g., to an applicant planning,
as Consolidated Freightways is doing, to operate for the.
first year only in the four cities ranking highest in volume
* of air freight forwarder traffic, and would not multiply
the latter type of authorization in the absence of a strong
showing of public interest. In sum we expect that the.

-~ Board will in time demand that the performance of the

long-haul truckers as air freight forwarders should con-
form to the rationale stated for their authorization, and
that if the “controlled experiment” proves disappointing,

12
new authorizations will not be granted and existing gnes
may be revoked. We anticipate also that in granting ad- —
ded authorizations to long-haul truckers the Board will —
take the condition of the independent forwarders into
proper account. In performing these difficult tasks the |
Board will be immeasurably aided by the detailed report-
ing requirements imposed or proposed as a result of the
remand. If deficiencies should emerge in the Board’s per-
formance, these can be brought before a court at an ap-
propriate time.

While we have felt free to consider the Board’s pro-
posed regulations as casting light on its action in granting
the three authorizations, as all parties have agreed to de rf
proper, we have no power to terminate the rule-mak:ng
proceeding with respect to the long-haul truckers, as peti-
tioners ask, even if we had any will to do so. Although
comments on the proposed regulations were due by May
23, 1969% the Board has not yet acted upon them, and
review would thus be premature. Myers v. Bethlehem
Shipbuilding Corp., 303 U.S. 41 (1938). Neither would
the situation be altered if the regulations with respect to
Jong-haul truckers are adopted. These regulations, in con-
‘trast, to any new reporting requirements on the inde-
pendents, do not compel petitioners to do anything they
have not previously done or to refrain from doing any-
thing they were previously permitted to do, as in Abbott
Laboratories v, Gardner, 387 U.S. 136 (1967), and Gardner
y. Toilet Goods Ass’ n, 387 U.S. 167 (1967). Petitioners
will be affected by the regulations only when, as and if
the Board grants further authorizations to long-haul truckers
under them. We need not consider whether review could
be thhad, or where, if the mere possibility ‘of such grants
were unlawful'since, for reasons indicated, we do not
believe this to be so. Failing that, review must await
further grants pursuant to the regulations, by _— peti-
tioners — be aggrieved.

13

_' Insofar as the petition to review is addressed to Order
69-4-100, it is denied; insofar as it is addressed to the
Notice of Proposed Rule Making, it is dismissed.

. 15

UNITED STATES OF AMERICA
CIVIL AERONAUTICS BOARD
WASHINGTON, D. C.

Adopted by the Civil Aeronautics Board
at its office in Washington, D. C..
on the 21st day of April, 1969

— — — — —_ a — _ — — — — — —

As the history of forwdrder regulation shows, the _
Board has ‘always recognized these precepts. Initially, of
course, when the forwarding industry was in its infancy, f
the Board’ s policies were influenced strongly by the fledg- 2
ling air cargo industry’s need to establish itself. Thus, in
the 1948 Air Freight ‘Forwarder Case, the record showed
that the certificated cargo carriers transported only about
“63 thillion ton-miles of air freight*in 1947 (9 CAB. at
481). Those applicants who had solicited air cargo as
agents were in a precarious financial position: Emery,
whose freight revenues were among, the largest, had not
yet shown a profit U/d. at°491). Accordingly, the Board
denied the applications of railroad affiliates to becédme
forwarders, although it authorized letters of registration
for surface freight forwarders and their -affiliates, and for
motor carrier affiliates. .

When it decided the 1949 Air Freight Forwarder Case
(International), 11 C.A.B. 182, the Board again granted”
authorizations for surface forwarders, surface forwarder -
affiliates, and motor carrier affiliates. In addition, the
Board was faced with applications by railroad affiliates
which had_been ‘denied authority in the domestic case.

° Finding that the railroad affiliates did not offer the same
danger as in the domestic field, the Board approved their
entry into international air forwarding.

The Board’s nondoctrinaire approach is nowhere better .
illustrated than in the 1955 Air Freight Forwarder Investi-
gation. Then holding that domestic forwarding authoriza-
tions should be issued to two railroad affiliates, whose

at ~~

4 (Continued) (
Sess. (1963); Hearings before Subcommittee No. 4 on Distribution
Problems of the House Select Committee on Small Business, 89th
Cong., Ist Sess. 103-121, 129 (Vol. 1, 1966).

> ¢
'

23 -
applications had been denied in the 1948 Case, the Board
was aware that airline domestic freight revenues and ton-
miles had increased over 65 percent since the earlier Board
decision (21 C.A.B. at 541). And aithough the individual
forwarders’ financial health was frail by today’s standards
(id. at 598), the Board found that several vigorous for-
warder enterprises had developed and that domestic com-
_ petition by railroads should no longer be deferred.

Again, in the 1964 Airfreight Forwarder Authority
Case, 40 C.A.B. 673, the Board refuted the argument that
there was a presumption against granting authority to- .
applicants having direct surface transportation interests. ©
' Rather, the Board characterized its policy as prohibiting |

“entry by surface carriers into the -airfreight forwarder

field where it appeared that such "conflicts of interest ‘fy
would arise between air and surface operations ‘as to re-
sult in material diversion of. traffic from air to surface
transportation and deprive the applicants of. sufficient -
incentive to conscientiously promote and develop airfreight
forwarding. * * *” Ud. at 675). That, of course, is
fundamentally a factual test.

In sum, the history of the ,Board’s forwarder fegula-
tion is that as the air cargo industry has grown, the Board
has narrowed its shield of protection enough to allow. in-
creased competition from surface interests. Only rarely
during recent years have surface carrier requests for for-
warding authority been denied on conflict of interest
grounds. In July 1965, however, the staff issued an order
under delegated authority in which it adopted a restrictive

> While in 1958 the Board denied REA’s ‘application for for-
warding authority (Railway Express Agency, Airfreight Forwarder
Application, 27 C.A.B: 500), the Board’s consistent treatment .of
REA over the preceding decade shows that REA was regarded as
unique, primarily because it wag the largest nongovernment carrier
. (Continued)

en 7 ae Gs.
view of Board policy and denied such a request. Telstar
* Air Freight,*Inc., Order E-22479. . Within months after that
unappealed staff action became final, the Board instituted
this Investigation to consider whether long-haul motor
carriers of general commodities should be allowed to par-
ticipate in air forwarding.

The central question posed by the Court’ s remand is
whether the Board is legally free to give an affirmative —
answer to that question. Since the Boartd does not regard
its past policies as mandetéd by the second proviso, the
Board believes that it may lawfully continue to shape
and reshape those policies as a matter of judgment; it
need not corapile an evidentiary record to justify each
adjustment of policy. “Of course, the Board must remain
faithful to the public interest commandmenis of the. Act. °
So long as it does so, the Board believes that it can rely
upon its judgment and experience as a basis for adapting
its policies to the dynamic technology of the air cargo
industry and to the needs of the public. In any event,
the Board finds that the record here justifies a new policy.

_ Il.

In finding that a new policy is needed, the Board is
convinced that ‘the three applicants’ entry into the air »
forwarding business is likely to produce important public
benefits. Indeed, as the Board found in its earlier opinion,
the participation of strong new entrants like the applicants
may be essential to achieve the full promise of air cargo.

> (Continued) |

of small-package traffic by all mddes of transport. (See Airfreight
Forwarder Authority Case, 40 Cc A.B. 673, 674-675.) In contrast

to REA’s cases, the Board authdrized United Parcel Managers Co.
and United Parcel Service of. America, Inc., which in turn owned

12 regional operating companies, to acquire Air Parcel, Inc., an air
freight forwarder. (United Parcel Managers Co., Order E-7324, April
22, 1953). eens .

“Ne

¥

‘

aS

7,

er

one keahy there is no doubt that the’ air cargo industry -
stands onthe threshold of.a new era. Over the 1951-1965
periodgdomestic and# international air freight. ton-miles
increased sevenfold. In the Iast year surveyed, 1965,
domestic freight traffic increased over the preceding year

~ by 26 percent; international traffic by almost 46 percent.

The result is that U. S. domestic and international freight -
shipments reached about 1.7 billion ton-miles in 1965.

Yet despite that growth, the carriers’ excess freight
capacity has been increasing at an alarming rate, The-
domestic trunklines’ unused cargo capacity, which had been -—
less than a billion ton-miles before 1959, reached more than
3 billion ton-miles in 1965. Each year the carriers have
found cargo enough to fill only about a quarter or less of
their freight capacity, leaving the rest to be flown empty.

Unless air freight can achieve a dramatic breakthrough, ©
it will lag even further behind available aircraft capacity
soon. By 1970, the Nation’s air carriers are expected ‘to.
have a fleet of all-cargo aircraft capable of carrying 6.5.

“billion ton-miles of freight. Even without considering the
additional freight capacity of combination aircraft, air cargo

| must expand several times to fill the airlines’ pressing need

for more freight.

Given, sitexielte darelagemes. air’ freight can meet
the challenge. One important factor is that air transpor- .
tation’no longer commands a premium rate vis-a-vis sur- |
face transport. The Board has previously found that be-
tween 1946 and 1966 motor carrier rates increased by
52 percent; and air freight rates decreased by 30 percent.®
Motor carrier rates, particularly for small packages, are
expected to continue increasing. With the adyent of the*
larger jets, improved ground handling techniques, and

6 Airlift-Slick Route Transfer Case, Order E-26810, May 20,
1968 (mimeo page 7).

tile *

a

Ld

26

containerization, the ton-mile costs of air freight should

~~ continue to decline, thus narrowing the gap between sur-

face and air transportation costs.’ Even if motor trans- -
portation rates remain less than air freight rates, shippers ° :
will increasingly find that air transportation is economical
. because it produces savings in overall distribution costs.
Based upon these cqnsiderations, one. forecast of record
estimates that domestic air freight ‘will more than“double
by 1970. — ;

But that breakthrough in air freight will not come

,» about from lower rates alone. Both the ditect air carriers,
and the forwarders who generate over 20 percent of aif
freight traffic, must ‘increase their promotional efforts.
They must awaken shippers to the new low rates and to
the savings in warehousing and distribution costs and
other advantages of air over surface transportation. And
they -must make massive investments in containerization,
computerized billing ‘systems, and sophisticated communi-
- cations networks. One’ fact is inescapable: the needed*
, promotional campaigns and investments will require sub-
. Stantial capital expenditures.

‘There is reason to doubt that many existing indepén-
dent~air forwarders cain afford the necessary sales effort 3
and capital investments. Most forwarders ‘are thinly cap- .
italized. ‘ Of 124 forwarders reporting assets-in 1966, 112
had less than $2 million in total assets; 102 had less than
$1 ‘million;-85 had less than $500,000; and 48 had less
lesa 8160000 ‘And most forwarders, who already carry
‘heavy debt loads, will have difficulty raising outside capital.

It is true that. the industry includes many substantial
forwarders. But these’ large forwarders cannot be relied
upon to carry the burden alone. Even Emery, the forwarder ~
which controls 30 percent of industry revenues, concedes

a rie ,
that if it could ‘have-budgeted more money for promotional
efforts, it could have generated more air freight. If the

j
»

Aa

5 SS a,

a © - F
dominant company in the industry ‘must cuftail its promo-
tion of air freight because of finances, sur y the other
forwarders will be even more limited on f nds.

~.' There is thus a demonstrated neéd for new, able, and

well-financed enterprises to enter the air forwarding busi-

‘ness. The applicants have come forward to Till that role.
Ideally, perhaps, the Board might have been given the’
Opportunity to choose: between the applicants and other
equally knowledgeable and large companies having no con- °
nections with long-haul surface carriers.” ‘That possibility

_ would have raised the question, posed by the Court,
whether the greater sales effort called for in the future
can be better afforded solely by new independent for-
warders. But although the Board’s liberal entry policies —
have been outstanding for many years, few large indepen- ©
dents have asked to become forwarders. Of the 11 inde-
pendents -with applications now on file, none are as large
as the 17 largest forwarders. All have less than $190,000
in total assets; and seven have less than $75,000.7 If the
Board spurns ‘the trucking-related applicants now, it will
be left with nothing better than the bare hope that other
applicants, equally-qualified but without long-haul surface
connections, will emerge someday. a

Of course, the Board would not license these appli-
cants if it. concluded that they would experience a dis-
abling. conflict of interest between their air and surface
Operations—a conflict depriving them of an incentive to
‘promote air freight. In Part III of this Opinion, however,
the Board has spelled out the reasons why it.finds the

very opposite to be the case. Given the applicants’ dem-

Nanstted intention to promote air cargo conscientiously,

they have the resources needed to aid in accomplishing
that. goal. - ;

7 As of March 13,.1969. In the preceding six months, the Board
licensed only one applicant whose total asséts were in the $/ million
/ category. Included among the so-called independents are intrastate
and regional truckers.

. i $
"| we cut a

°

° '

_. About this there can be no real dispute. As the
examiner found, the applicants. are large, well-financed,
profitable Organizations, They will provide sophisticated
management, experienced personnel, and substantial addi-
tional -air forwarding facilities. They plan aggressive pro-
motional programs combining promising, new sales ap-
proaches with the formulas which have proven successful
for forwarders like Emery. And the applicants -will have
access to nationwide communicatiohs networks and to ~ '’
‘computerized billing and reporting systems, thus Satisfying |
shippers’ demands for an_ efficient and reliable service,

- All told, the applicants’ will be a potent force in developing
new air freight—even in the 10 leading cities in which one

_ Or more applicants will compete with existing forwarders. |
. 4

But entirely apart from those thriving markets, the
applicants also have an exceptional ability to stimulate air

freight in underdeveloped cities. Today, the Nation’s three °

largest cities account for over one-half of all freight for-
warder tonnage; the 10 leading cities are responsible for
over three-quarters. - Conversely, among 131 cities reported,

* the lowest ranking .41 ¢ities produced .only one-tenth of
one percent of the traffic; 101 cities produced less than.
five percent. This Overconcentration of forwarder activities
is Obviously inimical to the development of a truly national
air freight transportation system.

Yet either existing nor new independent air forwarders
can be relied upon to develop theNess productive cities,
It ix true, of course, that Emery an&some other forwarders
have opened sales ‘and operating statious in some of those
cities. As Emery has discovered, however, those stations
incur average direct transportation costs per pound far in
excess of those experienced #t more lucrative stations, —
Cons€guently, these’ secondary markets may not be directly
profitable. The ‘thinly-capitalized independent companies
now applying .permission to enter the forwarding busi-
ness are not equipped to make their mark in the under-
“developed cities. This means that Emery and a relatively

*

‘

29

few other forwarders will continue to dominate the for-
warding business in those cities—thus depriving the cities
of the very competition which they need to harvest their
full freight potential. | 3 |

The applicants are the most likely candidates to pro-
vide that needed competition. First, they are financially
strong enough to open new air-Only terminals in cities
Where separate facilities are needed. though initially un-
profitable. Second, where Separate air-only stations are
not immediately practical, the applicants can begin by
basing air forwarding personnel at the existing. terminals ©
of their -surface affiliates. By sharing those existing ter-
minals with the surface operations, the applicants can re-

. duce the heavy overhead costs attributable to their. air

freight activities, thereby making service to smaller cities
more feasible.

The applicants have not only the capacity fo begin
Operations in the less promoted communities, but also the.
intention dp do so. Navajo Freight Lines plans to begin
services at terminals in 13 cities, six of which are not
among the top 10.8 Although CF Air Freight will limit
itself for the first six months or a year to operations at ,
the four largest cities, it intends to open two more stations.
each year thereafter. The third applicant, P.I.E. Air Freight
Forwarding, will open ai-Only stations in 14 cities and
will offer direct air forwarding service through struck termi-
nals in 16 other communities. In all. the air gto

-arms_of the applicants will offer immediate air forwarding

services to 21 cities not among the top 10 traffic generat- -
ing points, and to 12 cities not among the top 20. More
cities will receive service later.

s

*

8 In listing Navajo’s initial stations, the examiner inadvertently
omitted to mention Philadelphia and Phoenix. -

"30 | 4

The increased competition which the applicants will
provide in the intermediate-sized cities can be ex pected
to stimulate an immense growth in air freight. By com-
parison with the 10 leading air freight centers in terms
of comparative economic indicia, the intermediate-sized
cities’ freight traffic is grossly and’ disproportionately small.
Lack of vigorous, competitive promotion is plainly one
cause. The applicants’ entry into these markets will pro-
vide a long overdue competitive spur. Not only will the
increased competition aid both shippers and the airlines,
but it will probably generate new freight far exceeding
any diversion from independent forwarders. As a result,
the applicants will not jeopardize the able independents’
operations in underdeveloped markets, but may actually
- benefit them. If our expectations prove false, the Board
will retain the option not only to suspend or terminate
the applicants’ authorizations, but also to limit them geo-
graphically.

Finally, the applicants’ authorization may increase the
chances of air freight’s message being carried to smaller
cities in which no air forwarder will operate for many
years. - Regrettable as it may be, a substantial number of -
cities do not possess a freight potential adequate to support
direct forwarder operations. Unless they are adjacent to
the terminal area of larger cities, those cities must depend
upon coordinated truck-air transportation, Although smaller
cities are linked to airports by surface transportation, effec-
tive intermodal transportation will not come into being
‘ unless truckers gain an incentive to facilitate combined air-
surface shipments. As explained in the next section of
this Opinion, our decision today will go a long way towards
providing truckers with that incentive. Henceforth, we
believe, the applicants will be able to cooperate with their
surface affiliates (and other truckers who interline traffic
with those affiliates) to tap shipping sources located beyond
the metropolitan areas.

: "31

In sum, the Board believes that the applicants’ entry
will stimulate the growth of air cargo from several sources:
metropolitan areas now being served by many existing
forwarders; other -cities in which the applicants’ competi-
tive force will stimulate a lagging freight development;
and smaller cities which will depend ‘upon a more vigorous
use of coordinated truck-air interline operations. In each
area, the applicants’ authorizations will help to realize air
cargo’s full promise. |

Il. i

Our 1967 findings that important public advantages
will result from motor carrier entry into air freight for-
warding were said to have been undermined by the con-
flict of interest problem. The Court was dubious that the
entire trucking industry could be found immune to con-
flicts. Nevertheless, the Court recognized that the Board
might conclude, after Studying a particular surface carrier’s
proposals, that the carrier will conscientiously promote
air transport. The three successful applicants have clearly.
met that test.

To illustrate, CF Air Freight, a subsidiary of Consoli-
dated Freightways, plans to conduct: its Operations auto-
nomously. It will establish its own sales organization,
with personnel developing specialized air freight marketing
programs. With some exceptions listed by the examiner,
it will function as a separate company in fact as well as
form. Its president will report directly to the president
of the holding company; in other respects it will be inde-
pendent of any motor carrier in the Consolidated Freight®
ways. system. Indeed, the holding company’s president
Stated unequivocally that CF Air Freight’s salesmen will
solicit the affiliated truckers’ customers for air freight.

P.I.E. Air Freight Forwarding, a*subsidiary of Pacific
Intermountain Express Co., plans to conduct Operations

32

in 14 cities from separate airport terminals, stocked with
air freight equipment and staffed by personnel specializing
in air freight. At 16 other points, it will employ driver
salesmen who will be headquartered at a motor Carrier
terminal but will devote themselves exclusively to air freight.
P.1.E. Air Freight will also offer air freight at other loca-
tions using its parent’s facilities and personnel. While in
comparison to CF Air Freight this applicant will offer a
coordinated truck and air service, it will also be operated
independently and will. not refrain from soliciting customers
of its motor carrier parent.

*

Unlike the other two successful applicants, Navajo
Freight Lines proposes to establish its air forwarding enter-
prise as a separate division within the corporation. As a
guarantee of the division’s commitment to air forwarding,
Navajo has assembled a management team drawn from the
aviation ‘industry and dedicated to air cargo’s promotion.
Navajo will commence air forwarding operations at surface
facilities, with some new Air forwarding pick-up equipment,
but will establish separate facilities as traffic growth dic-
tates. Its 25 full-time air freight salesmen, together with |
other air forwarding staff, will be directed to solicit poten-
tial customers whether or not they patronize Navajo’s sur-
face Operations.

These applicants’ proposals cast doubt upon the con-
ventional conflicts shibboleths. While the examiner assumed
that motor carriers would prefer to carry “all” traffic by
surface means, these applicants testified to the contrary. |
According to them, truckers now carry the so-called ‘‘small-
shipment traffic” at a loss or minimal gain. As a result,
they say, the applicants and their affiliates will be eager
to divert small-shipment traffic to air if they can thereby
harvest the forwarders’ profit. ire

_ In judging the good faith of the applicants’ position,
- they Board need not find indisputable proof of the assertions

>.

E %

about smiall-package traffic. The record contains several
ICC studies showing the comparatively high cost of that
traffic. Moreover, the Interstate Commerce Commission
has stated as a matter of public record both its concern
over the small-pacKage problem and its recognition that
many motor carriers believe that small-package traffic is
noncompensatory.? These matters lend enough credence
to the applicants’ words io justify putting the quéstion to
the test of actual experience. In their special quarterly
reports to the Board, the applicants will be asked to supply
detailed information about both their own and their sur-
face arms’ small-shipment traffic. By. comparing the trends
in small-shipment traffic for the air and surface enterprises
of the same company or corporate system, the Board will
be able to make a truly informed judgment whether the
surface carrier applicants keep their promise to divert a sub-
stantial tion of that traffic to affiliated air freight for-
warders.. | |

as

In this connection, the Board has considered documents
which suggested to the Court that motor carriers would be
‘unwilling to divert small shipments to the airlines. That
small shipments comprise a large percentage of motor car-
rier shipments is not, to.our minds, dispositive. In the
case of Consolidated Freightways, for example, while less-
than-100 pound shipments constitute almost 28 percent
of total shipments, they account for less than 2 percent ©
of tonnage shipped and only 6 percent of revenues. With
motor carrier revenues increasing over 8.6 percent annually,
truckers are not likely to view a loss of small-shipment
revenues as catastrophic. . This is particularly true if the: -
truckers believe that those revenues cannot be translated
into profits, or cannot match the profits which their air
forwarding arms will earn through shipping that traffic by
air. 7

9 See e.g., LTL Cor Rates—Between East and Territories West,
326 1.C.C. 174, 177 (1966); General Increases—Eastern Central Terri-
tory, 316 I1.C.C. 467 (1962).

> : -

34

The applicants’ promotion. of air transportation will
not be limited to small shipments. Stridtly speaking, of
course, the licensing of a trucker or its affiliate as an air
forwarder will not reduce the trucker’s potential conflicts _
of interest about shipments which can be carried profitably
by surface. But it wiilteduce the trucker’s incentives to
thwart the diversion of that traffic to air. Without air
forwarding authority, a trucker can earn nothing by tyrning
shipments over to air carriers and, hence, has no reason
to do so. If the trucker or its affiliate is awarded air
freight forwarder authority, ‘however, the trucker will have’
incentives to permit air traffic to grow. As an air freight
forwarder or its affiliate, the trucker will have a stake in
the air forwarding business; the corporate system can con-
solidate shipments and realize earnings from the spread be-.—
tween the air carrier rates for small and large shipments,
It is clear that these truckers can do’ much for air transport
if they cooperate with their air arms’ activities, instead of
battling against any diversion of their surface traffic to air.

The Court’s concern about conflicts was not directed

' to a controlled experiment, limited to truckers who show
a plan to promote air freight conscientiously.. Thus, in
questioning whether truckers would boost air freight over
surface in marginal cases, or would support efforts to ex-
pand air forwarding terminal areas, the Court had in mind ‘
cases where the trucker-forwarder would be required to
balance the.economic interests of both its surface and air
activities. The successful applicants here,‘ however, are
organized as air-only components; each is insulated from
the trucking operation both by organization and by a man-
date to solicit the same customers. Similarly, when the

10 The Board does not adopt the examiner’s assumption that air
forwarding may not be as profitable as motor carriage. Insofar as
_ the record illuminates this question, it tends to show that some for-
warders -have rates of return which are higher than the applicants’.

*

ao

Court wondered whether independent forwarders would
remain vigorous enough to compete with motor carriers
and thereby insure that the truckers would promote air
freight, the Court’s fears premised “a large- scale invasion
by. motor carriers * * *” (391 F.2d at 304). The limited
_ number of. trucking-related forwarders to. be licensed will

‘ have no chance to silence the competitive voice of inde-
pendent forwarders—and certainly not of the airlines, who
promote nearly four-fifths of interstate air cargo.

It is still possible, of course, to speculate pro and _
con whether. the conflict of interest hypothesis has any
remaining vigor for truckers or affiliates like the three
applicants. The lessons of the past teach some skepticism.
By 1964, sixty-two percent of companies engaged in air
freight forwarding ‘were surface carriers or their affiliates.
Yet they have not dominated air forwarding; the preemi-
nent air forwarder is an independent (Emery) who captures
the lion’s share of total industry revenues. On the other
hand, the surface carrier-air forwarders have not failed to
promote air traffic; they include a number of leading air
forwarders.11_ While few if any of the existing surface
carrier-air forwarders have surface rights as competitive
with air as those of the long-haul truckers, the former’s
entry into air forwarding was also once opposed by air
transportation's defender¢”

The time has come, the Boarw believes, to test the
conflicts hypothesis in a controlled experiment. Each
applicant has given persuasive evidence of its intentidn to
promote air cargo. Each has offered a different organiza-
ngs pian to guard ‘against conflicts with the related

1 Though one ,exhibit (BOR- 1) purports to show that indepen-
dent air freight Tptwarders have been more productive than surface-
affiliated forwarders, the inclusion of Emery in the former group
distorts the comparison and renders it meaningless.

‘

-

~~»

ss 36

Surface operation. Only experience can verify or disprove
the applicants’ promise, or indicate whether one’s organiza- :
tional format is sounder than another’s. During the experi-
mental period, the Board will receive from the applicants
Special reports showirig whether the applicants are stimu-
lating new off-line business, increasing traffic from outside
present terminal areas, and receiving new traffic from their
Surface divisions or affiliates. That information will enable
the Board to: answer the conflicts question on the basis * ~
of fact, not surmise. .

If other trucking-related enterprises can show that they
are equally dedicated to air cargo promotion, they too \will
be eligible to participate in the experiment under the terms
of the proposed regulations issued today. As the regula-
tions make clear, however, only applicants whose proposals

affirmatively show promise of conscientious promotion will

be licensed. \

B 3 6
IV.

\

The applicants’ entry into air forwarding is also opposed
on the grounds that it will Supposedly decimate the existing
air forwarder industry. That contention is advanced pri-
marily by the Air Freight Forwarders Association, repre-
senting the American kxpress Company and 20 of the other
24 largest forwarders.12 The Board must reject.the argument.

r

The record contains little evidence designed expressly
to answer the impact question. The forwarders and their

12 The record shows 22, not 21 members of the Association; but
two members merged with’ each other last year. Airborne Freight
Corp., Order 68-9-140, Sept. 27, 1968. Two other Association mem-

"bers merged into firms which were not Originally part of the Assdécia- ‘

tion. A fourth Association member changed its corporate name.

¢

cy
allies did not present any diversion estimates; and they .
_ do not offer to do so now. Although the applicants
sponsored shipper witnesses who testified on this. subject,
the Board agrees with the examiner (Tr. 78) that the
shippers’ testimony is entitled to little weight pro or con.

_In these circumstances, the Board is called upon not
merely to consider the facts of record, but also to draw
inferences from them, taking into-account the Board’s
accumulated experience. Such judgments about the future
' necessarily involve elements of uncertainty. That is partic-

ularly true when, as now, the regulatory action “contem-
plates a proposed development, new, not existing,” Tequiring
a type of judgment going beyond “the mere evaluation
of past facts * * *.” See*American Airlines v. CAB,

192 F.2d 417, 420 (D.C. Cir. 1951). So, although the
Board cannot foretell the answer to the impact question
\with mathematical precision, it also Cannot escape the duty
>to determine the reasonable probabilities.

As we see it, those probabilities are heavily in favor
of the examiner’s conclusion that “[t]he market potential
is large enough, if developed, to support the existing for-
warders, the applicants, and a substantial numer of addi-
tional forwarders * * * .” The examiner’s assessment
rested only partially on the top 10 forwarders’ Operating
statistics. In addition, the examiner also correctly recog-
nized that the history of the entire forwarding industry’ is
- financial growth justifies allowing new competition, not
preserving the status quo.

One excellent guide to the forwarding industry’s ability
to withstand competition is the record of its growth since
the 1955 Investigation. Then, as now, the Board heard
the incumbent forwarders argue that the entry of surface-
controlled applicants (two railroad affiliates) would destroy -
competition. At that time, the evidence for the test year
(1953) showed that forwarders had shipped only 30 ,900

4 a
m

38

tons of freight and‘ had’ gross revenues of $13.5 million—~
Only Emery had a substantial overall profit ($407,000)

and only six other forwarders earned overall profits between
$10,000 and $30,900 (21 C.A.B. at 598, 656-657).

. In contrast, by 1964, the forwarding industry increased
its cargo shipments by nearly sevenfold, to 200,000 tons
of cargo. ‘By 1965, the industry’S gross revenues exceeded

those of 1953 by 12 times, equalling $163.6 million. And

by 1965 the number of forwarders earning profits of

$10,000 or more’ on farwarding operations was 35, of :

whom 16 earned between '$10,000-$30,000, nine earned

between $30,000-$100,000, seven earned between $100,000-

_$300,000;-and three earned over $475,000. Emery’s pro-
as fits were over $5.4 million. ~ ,

In the 1955 Jnvestigation, when it rejected the for-
warding industry’s pleas for a protettionist policy, the
Board found that “several vigorous successful forwarder
enterprises have already developed” and that the railroad-
controlled forwarders would encourage competition (21
C.A.B. at 545). Although the railroad-controlled forwarders
did not implement their authority, the number of author-
ized forwarders has increased from 43 at the time of the
Investigation to 137 in 1966. Despite this heightened
competition—or, more likely, partly because of it—the for-
warding industry has become much more affluent. In this

context, it would be illogical for the Board to reverse its

=e ne by adopting a protectionist policy found unjustified
O

a decade ago.

Moreover, the. Association’s arguments about the appli-

_ cants’ supposed ability to dominate forwarding are greatly

- exaggerated. Considering the applicants’ plans to conduct
their air forwarding ventures as independent enterprises,
the crucial facts relate to the size of those operations, not
of their affiliates’ surface services. The record shows that
P.I.E. Air Freight Forwarding anticipates. first-year revenues

ec

a3:

. of $4.2 million; CF Air Freight, of $1.5 million; and

Navajo Freight Lines, of $1.8 million. In 1965, eight of.
the Association’s members grossed over $4. million; 13. °
members (and one nonmember) grossed: over $1 million.
With the industry’s tremendous growth~rate continuing, '

-other forwarders will have an opportunity to reach the --

million dollar mark before the -applicants begin Operations
this year or next. Contrary to the examiner’s finding,
these stronger forwarders may not suffer even “minor

‘losses’ with the entry of the applicants into competition.

As to most of the remaining, smaller forwarders, the
examiner prophesied that some may be initially injured
but, will be strehgthened in the long run by the addition
of strong new f warders like.the applicants. Even that
initial injury is opan to question. Many smaller forwarders
| ice in particular commodities or
tailor their operations to uniqué needs of certain shippers.
Even among forwarders who will compete with the appli-
cants, little or no diversion may result. On an industry-
wide basis, the three applicants’ aggregate initial revenues
are anticipated ta be equivalent to less than five percent
of the independentNorwarders’ 1965 revenues—and less
of their 1969 or 1970 revenues... Part of the applicants’
revenues will not represent diversion; they will come from
newly-generated business. .All in all, for the overwhelming
majority of forwarders, the Board believes that the appli-
cants will stimulate so much new freight that they will
contribute to the existing forwarders’ continued ‘growth—
and not undermine it.

Obviously, a few of the weakest forwarders may dis-
continue operations after the long-haul truckers enter the
field. Notwithstanding the examiner’s speculation, how-
ever, it cannot be said that the demise of those forwarders
will be hastened by that new competition. Taking advan-
tage of the. Board’s free entry policy and the industry’s
low initial capital requirements, some small companies

——EEeEeEe—EEEeE Ei

40

have begun forwarding businesses which are ill-conceived,
inadequately financed, and poorly managed. To those

* ventures, it makes no difference whether competition comes
-s from the applicants or from the many large independent

‘-torwarders. Whether or not the applicants and other
truckers are licensed, those few weak forwarders will dis-
cover that competition is inevitable and inevitably disastrous.

- The Board finds no reason to believe that air forwarding
will be inundated by long-haul truckers and railroads. First.
so far as truckers are concerned, only two long-haul truckers
other than the applicants and their affiliates applied before
our September 1967 decision to become or to acquire air
forwarders; only 10 more applied thereafter. Second, our

monitored-entry policy will be selective as to those .truckers

who can qualify to become forwarders. Moreover, our
proposed rules provide that a trucker forwarder must make
an appropriate showing “that its operations (either alone
or together with other similar carriers granted air forward-
ing authority) will not result increating a monopoly or
monopolies and thereby restrain competition or ‘jeopardize
another air carrier, or will not otherwise be inconsistent
with the public interest.” Finally, contentions regarding
railroads are to be evaluated in proceedings regarding rail-—
roads, _

In the final analysis, the Board must look ahead aad
give its Opinion whether air transportation will benefit
more from increased competition or from protectionism.
In.our view, the case for protectionism is far more specu-
lative than the case for competition. And to the extent
necessary, Competition is also the preferred: statutory goal.

V.
Airlift asserts that the applicant will gain control of
most air cargo and, by threatening to withhold such cargo
from the direct air carriers, will be able to pressure the

¥ ‘

4]

direct air carriers to grant rate concessions. But for the
reasons already explained, the Board believes that trucking-
related forwarders will not dominate air cargo. Nor will
they be likely to try to act in concert in negotiating with
the airlines. Rather, individual trucking-related forwarders
can be expected to compete vigorously with each other,
and also to face strong competition from independent
forwarders and the independent airlines. Hence, as the
examiner correctly concluded, the argument espoused by
Airlift “is based on assumptions not in accord with the
facts of present day air transportation’,

Vi.

The applicants’ authorizations will be made subject
to the conditions spelled out. in the accompanying order.
While these conditions will enable the Board to monitor
and maintain control over the experiment, the Majority
does not believe that the requirements will create proce-
dural difficulties. ;

The reporting condition will enable the Board to
monitor the experiment closely. Whereas independent
forwarders now file their reports under Part 244 semi-
annually, the applicants will file their special reports
quarterly. They will be directed to provide new, addi-
tional traffic and station informationwhich will show
whether they are promoting air freight m new, untapped
sources, At least some of the independent forwarders will
file the more detailed reporting information so that the
Board can evaluate the Operations of independent Ind
trucker-affiliated forwarders on a comparable basis.

Together with the Part 244 filings by* independent
air forwarders, the applicants’ filings will show if the appli-
cants” Operations have any undue competitive effect upon
the independent forwarding industry. We do not antici-
pate that our staff will encounter difficulties in analyzing

42

the reports promptly and in keeping the. Board fully in-
formed. Conditions .in the applicants’ licenses will give
the Board power to protect existing forwarders by restrict-
ing, suspending, or terminating the applicants’ authoriza-
tions if necessary. Unless the experiment ends sooner,

the Board will reevaluate it at the end of five years. |

The new regulations incorporate similar safeguards.
In order to consider the possibility that the new reporting
regulation may burden forwarders, the Board has invited
parties to the rulemaking. proceeding to comment on this
point and to submit proposals to except smaller forwarders
from the new rule. 9

VIL.

Although the Board has found that licenses should
be granted to three of the applicants, it has reached a
different conclusion regarding the fourth applicant, D. C.
International, Inc. |

In Order E-25725 the Board deferred action on D. C.’s
application because National City Lines, Inc., a motor car-
rier holding company whose acquisition of control of D. C.
had been approved by the ICC, had not applied for Board
approval of the control relationship. Thereafter, D. C.’and
Los Angeles Seattle Motor Express, Inc., a major West
Coast trucker, agreed to merge with and into T.I.M.E. _
Freight, Inc., another transcontinental motor carrier. As
a result of this merger, T.I.M.E. Freight will change its
name, to T.1.M.E.—D.C., Inc., and will be controlled by
National City Lines. On . 1968, the parties sub-
.mitted a petition requesting both substitution of T.1.M.E.
Freight in lieu of D.C. as the party-applicant, and approval
of the control and interlocking relationships.

As we see it, these events make D.C.’s present appli-
cation moot. D.C.’s promotional plans, which were the

43 ie

weakest before us, were premised upon the corporate
organization existing at the time of hearing. There has

been no opportunity to explore on the record what changes
may result from the major corporate reorganization. Accord-
ingly, we find that D.C.’s application should not be granted,
although the new carrier can refile a new application under
eur proposed regulations.

VIL.

The Board will deny the-motions of seven long-haul
truckers or trucking subsidiaries to consolidate their appli-
cations for forwarding authority, with this proceeding. ee
Similarly, we will deny the request of four of those car
riers for permission to intervene.

Plainly, movants are not entitled to consolidation or
to intervention as a matter of‘law. Under the Board’s
_ Rules of Practice, motions to consolidate must ordinarily
be filed by the time of the prehearing conference and
, must ordinarily relate to an application pending by that
time. Requests for intervention must be filed by that
date too. All the motions here were filed after the Court’s
remand. One motion selinpe to an application filed eight
- months after the prehearing conference and after the
hearings began. The other motions concern applications
that were not submitted until after the Board published
its first opinion. ; end

While the Rules allow the Board to grant consolida- .
tion. or intervention if the movants show good cause for |
their failure to file on time, the’ movants have not given
ample justification here. In essence, their position is that
the Court remand changed the ground rules and that, for
the first time, the applicants’ applications and the movants’
applications have become mutually exclusive. We disagree.

44.»

Of course, the Board has discretion after a Court re-
mend to reopen the record, to allow new interventions,
and to consolidate the original applications with subsequently
filed Ones. But where, as here, the Board can cure the
Court’s objections on the basis of the existing record, it is .
-not obkgated to hold new hearings simply to convenience
newcomers like the moyants. That is particularly so since
the applications are not mutually exclusive.’ The Board’s
_ decision today does not foreclose the movants’ entry in
later proceedings. Under the Board’s proposed regulations,
movants will be entitled to have their applications processed
_ under the same criteria applied to the three successful

applicants here. ;

The Board’s decision not to limit the experiment to
the three applicants ends any real likelihood that the
experiment will create unfair dislocations within the motor
carrier field. Actually, apart from the applicants and. the
movants, only five long-haul truckers have been interested
enough in air forwarding to file applications. In these
circumstances, any possibility that the movants or others
will be prejudiced by later Board action closing the class
is remote and speculative.

In sum, to withhold the applicants’ licenses now would
be unfair both to them and to the public. The applicants
have waited three years for their authorizations, expending
substantial sums of money in the process. . But more im-
portantly, shippers also await the benefits which the appli-
_cants’ authorization will bring. As we see it, any additional
delay cannot be squared with the public interest.

?

IX.

The last issue to which we turn is the Air Freight
Forwarders Association’s request for a moratorium. Accord-
‘ing to the Association, the Board should hold its action in
abeyance while it assesses the effect of the new terminal

6

20, rh 4 v3 ¥ ‘2,
area policies, the progress of ‘the, ade Sir plification Act
of 1968, and the renewed promotion of joint _aitline-truck
agreements under Section 1003 of the Act. The Associa-

tion’s arguments are unpersuasive.

The Board has. every intention to continue processing
forwarders’ requests to expand their pick-up and delivery
services beyond presently defined terminal areas. The
Board has granted many of those requests since judicial
decisions clarified the Board’s authority nearly two years
ago.13 Our experience shows, however, that expanded
terminal authority for air forwarders is not and will not
be a panacea. Many potential air freight markets lie out-
sidé the expanded terminal areas defined in forwarder tar- -
iffs approved or presently pending. And both inside and
Outside terminal areas, the competition brought by vigorous,
new entrants like the applicants will still be beneficial.

Proposed legislation known as the Trade Simplification
Act of 1968 was introduced in the 90th Congress but was
not enacted. Whether similar legislation will be introduced
in the 91st Congress is unknown. Even if enacted, how-
ever, that -legislation’s' main significance here is solely for
joint rates between truckers and forwarders—in international
transportation only. Confirmation of the legislation’s - |
limited impact here is Supplied by the fact that the 1968
bill’s primary advocate, the Department of Transportation,
has taken a position favoring motor carrier entry into air
forwarding.14 |

'3 Law Motor Freight, Inc. v. CAB, 364 F.2d 139 (1 Cir. 1966):
National Motor Freight Traffic Assoc., Inc. y. CAB, 374 F.2d 266
(D.C. Cir. 1966). Certiorari was denied in both cases on May 15,
1967, 387 U. S. 905.

14 The Department requested leave to file its Statement of Position *
as an Otherwise unauthorized document. Considering the Department’s
statement of its reasons for filing late, and the lack of prejudice to :

(Continued)

46 z :

Renewed promotion of joint agreements between air-
lines and truckers under Section 1003 of the Act will not
moot the need for the applicants’ services. In the past,
very little traffic has moved under airline-truck agreements.
The record is filled with recriminations about why that is
so. But the ultimate reason is economic. Most airline:truck
shipments have involved a relatively short surface haul. So
long as surface earriers can earn nothing for the longer air
journey, they have no incentive to turn shipments over to
airlines. To delay our décision will only perpqtuate the
present, ee, situation.

We have reviewed the parties’ remaining contentions
and find that they do not alter our decision. In view of
the foregoing and all the. facts of record, we find:

1. That CF Air Freight, Inc., and Navajo Freight
Lines, Inc., are capable of performing air transportation
as domestic and international air freight forwarders, and
that PILE. Air Freight Forwarding, Inc., is capable of per-
forming air transportation as a domestic air freight forwarder,
and that all are capable of conforming to the provisions of
the Federal Aviation Act and the Board’ S rules and regula-
tions thereunder.

2. That (a) the authorizations of CF Air Freight,
Inc., Navajo Freight Lines, Inc., and P.I.E. Air Freight For-
warding, Inc., as air freight forwarders, and (b) the control
of CF Air Freight, -Inc., by ‘Consolidated Freightways, Inc.,
the control of P.I.E. Air Freight Forwarding, Inc., ‘by
Pacific Intermountain Express Co., and the control of Na-

- tional Air Freight Forwarding Corporation by Pacific

Z

14 (Continued) —
any party, we will accept the Department’ s document. Correspondingly,
we will deny the Air Freight Forwarders Association’s motion to strike
but will accept its reply pleading.

’

m

47

Intermountain Express Co., will not be inconsistent with
_or adverse to the public interest and‘ will not result in
creating a monopoly or monopolies and thereby -restrain
competition or Jeopardize another- air carrier not a party
ua ,

. 3. ThECF Air Freight, Inc., and Navajo Freight
Lines, Inc., should be authorized.to perform air transpor-
tation as domestic and international air freight forwarders
and that P.I.E. Air Freight Forwarding, Inc., should- be
authorized to perform air transportation as a domestic
air freight forwarder, each for a period of five’ years (sub-
ject to the provisions of subparagraphs 7(a) and 7(b) of
the attached order).

4. That approval should be granted to the controk
of CF Air Freight, Inc., by Consolidated Freightways, Inc.:
to the control of P.I.E. Air Freight Forwarding, Inc., by
Pacific’ Intermountain Express Co.; and to the contro! of
National Air Freight Forwarding Corporation by Pacific
Intermountain Express Co., the last for a period of five
years: (subjecf to the provisions of subparagraphs 7(a) and
/(b) of the attached order).

5. . That the interlocking relationships between the
officers and directors of Consolidated Freightways, Inc.,
and CF Air Freight, Inc.; of Pacific Intermountain Express
Co., and P.L.E. Air Freight Forwarding, Inc.; and of Pacific |
Intermountain _Express Co., and National Air Freight For-
warding Corporation, are not adverse to or inconsistent
with the public interest and should, therefore, be approved.

6. That the approval of the control and interlocking
relationships described in paragraphs 4 and 5 above should
be subject to the provisions of Part 251 of the Board’s
Economic Regulations now in effect and as hereafter
amended.

48
/ A .
7, That the authorizations and approvals granted
herein should be subject to the conditions contained in
the attached order.

8. That the Board should retain jurisdiction over
this proceeding for the purpose of reviewing at any time
the approvals and authorizations granted herein and of
imposing at any time, with or without hearing, such other
conditions as the Board may find just and reasonable.

9, That the application of D. C. International, Inc..
and the application of T.I.M.E. Freight, Inc.,.for substitu-
tion as party-applicant and for other relief, should be dis-
missed without prejudice.

10. That the motions to consolidate filed by ILM
Freight International, Inc., Roadway Express, Inc., Western
Gillette, Inc., Wilson Air ‘Freight Forwarding Systems, Inc..,
by Gateway Transportation Co., Inc., and Gateway Avia-
tion Co., Inc., by Yellow Transit Freight’ Lines, Inc., e¢ al.
and by Mercury Motor Express, Inc., should be denied:
and that the petition of the first four named movants for
leave to intervene should likewise be denied.

ll. That the motion of the Department of Transpor-
tation to file a statement of position should be granted;
and that the Air Freight Forwarders Association’s motion
to strike the Department’s pleading should be denied. but
Should be accepted as a reply thereto.

An appropriate order will be entered.

CROOKER, Chairman, MINETTI, GILLILLAND and.
ADAMS, Members, concurred in the above opinion.
MURPHY, Vice: hair, filed the attached dissent.

; 49

-MURPHY, VICE CHAIRMAN, DISSENTING: :

Without further evidentiary hearings, the only sound
course of action open to the Board, in my judgment, is
to deny the pending applieations and to terminate: this
investigation. I am not satisfied that the revised findings
are dispositive of the concerns articulated by the Court or
that they can find convincing support in the record.

The “monitored entry” system as proposed by the
majority consists, in my opinion, more of shadow than of
substance. Pragmatically speaking, we cannot hold the
gate against the tide of large, well financed applicants
from the long-haul trucking industry and the railroads
whichswill follow promptly upon entry of the order in«
this case.

The element of ‘this case which has most concerned
me is the conflicts of interest ‘which will face trucker-
forwarders. That such conflicts exist is undeniable. Rec-
ognizing this fact, the Board has endeavored to devise a
system of rules*and reporting regulations to cope with
the problem. However, I fear the proposed reporting
rules will lead us into a procedural morass as well as im-
pose an unbearable burden on all parties in interest. Bet-
ter that we take a hard look at the policy problem, in
light of the Court’s commentary, in a reopened evidentiary
hearing. . °

Insofar as the Court was concerned about impact on
the air freight forwarding industry, the record now is the
Same as it was when the question was before the Court.
The majority’s revised findings on this important issue
are of modest solace to those forwarders who will be put*s
out of business by the new trucker entrants and ‘to those
others who have literally created the business and ‘whose
potential growth mays be seriously undermined.

7

50

j

I can well understand the truckers’ motivation to enter
air freight forwarding which is a relatively new and Mra-
matically expanding field. It is patent that the largest
volume of future freight available for air service is that
pool now carried by surface modes. Air freight, is now
in a period of rapid growth whereas the surface modes
have reached a plateau of maturity with their future growth
keyed to annual increases in the economy. The availability
to air of traffic presently moving by surface modes far
exceeds any new traffic that air carriers might develop.

Hence, the question is not so much what the trucks can
do for air transport but rather what air transport authority

can do for the trucks. The majority opinion seems to
be keyed entirely the other way and to that extent con-

‘Stituteg an overdrawn indictment of the direct and indirect

air carriers presently promoting the booming dir freight
business.

The majority places great stress on the ability of the
truckers to bring the benefits of air freight to smaller off-
line points. Yet no applicant proposes to so limit its
operations. The fact of the matter is that there is presently
a comprehensive system of surface transport linking virtually
every hamlet with the nearest air terminal whether the ser-
vice is by an airline or an air freight forwarder truck, a
local cartage agent or an over-the-road line-haul truck. ser-
vice. Consequently, this is not a case in which the existing
system is so devoid of available. service that we must turn
to the ranks of the-very largest line-haul truckers, eventually
the railroads et al, to insure the availability of air service
to so-called off-airline points.

The trucker applicants are not essential to the continued
healthy growth and expansion of the air freight market.
if granted authority they would become very powerful
competitors operating in a framework of continuous conflicts
as to their best: corporate interests. The monitored entry
procedure is to all intents and purposes iree entry upon

51

recitation of the required incantation. These factors and
the revised opinion do not, in my view, measure up to
the standards imposed upon us by the Court in the re-
mand. As I have indicated many times before, | am an
ardent advocate of modernized coordination among the
transport modes so that consumers may have the very
best service. However, I fail to comprehend how inter-
modal coordination will be advantaged by this decision.

For these reasons of policy and procedure, I must
dissent.

/s/ Robert T. Murphy

f Appendix

DOCKET 16857

The Examiner’s initial decision referred to herein is
not attached to this copy because of the wide circulation
given at the time of its release. The initial decision is
attached to the original of the Board’s Opinion and to
the official copies in the Board's files and may be examined
there. It will also be printed as part of the official “Civil

Aeronautics Board Reports”’.

[Ed. note: The Examiner's initial decision appears infra
at A-132] a

as
ww

t 7” - ORDER

A tull ‘public hearirig having been held in the above-
entitled proceeding, and the Board, upon consideration
of the record, having issued its opinion containing its
findings, conclusions, and decision, which is attached here-
to and made a part hereof:

IT IS ORDERED:

1. That Operating authorizations to engage in air
transportation as domestic and international air freight
forwarders in accordance with’ the provisions of Parts 296
und 297?%of the Economic Regulations of the Board be
issued to CF Air Freight, Inc.. and Navajo Freight Lines.
mc.*

2. That an Operating authorization to engage in air /
transportation as a. domestic air freight forwarder in accord-
ance with the provisions of Part 296 of the Economic
Regulations of the Board be issued to P.LE. Air Freight?
Forwarding, Ine.: °

* That the control of P.LE. Air Freight Forwarding,
Ine. by Pacific Intermountain Express Co., and the inter-
locking relationships involved therein be and they hereby
ire approved: ‘

4+. That the control of National Air Freight For-
warding Corporation by Pacific Intermountain Express Co..
and the interlocking relationships involved therein be and
they hereby are approved:

5. That control of CF Air Freight, Inc.. by Con-
solidated Freightways, Inc., and the interlocking relation-
ships involved therein be and they hereby are approved:

> -

~
;

‘ ‘

54

6. That (a) the operating authorizations of CF Air
Freight, Inc., Navajo Freight Lines, Inc., and P.LE. Air
Freight’ Forwarding, Inc.. and (b) the approval of the
control of National Air Freight, Forwarding Corporation
by Pacific Intermountain Express Co., shall terminate five
years from the effective date of this order (subject to the
provisions of subparagraphs 7(a) and 7(b) hereof):

7. That the authorizations and approvals granted
herein shall be subject to the following conditions:

(a) The Board may revoke an authorization
or approval, in whole or in part, if it finds after
hearing that (i) the holder is no longer capable
of performing the authorized air transportation
or of conforming :o the Act or the regulations
thereunder; (ii) the’ holder is no longer willing
to conscientiously promote air cargo and to

' benefit air transportation; or (iii) the holder’s
operations, alone or together with other similar
Carriers granted air freight forwarding authority,
will create a monopoly or monopolies and
thereby restrain competition or jeopardize
another air carrier not a party thereto, or will
otherwise be inconsistent with the public interest.

(b) If proceedings are instituted to revoke
an authorization or approval under paragraph
7(a), the Board may suspend or limit such
authorization or approval pending the outcome
of the proceedings in accordance with .the
procedures specified by Sections 296.48 and
297.43 of the Board’s Economic Regulations.

(c) CF Air Freight, Inc.. Navajo Freight
“® 1 ines, Inc., PILE. Air Freight Forwarding, Inc.,
and National Air Freight Forwarding Corpora-
tion shall file, in addition to the financial and
Statistical réports prescribed by Part 244 of the
Board’s Economic Regulations. the following
schedules in the format attached to this order:

55

(i) The “Originating Air Station
Data Schedule” reflecting the source of
air freight tonnage enplaned and deplaned
at originating air station (exclusive of
reconsolidations) and data on the miles
of surface movement of the air freight
before and. after its air ‘transportation.

(ii); The ‘Supplemental Operating
Statistics Schedule”: reflecting the number
and weight of those air freight shipments
handled by both the air-freigh® forwarder
and* the surface carrier who is its parent
or affiliate or who operates as a separate
division within the same corporate structure.

(iii) The “Analysis of Traffic by
Weight Breaks” schedule reflecting, by
specified weight breaks, the number and
weight of shipments handled in air freight
forwarding operations and the revenues
received for the shipments,

(d) The ‘persons named in paragraph 7(c)
above shall also file with the Board, within 45
days after the close of each Calendar year, a
report showing as of December 31 of such
year the location of each specialized air freight
forwarding station and of each surface transport
terminal at Which air freight forwarding services
are offered. The statement shall indicate, for
each station or terminal. the number of drivers.
salesmen, and oak personnel who are assigned
to promote air freight exclusively.

(e) Navajo Freight Lines. Inc., Pacific, Inter-
mountain Express Co., and Consolidated Freight-
ways, Inc., shall file with the Board’s Bureau
of Accounts and Statistics. not later than 45

56

days after the end of each calendar quarter,
the “Analysis of Traffic by Weight Breaks”
schedule, in the format attached to this order,
reflecting, by specified weight breaks, the
‘number and weight of shipments handled in
long-haul motor carrier Operations and the

\ revenues received for the shipments.

(f) In addition, the persons named in
paragraph 7(e) above shall file the “Analysis
of Traffic by Weight Breaks” schedule showing

’ comparable data, to the extent available, for
the corresponding quarter of each of the pre-
ceding five years.

8. That the approval Of the control and interlocking
relationships described in paragraphs 3, 4, and 5 above be
and hereby are subject to the provisions of Part 251 of
the Board’s Economic Regulations now in effect and as
hereafter amended; _ t

9. That the application of D. C. International, Inc.,
and the application of T.I.M.E. Freight, Inc., for substitution
as party-applicant and for other relief, be and hereby are .
dismissed without prejudice;

10. That the motions to consolidate filed by [LM °*
Freight International, Inc., Roadway Express, Inc., Western
Gillette, Inc., Wilson Air Freight Forwarding Systems, Inc.,
by Gateway Transportation Co., Inc., and Gateway Aviation’
Co,.: ine. by\ Yellow Transit Freight Lines, Inc., ef al, and
by, Mercury Motor Express, Inc., be and hereby are denied;
and that the petition of the first four named movants for
leave to intervene be and hereby is denied;

11.. That the motion of the Department of Transpor-
tation to file a statement of position be and hereby is
granted; and that the Air Freight Forwarders Association’s
motion to strike the Department’s pleading be and hereby
is denied, but such pleading be and hereby is accepted as
a reply thereto;

fd

12. That the Board shall retain jurisdiction over this
proceeding for the purpose of reviewing the approvals of
the authorizations, common control, and interlocking re-
lationships granted herein and/or of imposing at any time,
with or without hearing, such other conditions as the
Board may find just and reasonable; and

4

g t
‘13. That this order shall become effective immediately.

By the Civil Aeronautics Board:

/s/ Harold R. Sanderson

SO Secretary
(SEAL) ey | ‘, %
yy
ty i

58

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————Y

7) Ce) (2) 0) 5) (") ( Economic Regulations
Docket No. 20926

Dated: Apr 21, 1969>

PART 399
STATEMENTS OF GENERAL POLICY

PART 296
CLASSIFICATION AND EXEMPTION OF
INDIRECT AIR CARRIERS

PART 297 ; “es
CLASSIFICATION AND EXEMPTION OF INTER-
NATIONAL AIR FREIGHT FORWARDERS

PART 244

FILING OF REPORTS BY AIR FREIGHT FORWARDERS,
INTERNATIONAL AIR FREIGHT FORWARDERS,
,AND COOPERATIVE SHIPPERS ASSOCIATIONS

PROCESSING OF APPLICATIONS BY LONG-HAUL MOTOR
CARRIERS OF GENERAL COMMODITIES AS AIR
FREIGHT FORWARDERS OR INTERNATIONAL
AIR FREIGHT FORWARDERS

NOTICE OF PROPOSED RULE MAKING

Notice is hereby given that the Civil Aeronautics Board
has under consideration proposed amendments to Parts 399,
296, 297, and 244 of the Board’s Regulations (14 CFR a
Parts 399, 296, 297, 244) concerning the filing and pro-
cessing of applications of long-haul motor carriers of general

69

commodities for authorization as air freight forwarders

or international air freight forwarders and applications of
long-haul motor carriers of general commodities for approval
of control of an air freight forwarder or international air
freight forwarder. The principal features of the proposed
amendments are further described in the Explanatory
Statement, and the proposed amendments. are set forth
in the Proposed Rule. This regulation is proposed under
the authority of Sections 204(a), 101(3), 407 and 416
of the Federal Aviation Act of 1958, as amended, 72
Stat. 743, 49 U.S.C. 1324; 72 Stat. 737, 49 U.S.C 1301;
_72 Stat. 766,-49 U.S.C. 1377; 72 Stat. 771, 49 U.S.C.
1386. It interprets or applies sections 102 and 408, 72
Stat. 740, 49 U.S.C. 1302: 72 Stat. 767, as amended by
74 Stat. 901, 49 U.S.C. 1378:

Interested persons may participate in the proposed
rule making through submission of twelve (12) copies of
written data, views, or arguments pertaining thereto, ad-
dressed’ to the Docket Section, Civil Aeronautics Board,
Washington,'D. C. 20428. All| relevant matter or com-
munications received on or before May 23, 1969, will be
considered by the Board before taking final action on the
proposals. Copies of communications will be available for
examination by interested persons in the Docket Section,
Room 712. Universal Building, 1825 Connecticut Avenue,
N. W., Washington, D. C., upon receipt thereof.

By the Civil Aeronautics Board:

ee:

/s/ Harold R. Sanderson
Secretary
(SEAL) |
VICE CHAIRMAN MURPHY DISSENTING:

See my dissent attached. to Order 69-4-100.

/s/ Robert T. Murphy
] ‘ oe

70

) , cs)
EXPLANATORY STATEMENT

In Order 69-4-100, dated April 21, 1969, issued con-
currently herewith, the Board determined to authorize three }
long-haul motor carriers of general commodities or their>
subsidiaries to engage in air. freight forwarding operations
on. an experimental basis for a temporary period. It also
approved the resulting control and interlocking relationships.

At the same time the Board announced that applications
by other motor carriers to enter the forwarding field would
be processed under regulations articulating a policy of
monitored entry. The proposed regulations are intended ~

to implement that policy.
J

In brief, these regulations provide that air freight. for-
warding authority may be granted to long-haul motor car-
riers of general commodities on an individual application
basis, with or without hearing, upon a showing that (1)
the applicant is capable of performing the proposed air
transportation and of conforming to the Act and the regula-
tions thereunder; (2) the applicant will conscientiously pro-
mote air cargo and will benefit air transportation; and (3)
the applicant’s operdtions, alone or together with those of
other similar carriers granted. air forwarding authority, will
not result in creating a monopoly or monopolies and there-
by restrain competition, or jeopardize another air carrier
and will not otherwise be inconsistent with the public
interest (Parts 399, 296 and 297). The regulations further
provide for approval of applicatians of long-haul motor’
carriers of general commodities for control of air freight
forwarders or international air freight forwarders, with or
without a hearing, based upon similar criteria (Part 399).
Finally, there will be new reporting requirements (Part 244)
requiring motor carrier/air freight forwarders to disclose ©
both their own dnd their surface affitiates’ traffic in various
classes of small shipments as well as other data which will
indicate whether the applicants are stimulating new off-line
business, increasing traffic from outside present terminal areas,’
and receiving new traffic from their surface divisions or’ affiliates.

71

Specifically, this new class of ‘air carriers will be
‘required to file three additional schedules: (1) an “Orig-
inating Air Station Data” schedule to reflect the source ©
and distribution of t6ns enplaned and deplaned at the
originating air station, and data on the miles of surface
movement of the air freight before and after its air trans-
portation; (2) a “Supplemental Operating Statistics” schedule
to provide the number and weight of those intermodal
air freight shipments handled by both the air freight. for-
warder and the surfs cari who is its parent or affiliat
or who operates as a arate division within the same
corporate structure; (3) an “Analysis of -Traffic by Weight
Breaks” schedule to indicate, by specified weight breaks,
the number and weight .of shipments handled in air -freight
forwarding operations and the revenues received therefor;1
and (4) an annual report setting forth the location of each
air freight farwarding station and each surface transport
terminal at which air freight forwarding services are offered
as well as certain personnel data relating to such’ stations
and _ terminals.

Independent forwarders will also be required to file
the “Originating Air Station Data” and the “Analysis of
Traffic by Weight Breaks” so that .the Board can evaluate
the Operations of independent and trucker-affiliated for-
warders on a comparative basis.?

he

| The related long-haul motor carriet will also be required to file an
“Analysis of Traffic by Weight Breaks” schedule containing applicable
data relative to its long-haul motor carrier operations, for both the current
* quarter and the corresponding quarter of each of the preceding five years.

2 The Board recognizes that the new reporting requirements may
prove burdensome to some of the independent forwarders, particularly the
smaller carriers. While the Board can waive the requirements for individual
carriers, it may be that the rule itself should not apply to the entire class
of independent forwarders. Comments on this issue should contain specific
data regarding the burdens involved in preparation of the reports and
specific proposals for delineating the exempted class of carriers.

!

he

It is our intention to impose these requirements for
a temporary period coterminous with the term of the
operating authorizations issued -in the Motor Carrier-Air
Freight Forwarder Investigation: (Docket 16857, Order 69-
4100) and for the duration of any proceeding in Waich a
renewal of ee authorization is sought.

-PROPOSED RULES.

It is proposed to amend Parts 399, 296, 297 and
244 of the Board’s Regulations (14 CFR-Parts 399, 296,
297, 244) as follows:

PART 399

1. Amend Part 399- by jai to the table lof con-
tents a new section at the end of Subpart B, reading as .
follows:
Sec, | 5 bt
399.218 Processing of applications of long-haul: motor:

_. cCarriers-for authority as air freight forwarders

or international air freight forwarders.

2. Amend Part 399 by adding new § 399,21 to read
as follows: :

§ 399.21 Processing of applications of long-haul motor :
scarriers for authority as air freight forwarders
or international air freight forwarders.

(a) General. This Policy Statement prescribes
the procedures and general standards which the Board will
use in -processing applications of long-haul motor carriers .
of general commodities for authorization as air freight
forwarders or international air freight forwarders. It will
also apply to such motor carriers’ applications for Board
approval of the acquisition of control of such forwarders.

te

(b) Definition of long-haul motor carrier. As
used in this section, the term “long-haul motor carrier”
means a motor carrier holding operating rights issued by
the Interstate Commerce Commission to haul general. com-
modities between any pair of points which are over 500
_ air miles apart, or an affiliate’ of such a carrier.

(c) Applicatians for forwarding authority. Where
a long-haul motor, carrier applies for. authority as an air
freight forwarder or an international air freight forwarder
and submits a proposal to conscientiously promote air cargo
in conformity with Part 296 or 297, the following will be
the-Board’s policy in ordinary circumstances:

(1) The Board will process the
application without hearing. ~

(2) The Board. will not deem the size,

_ geographical extent, or general commodity

. lights of the long-haul motor carrier’s sur- oN
face transport authorization and operations, \
of, themselves, as factors indicating that the
applicant’ S Operations as an air freight for-
warder or international air freight forwarder
will result in creating a monopoly or mo--
nopolies, and thereby restrain competition |
or jeopardize any: air carrier, or will other-
wise be inconsistent with the public interest.

~ (d) Applications for acquisition of control.
Where a long-haul motor carrier applies for Board approval
to acquire control of an air freight forwarder or an inter-
national air freight forwarder and submits a proposal to
conscientiously promote air cargo, the Board’s policy in
ordinary circumstances will be ‘as follows:

(1) The Board will process the ‘applica-
tion without a hearing if it determines (i)

! For the definition of “affiliate” see $296.1(e), infra, p. 9.

74

that the transaction which is the subject
of the application does not .affect the
control of an air carrier directly engaged
in the operation of aircraft in air trans
portation, does ‘not result’ in creating a
monopoly and does not tend to restrain
competition, and (ii) that no person dis-
closing a substantial interest thén currently
is requesting a hearing. _

(2) The Board will not deem the
size, geographical extent, or general com-
modity rights of the long-haul motor car-
rier’s surface transport authorization and
Operations, of themselves, as factors indi-
cating that the motor carrier’s control of
the air freight forwarder or international
air freight forwarder will result in creating
a monopoly or monopolies, and thereby
restrain competition or jeopardize another
air carrier not a party to the consolidation,
merger,: purchase, lease, Operating contract,
or acquisition Of control, or will otherwise
be inconsistent with the public interest.

(e) Exceptions.

(1) If the Board finds that the long-
haul motor carrier has not made a prima
facie showing that it will conscientiously
promote air cargo, the Board may (i) deny
the application without hearing; or (ii)
order a hearing.

(2) If the Board finds that the long-
haul motor carrier has not made a prima
facie showing that its operations (either
alone or together with other similar carriers
granted air forwarding authority) will not

75

result in creating a monopoly or monop-
olies and thereby restrain competition or
jeopardize another air carrier, or will not
otherwise be inconsistent with the public
interest, the Board may (i) deny an applica-
tion without hearing; or (ii) order a hear-
ing.

(3) The Board may also order a hear-
ing if any person demonstrates that he will
present evidence which may contradict the
prima facie showing of a long-haul motor
carrier described in this paragraph.

(f) Priority in processing applications and de-
ferral of applications. oh ¢

(1) Applications will not necessarily
be scheduled for processing in the chrono-
logical order in which they are filed. In
ordering its docket, the Board will give
priority to those applications which appear
best to effectuate the public interest, con-
sidering, among other things: (i) the num-
ber of similar applications previously proc-
essed and pending; (ii) the nature and
extent of air freight forwarder services
presently available at the cities in which
applicant proposes to provide service; (iii)
the nature of any objections filed: and
(iv) the complexity of issues raised.

(2) The Board may defer action on
any application or class of -applications
covered by this. Policy Statement if it con-.
cludes that the public interest so requires.

> PART 296 _

3. Amend the table of contents of Part 296 by
adding Subpart, ] entitled as follows: —

76

a

—s

. " Subpart i hatteidioninn of Long-haul

Sec.

296.80 *

396.81
296.82
296.83
296.84
296.85
296.86
296.87
296.88
296.89

4. Amend 8296.1 by adding paragraphs (d) and (e)

Motor Carriers of General
Commodities as, Air Freight
Forwarders

Applicability of subpart.
Applicability of other subparts.
Applicability of nol@y statement.

Application for operating authorization.

Notice.

Objections.: :

Criteria for authorization. ,
Conditions. he
Duration. : z
Revocation or suspension.

to read as follows:

§296.1

Definitions.

‘For the purposes of this part:

* * * *

-

(d) ‘“‘Long-haul motor carrier” means a motor

carrier holding operating rights issued by the Interstate
Commerce Commission to haul general commodities between

any pair of points which are over 500 air miles apart, or
an affiliate of such a carrier. * j

_ (e) An “affiliate” of a long-haul motor carrier
or an air freight forwarder means a person who controls
such carrier or is controlled by such carrier or by another

person who controls or.is controlled by such carrier.

~~ ra

A

A-

77

person who owns, directly, or indirectly, 20 percent or
more of the outstanding issued capital stock of a carrier, . --
in the absence of a proper showing to the Board that he
does not control the carrier despite his’ stock ownership,
shall be deemed to control saith carrier for udoinn of

this part. -—

3. “Amend Part 296 by adding Subpart I to read
as follows:

Subpart I—Authorization of Long-haul
~ Motor Carriers of General
Commodities as Air Freight
Forwarders

§ 296.80 Applicability of subpan.

This subpart sets forth the special rules applicable to
the processing of applications of long-haul motor Carriers, « °
as defined in § 296.1(d), for authorization to Operate in
their own names as air freight forwarders. Thé regulation
does not govern requests of’ motor carriers for Board ap-
proval of control relationships created when they apply
_ through subsidiaries for authorization as air freight forwarders:

§ 296.81 Applicability of other subparts.

Unless otherwise provided in this subpart, the provi-
sions of Subparts A through C and E through H of this
_ part shall be applicable to the processing of applications
of long-haui motor carriers for authority to gperate as air
freight nn and to the conduct of such operations.

§ 296.82 ° Applicability of policy statement.

_° The provisions. of § 399, 21 of the Board’s Policy State-
ments (14 CFR Part 399) shall be applicable to the proc-
essing of long-haul motor carriers for authority under this
subpart.

t

\

x

78
§ 296.83 Application for operating authorization.

. -) e
In additidn to the requirements set forth in 8 296.42,
a long-haul motor carrier applicant ‘must show:

(a) A plan to consciéntiously promote air cargo.
This showing shall include, inter alia: -

» (1). A statement as to whether the

- long-haul motor carrier plans to solicit

existing surface customers for air cargo | |
and, if so, the extent of such plans; .

_ (©). A traffic estimate showing what
traffic is newly-generated or presently
. Shipped by surface means;

(3) An estimate of what portion of
the long-haul motor carrier’s existing
surface traffic is subject to diversion to
air;

~ (4) An estimate of beyond-terminal-- ‘
area traffic moving by surface transporta-
tion over the routes of the long-haul
motor carrier or-via.interline agreements;
and ;

\y (5) A statement of the proposed air
cargo sales force and facilities.

(b) A statement of the long-haul motor carrier’s Zn
authority from the Interstate Commerce Commission
or Other regulatory agency, including a description
of surface transportation authorized and offered at
the stations at which air forwarding operations are.
proposed. ‘

(c) A statement of any other advantages which
would result from approval of the application. —

les eee

§ 296.84 Notice.

Notice of applications will be published in the Federal
, Register and in the Board*s weekly publication of applica-
tions filed."

$296.85 Objections. ©

: Within thirty,(30) days after publication of notice of
application in the Federal Register, any interested person
may file an objection thereto. The objection must set
forth an’ adequate factual showing of:

(a) the party’s interest in the matter;

° (b) his reasons for believing that ‘the long-
haul motor carrier or its- affiliate will not pro-
mote air cargo; and ff

(c). any other reasons why the application
‘ does not meet the licensing criteria of § 296.86.

*

If a hearing, is requested, the objection must set forth the
economic data and other facts which the party will offer
to prove.

§ 296.86 Criteria for authorization.

The Board will approve the apptication if it appears
that: : |

(a) the applicant is capable of performing
the ‘proposed air transportation and of con-
forming to the provisions of the Act and all
riles and requirements thereunder; _*

(b) the applicant will conscientiously pro- _
mote air cargo and will benefit air transporta-
- tion; and :

“ I Requests for the weekly publication should be addressed to the
€ Publications Section, Civil Aeronautics Board, Washington, D. C. 20428.

cr

‘
rd

~

;
TR NI NEN Be Et Mee PENS

Ae OEY Panes, ~ us .

80
“ ; > a . Seay
os (c) the applicant’s operations, algne or
together with those of other similar ‘carriets .

sy granted air forweiding authority, will not

create a monopoly or monopolies and thereby

restrain Competition or jeopardize another air

carrier, or Otherwise be inconsistent with the

public interest.2 ° es eo
8296. 87 ‘Conditions. mae

o

An iaiodisetion may’ be limited geographically or
by classes of traffic.- Additional conditions, and restrictions ;
may be imposed without hearing. ~

§ 296.88 Duration.

?

Unless sooner suspended or revoked, an authorization
will continue in effect until is.expires by its terms of un-.
til this subpart is terminated or revoked.

$296. 89 Revocation or suspension.

The Board may institute proceedings to revoke the
authorization of one or more long-haul motor carriers or
a group of motor carriers if it has cause to believe that
the continued operations of such carrier_or carriers’ are
contrary to the above-stated licensing criteria (8296.86).
Pending completion of revocation proceedings, the Board

‘may without hearing suspend or limit the au thorization

of such motor catfier or motor carriers: in accordance with
procedures specified by § 296.48.

/ + . f:
. fi.

: Section 399.21. (Policy Statements) articulates decisional stand-
ards in this area (see, supra, p. 5, et seq.). :

=

81.
‘PART 297
6. nSiena the sible. of contents of Part 297 by
adding si de F to read as follows: . :

Subpart F- Authorization of autre
Motor Carriers of General
Commodities as International
Air Freight Forwarders
Sec. oh :
7 J
297.60. Applicability of subpart. —
_ 297.61. Applicability of other subparts.
297.62 Applicability of policy statement.
297.63 Application for operating authorization.
297.64 Notice. .
297.65 Objections.
* 297-66 Criteria for authorization.
297.67 Conditions. 7
297.68 Duration.
-» 297.69 Revocation or suspension.

7. ° Amend § 297. 1 by adding ree (e) and (f)
to read as follows:

$297.1 Definitions. -
For the’ purposes of this part:

(e) ‘‘Long-haul motor carrier’? means a motor
carrier holding operating rights issued by the Inter-
state Commerce Commission to haul general com-
modities between any pair of points which are
over 500 air miles apart, or an affiliate of such
~ a Carrier.

3 (An “affiliate” of a long-haul motor carrier
‘or an air freight fowarder means a person who

It is as obvious as anything can
be that the effect on the existing air freight forwarders
will be very different if the permission here accorded is
utilized by all long-haul motor carriers, almost all, many,
or only four. And, as the Board properly recognized, the
continued health of the independent forwarders is of ut-
most importance not only to themselves but to the future
of air freight. Indeed, the argument that motor carrier ap-
plicants were not disqualified by their conflicting interests
rested in. part on the continued ability of the independents
to prevent them from fooling all of the people all of the
time. —

Perhaps concerned by realization that the breadth of the
Board’s policy pronouncement and the meagreness of its

" findings as to A ia ate were not in mesh, counsel

> We realize that the Board’s new policy is stated to be “experi-
mental” and the “experiment” is limited to five years.» But experi-
ence with other time limitations in certificates and exemptions sug-
gests the fatuousness of believing that an authorization widely availed
of by the motor carrier industry could be feasibly brought to an end.

101 >

for the Board, in a footnote to their brief, accused peti-
tioners of having “distorted the Board’s opinion” by indi-
cating “that only casual pro forma consideration would be
given to further applications of ‘all members of? an ‘entire
- Class’... . .” We find no distortion; indeed, as already
indicated, we would so read the opinion and Board coun-’
sel themselves said as much in the earlier passage we have
‘quoted from their brief. Of course, it may be that the
footnote is right and the earlier passage’ wrong; if entry of
motor carriers into air freight forwarding is indeed to be
an experiment, it would seem much more sensible to limit
the number unless — another point on which the decisions
shed no light — this would create unfair dislocations within
the motor carrier industry. But the case in this aspect
comes precisely within Mr. Justice Cardozo’s much-quoted
observation, “We must know what a decision means before
the duty becomes ours to say whether it is right or wrong.”
United States v. Chicago, M. St. P. & P. R.R., 294 US.
499, 511 (1935); see also Secretary of Agriculture y.
United States, 347 U.S. 645, 654 (1954). [301]

This failure of analysis of the effect of general entry
by motor carriers cannot be excused on the basis of the
Board’s twenty-year commitment to a policy of “free
entry” into freight forwarding in contrast with the con-
trary view arrived at by the Interstate Commerce Commis-
sion and adopted by Congress as to surface forwarding.
See 71 Stat. 452 (1957), and 2 U.S. Code Cong. & Adm.
News, 85th Cong., Ist Sess. 1640-45 (1957). Free entry —
by persons willing to risk new capital in air freight for-
warding as a prime occupation is one thing; entry as a
sideline to much larger investments in other business is
something else again. This consideration is peculiarly im-
portant when the other business is surface transportation
— another point of difficulty to which we now turn.

102
II.

Until the decision here under review, the Board has
granted surface carriers air forwarding authority only
after study of the particularized situation convinced it
that the carrier’s conflict of interest would not “result
in material diversion of traffic from air to surface trans-
portation and deprive the applicants of sufficient incen-
tive to conscientiously promote and develop airfreight
forwarding.” Air Freight Forwarder Authority Case, Or-
der E-21056, ‘July 10, 1964 (mimeo, page 4). In the
first Air Freight Forwarder Case, supra, 9 C.A.B. at 507-
08, the Board granted authority to three Class | motor
carrier affiliates but only on a showing that the motor
carrier operations were so limited as not to be truly com-
petitive with air transportation; it denied authority to a_
subsidiary of a railroad on the grounds that this “would
create a serious handicap to independent air freight for-
warders”’ and that the conflict of interest “might prove
detrimental to the full development of the air services.”
In its second domestic Airfreight Forwarder Investigation,

a

y

6 In Air Freight Forwarder Case (Intemational), 11 C.A.B. 182
(1949), the Board granted international authority to certain for-
warders affiliated with domestic surface carriers, but the ‘competi-

“tive situation was recognized to be quite different. Jd. at 197.
Even there, however, the Board refused Railway Express Agency
permission when it found that REA would dominate this branch
of this industry:

“Section 408 reflects the established general pol-
icy that our air transportation system shall be free
a of control by surface carriers. This fundamental
Be concept cannot be ignored. There is no showing
of inability on the part of existing international
airfreight forwarders — independent of surface

| (cont'd)

21 C.A.B. 536, 546 #6 19st eB Vv anted experimen-
tal authority to two aw rs * by railroads,
but once again the decision was ade only is the ap-
plicants’ particulaf proposals were studied\: no indica-
tion was given that subsequent applications would not be
subjected to similar scrutiny. Finally, in 1964, the Board
granted motor carriers permission to forward household
goods only after finding that very little of this merchan-
dise was then being shipped by air and that ‘carriers of
household goods did not have substantial investments in
long-haul equipment competitive with air transit.?_ Com-
pare Telstar Air Freight, Inc., Order B-22429 (issued un-
der delegated authority) (1965). What was done here was
not a modest expansion of these exceptions but a total
reversal of policy. [302]

We fully agree that. as Mr. Justice Fortas recently so
well expressed it, an administrative agency, “faced with
new developments or in light of reconsideration @f the

sy

(Footnote 6 continued)

transportation — to provide the public with ade-
quate service in this field. Rigid limitation of
other forms of transportation in the Nation’s
air transportation system is in accord with con-
gressional intent and is necessary for a soundly
. developed system.”

Railway Express Agency — Airfreight Forwarder
Application, 27 C.A.B. 500, 502:(1958).

See also the special conditions placed upon American Express’ en-
trance into international freight forwarding. American Express Com-
pany, 31 C.A.B. 118 (1960).

7 In 1963, the Board refused to review the decision of its Hear-
ing Examiner granting an affiliate of United Parcel Service, a’ mo-
tor carrier, the right to engage in domestic forwarding. Order E-
7324. Butsthis is not claimed to have constituted adoption of a
free entry policy towards motor carriers“ and subsequent Board de-
cisions have not accorded the decision any great precedential value.

104 \

relevant facts and its mandate may alter its past interpre-

i tation and overturn past administrative rulings and_prac-

| tice. ... [T]his kind of flexibility and adaptability to

i! changing needs and patterns of transportation is an essen-
tial part of the office of a elite Nee any. Regulatory

i agencies do not establish rules of conduct to last forever:

| they are supposed, within the limits of the law and of

i fair and prudent administration, to adapt their rules and

| practices to the Nation’s needs in a volatile, changing econ-

: omy. They are neither required nor supposed to regulate

the present and the future within the inflexible limits of

| yesterday.”” American Trucking Ass’ns y. Atchison, To-

peka & S. Fe. RR, 387 U.S. 397, 416 @1967). But we

also concur with the First Circuit that a reversal of agency

policy calls for thorough analysis and explication, City of

Lawrence v. CAB, 343 F.2d 589 (1965), such as was per- *

i formed by the Interstate Commerce Commission:-in the

case eliciting the remarks of the Supréme Court we have

quoted. ;

SSS SSS SSS

| This is particularly necessary when the previous policy
| is not wholly agency determined but is a radiation from
| a direction of Congress. We need not quarrel with the
i Board’s previously cited decision, sustained by the Sev-
i enth Circuit, American Airlines, Inc. vy. CAB, 178 F.2d
— 903, 909-10 (1949), that the second proviso to 8408(b),
see fn: 2, does not apply in terms to an “indirect air \
carrier’ since such a carrier could never avail itself of
the statutory escape hatch, namely, demonstrating that
it.can “use aircraft to public advantage in its opera;
tion.” Nevertheless, as was held by another court of
appeals reviewing the same decision, in an Opinion cur-
iously not called to our attention, National Air Freight
Forwarding Corp. v. CAB, 197 F.2d 384 (D. C. Cir.
1952), the Board is nevertheless obliged to consider the
policies behind the proviso in regulating entry into for-
warding. Congressional! efforts-to prevent participants
oe in one. form of_transportation from limiting the develop- :
ment, of competing forms have a fifty-five year history,
going back to the Panama Canal Act of 1912, 49 U.S.C.
85(14)-(16), see Lake Line Applications Under Panama
Canal Act, 33 ICC 699, 710-14 €1915). As to the im-
portance of this policy in air regulation, we need. only
_~. refer to the various opinions in American President Lines,
' Ltd., PetitionN7 C.A.B. 799 (1947), where, after thorough

105

reexamination, a majority of the Board concluded that al-
though the second proviso to 8408(b) did not in terms ap-
ply to an application by a surface carrier for a certificate
under 8401, respect for the policy determination of Con-
gress required that unless such a carrier could meet the
qualification of the second proviso as to Msing aircraft in
its operation, it must show “‘that disadvantages existing
upon the facts of the particular case by reason of its be-
ing a.surface carrier were avoided or overcome by other
considerations of public interest supported by the record.”
7 C.A.B. at 807.8 Later decisions of the Supreme Court
in the motor carrier field show that the effect of the sec-
ond proviso is‘at least that great. See American Trucking
Ass’ns v, United States, 355 U.S. 141 (1957) American
Trucking Ass’ns v. Frisco Transportation Co., 358 U.S.
133, 141 (1958): American Trucking Ass’ns Y. _ United
States, 364 U.S. 1 (1960).

We find no force in the contention of Board counsel
that questions of conflict in interest in air freight forward-
ing were ruled out by a clause in 8410(c) of Title IV added
to the Interstate Commerce Act by the Freight Forwarder
Act got 1942, 52 Stat. 300, which we quote in [303] the mar-
gin.” Apart from the fact that the clause prohibits the
issuance of forwarder permits tu carriers themselves, ‘is
the Board here proposes to do for D. C. International
and Navajo, since “this would create difficulties of admin-
istration and possible discriminatory practices,’ 87 Cong.
Rec.’ 8427 (1942) (remarks of Shetty con Wolverton), !9

8 chatinan Landis was unwilling to go so far, 7 C.A.B. 808, but

Member Brahch —— the majority had not gone far ee
_C.A.B.“821.

9 “No such permit [to act as a freight forwarder

with respect to traffic subject to the Interstate

Commerce Act] shall be issued to any common

carrier subject to chapters 1, 8,. or 12 of this

title; but no application made under ‘this section >
by a corporation controlled by, or under com-

mon control with, a common carrier subject to

said chapters shall be denied because of the -re-

lationship between such corporation and such

-common -carrier.”. -

10 For an explanation of the importance of Rep. Wolverton’ Ss con-
_ Struction of the Act, see Chicago, M., St P. & P. R.R. v. Acme
Fast Freight, 336 U.S. 465, 473-76 (1949). ‘

‘106 ~

the saline behind the 1942 proviso wdc not apply to the
situation before us. Congress believed that since independ-
ent forwarders could consolidate shipments, thereby gain-
ing a profit, it was “fundamentally unfair to deny to a
common carrier that has invested its money in transporta-
tion facilities the right to use those facilities upon as fa-
vorable a basis as any forwarder can use them.” Jd. So

* far as air forwarding is concerned, it would be the airlines,-

not other common carriers, that could make a similar com-
plaint. A second reason for this provision, also inapplica-
ble here, was that certain railroads had already acquired
forwarders whereas others had not and it was desired to
avoid discrimination. See U.S. Code & Adm. News. 85th
Cong., Ist Sess. 1641 (1957): 88 Cong. Rec. 8427 (1942)
(remarks of Representative Wolverton). Since Congress
was careful to make clear that “the Interstate Commerce
Commission shall not have jurisdiction of, and part IV
shall not apply to, freight forwarding by the use of air
facilities, utilized in connection with air transportation

” H. Rep. No. 1172, supra, at p. 7 (1941), the pro- |
viso ie 8410(c) of theeInterstate Commerce Act is of no
importance when the concerns that motivated its enact-
ment ar

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385604_1368%3A2. Public record. Not legal advice.