# Federal Maritime Board v. Isbrandtsen Company/Dissent Frankfurter

* Court Documents
* Case Syllabus
* Opinion of the Court
* Dissenting Opinions Frankfurter Harlan
United States Supreme Court
356 U.S. 481
Federal Maritime Board v. Isbrandtsen Company
Argued: Dec. 11, 1957. --- Decided: May 19, 1958
Mr. Justice FRANKFURTER, whom Mr. Justice BURTON joins, dissenting.
The Court today holds that any dual system of international steamship rates tied to exclusive patronage contracts that is designed to meet outside competition-howsoever justified it may be as a reasonable means of counteracting cutthroat competition violates § 14 of the Shipping Act of 1916 and cannot be approved by the Federal Maritime Board pursuant to § 15 of that Act. The Court thus outlaws a practice that has prevailed among international steamship conferences for half a century, that is presently employed by at least half of the hundred-odd conferences subject to Board jurisdiction, and that has been found by the Board in this case to decrease the probability of ruinous rate wars in the shipping industry. In doing so, the Court does more than set aside a weighty decision of the Federal Maritime Board. It could do so only by rendering meaningless two prior decisions in which this Court respected the power given by Congress to the Board, within the usual limits of administrative discretion, to approve or disapprove such agreements.
The agreement involved in this case is typical of the contracts used by the loose associations of steamship lines known as 'conferences' to effectuate their dualrate systems. See Marx, International Shipping Cartels, 207-210. The contracting shipper agrees to forward all of his shipments moving in the 'trade' or route of the conference by bottoms of conference members (§ 1). In return, the conference members, 'so far as their regular services are available,' agree to carry the shipper's goods at rates below those charged to noncontracting shippers; rates are subject to reasonable increase upon specified notice (§ 2). The conference members agree to maintain service adequate to the reasonable requirements of the trade, and if they fail to provide the shipper (who may ordinarily select which of the conference members' vessels will carry his goods) with needed space, he may obtain space from nonconference carriers (§ 4). If the shipper makes any shipments in violation of the agreement, he must pay as liquidated damages 50 percent of the amount of freight he would have paid if he had made the shipment under the contract, and he is not entitled to contract rates until he pays these damages (§ 5). If the shipper violates the agreement more than once in a twelve-month period, the agreement is canceled, and no new agreement will be entered into until all damages are paid (ibid.). Either party may cancel the agreement on three months' notice (§ 9), and any dispute arising out of the agreement is to be submitted to arbitration (§ 10).
Such differences as exist among the dual-rate systems that have for long been in wide use in international ocean tranportation are irrelevant if each such system is to be judged by the new test laid down by the Court: is it aimed at meeting outside competition? Of course these exclusive patronage contracts and the dual-rate systems of which they are an integral part are designed to meet nonconference competition. And there should be no doubt that today's decision outlaws such systems. This result cannot be clouded by the Court's reliance upon 'findings' of the Board that it
'consider(s) the inauguration of a dual rate system to be a necessary competitive measure to offset the effect of non-conference competition in this trade.' (4 F.M.B. 706, 736, 1956 A.M.C. 414, 450).
and that
'a reduction in the amount of conference sailings or other solution to the overtonnaging problem would not mitigate the conference's need to meet the competition of Isbrandtsen in order to obtain for its members a greater participation in the cargo moving in the trade.' (4 F.M.B., at page 737, 1956 A.M.C., at page 451.)
These statements in the Board's opinion are nothing more than a recognition of the dual-rate system as a device for meeting outside competition; they provide a basis neither for dustinguishing the situation before us from any other familiar use of a dual-rate system nor for concluding that the conference members in this case instituted the system in order to 'stifle' outside competition.
While limits have been imposed upon enterprise in meeting competition, which is itself the governing principle of our economic system, these limits, embodied in the antitrust laws, were found to be inapplicable to, because destructive of our national interest in, the international ocean transportation industry. The United States obviously could not completely regulate the foreign carriers with whom American carriers compete (not to mention the carriers that serve foreign shippers with whom American shippers compete). In view of the prevailing characteristics of the industry, it early became apparent that t would, on the whole, be in the national interest to tolerate some practices of steamship lines that in other industries would be deemed inadmissible. For the alternative, so it was concluded, would be to put it within the power of unregulated foreign carriers seriously to injure American firms-both carriers and shippers-if not, indeed, to put them out of business. And so, in the development of a scheme for regulating this international industry, self-protective measures by way of collective action were not left to the condemnation of the Sherman and Clayton Acts. In order to appreciate the Shipping Act of 1916 as an attempt to balance the need for some regulation with the economic and political objections to sweeping the shipping industry under the antitrust concept, the circumstances that begot the Act must be recalled.
The second half of the Nineteenth Century saw a tremendous rise in the development of ocean transportation by steamship. Unfor tunately, the supply of available cargo space increased during this period much more rapidly than the demand for it. The inevitable result was cut-throat competition among steamship owners. This in turn was followed by mergers of ownership and by concerted efforts among individual owners to limit competition. The practices by which this end was pursued led to abuses and demands for their correction, to which a number of governments at the turn of the century began to direct their attention. A series of investigations of rates and practices in various parts of the British Empire was followed by the appointment in 1906 of the Royal Commission on Shipping Rings, which rendered its report in 1909. See, generally, Marx, supra, at 45-50; see also Johnson and Huebner, Principles of Ocean Transportation, 263-302. In the United States, the Department of Justice in 1911 brought two proceedings against three steamship conferences to enjoin competitive practices in alleged violation of the Sherman Act, United States v. Prince Line, Ltd., D.C., 220 F.230; United States v. Hamburg-American S.S. Line, D.C., 216 F. 971.
The terms of the resolutions that gave rise to the historic investigation of shipping combinations by the House Committee on the Merchant Marine and Fisheries in 1912-1913, H.Res. 425 and H.Res. 587, 62d Cong., 2d Sess., 48 Cong.Rec. 2835-2836, 9159 9160, manifest the concern of Congress over these steamship conferences and their practices. The investigation was thorough and detailed. The Committee, under the chairmanship of Representative Joshua W. Alexander of Missouri, elicited great quantities of relevant data from shippers, carriers, trade organizations and the Departments of State and Justice, including copies of many kinds of agreements among carriers and between carriers and shippers, and it held extensive hearings in January-March, 1913. Fully considered were exclusive patronage agreements between shippers and conferences providing for a dual rate, see, e.g., Hearings before the House Committee on the Merchant Marine and Fisheries in the Investigation of Shipping Combinations, 62d Cong., 248, 254, 262-263; see also id., at 246, 263.
In 1914 the Committee submitted its comprehensive report. In summarizing the competitive methods used by steamship conferences in the American foreign trade, the report discussed, under the heading 'Meeting the competition of lines outside of the conference,' deferred rebate systems, the use of fighting ships, agreements with American railroads, and such types of contracts with shippers as individual requirements contracts, contracts giving preferential rates to large shippers, and the following:
'(a) Joint contracts made by the conference as a whole.-Such contracts are made for the account of all the lines in the agreement, each carrying its proportion of the contract freight as tendered from time to time. The contracting lines agree to furnish steamers at regular intervals and the shipper agrees to confine all shipments to conference steamers, and to announce the quantity of cargo to be shipped in ample time to allow for the proper supply of tonnage. The rates on such contracts are less than those specified in the regular tariff, but the lines generally pursue a policy of giving the small shipper the same contract rates as the large shippers, i.e. are willing at all times to contract with all shippers on the same terms.' Report on Steamship Agreements and Affiliations in the American Foreign and Domestic Trade, H.R. Doc. No. 805, 63d Cong., 2d Sess. 290. There can be no doubt that the Committee was amply alive to the primary purpose of the dual-rate system. But it did not, in subsequently discussing (id., at 304-307) the 'Disadvantages of Shipping Conferences and Agreements, as Now Conducted,' make any reference to the system as such, although it dealt extensively and disapprovingly, on the basis of evidence put before it, with such practices as deferred rebates, fighting ships, and retaliation against shippers for airing grievances. Nor were there any strictures against dual-rate systems in the survey of recommendations of witnesses at the hearings for corrective legislation (id., at 307-314), although it was there noted that recommendations were made in favor of prohibitions against deferred rebates and retaliation by refusal of accommodations to a shipper because 'he may have shipped by an independent line, or may have filed a complaint charging unfair treatment, or for other unjust reasons.' Id., at 313.
In making its own recommendations (id., at 415-421), the Committee recognized that steamship lines almost universally form conferences and enter into agreements for the purpose (among others) of 'meeting the competition of non-conference lines.' Id., at 415. The Committee recognized that it had to choose between prohibition of these conferences or subjection of them to government supervision.
'It is the view of the Committee that open competition can not be assured for any length of time by ordering existing agreements terminated. The entire history of steamship agreements shows that in ocean commerce there is no happy medium between war and peace when several lines engage in the same trade. Most of the numerous agreements and conference arrangements discussed in the foregoing report were the outcome of rate wars, and represent a truce between the contending lines.' Id., at 416. To prohibit existing arrangements, said the Committee, would be to invite rate wars leading to monopoly or to the exposure of American shippers and lines to disastrous competition with foreign shippers and lines. Among the complaints relating to existing conditions was 'the unfairness of certain methods-such as fighting ships, deferred rebates, and threats to refuse shipping accommodations-used by some conference lines to meet the competition of nonconference lines.' Id., at 417. The Committee concluded that the system of conferences and agreements was not to be uprooted. Its disadvantages and abuses must be curbed by effective government control.
Among the specific recommendations of the Committee were that carriers be required to file for approval with the regulatory agency (the Committee recommended use of the Interstate Commerce Commission) any agreements among themselves or with shippers, with the agency being empowered to cancel agreements it found to be 'discriminating or unfair in character, or detrimental to the commercial interests of the United States' (id., at 420); that the agency be empowered to investigate and institute proceedings concerning rates that are 'unreasonably high, or discriminating in character as between shippers' (ibid.), and
'* * * That the use of 'fighting ships' and deferred rebates be prohibited in both the export and import trade of the United States. Moreover, all carriers should be prohibited from retaliating against any shipper by refusing space accommodations when such are available, or by resorting to other unfair methods of discrimination, because such shipper has patronized an independent line, or has filed a complaint charging unfair treatment, or for any other reason.' Id., at 421. The cautious generality of the latter portion of this last recommendation (and, surely, of the legislative provision based on it) doubtless reflects a feeling on the part of the Committee that many shippers refrained from describing the various forms of and reasons for retaliation against them by carriers, for fear that they would subsequently be retaliated against for making the disclosures. See, e.g., id., at 5.
The report of the Committee was filed in February 1914, and four months later Representative Alexander introduced a bill, H.R. 17328, 63d Cong., 2d Sess., incorporating its recommendations. The bill provided, among other things, that carriers be required to file for approval with the Interstate Commerce Commission any of a wide variety of agreements, that the Commission be empowered to cancel or modify agreements that it found 'discriminating or unfair as between carriers, shippers, exporters, importers, or ports, or between exporters from the United States and their foreign competitors, or that it may find to operate to the detriment of the commerce of the United States, or that may be in violation of this Act,' and that agreements when approved should be exempt from the antitrust laws (§ 3). Where the Commission was of the opinion that rates, charges, classifications, regulations or practices were 'unjust or unreasonable,' it was empowered to determine and enforce what would be just and reasonable under the circumstances (§ 7). And the bill (§ 2) provided that it should be a misdemeanor (punishable by fine of up to $25,000) for any carrier to allow deferred rebates, use a fighting ship, or:
'Third. Retaliate against any shipper by refusing, or threatening to refuse, space accommodations when such are available, or resort to other discriminating or unfair methods, because such shipper has patronized any other carrier or has filed a complaint charging unfair treatment or for any other reason.'
As no action was taken on H.R. 17328 in 1914, it was reintroduced by Mr. Alexander in the 64th Congress late in 1915 as H.R. 450. Shortly thereafter he introduced H.R. 10500, a bill To establish a United States Shipping Board for the purpose of encouraging, developing, and creating a naval auxiliary and naval reserve and a merchant marine to meet the requirements of the commerce of the United States with its territories and possessions, and with foreign countries, and for other purposes.' That bill authorized the Board to purchase or charter commercial vessels to be leased to private concerns in peacetime and used as a naval auxiliary in wartime; the bill also (§§ 9, 10) provided for very general regulation by the Board of the ocean transportation industry.
Approximately two months later, in April 1916, Mr. Alexander introduced H.R. 14337, which adapted his earlier regulatory bill (H.R. 450) to the administrative framework of the Shipping Board bill (H.R. 10500). The bill was considered in committee with a view to substituting its provisions for the general regulatory language of §§ 9 and 10 of the Shipping Board bill. See Hearings before the House Committee on the Merchant Marine and Fisheries on H.R. 14337, 64th Cong., 1st Sess. 5. In these hearings, there was no discussion of the 'retaliation' provision of the bill; attention was concentrated on its more controversial aspects, such as the power of the Board to regulate rates.
At the close of these hearings, in early May 1916, a new Shipping Board bill, H.R. 15455, in which the substitution of the more detailed regulatory provisions had been made, was introduced by Mr. Alexander. The bill added a 'Fourth' to the prohibitions against deferred rebates, fighting ships and retaliation: unfair or unjustly discriminatory contracts with or treatment of shippers under specified circumstances; the standard ('discriminating and unfair') in the provision empowering the Board to cancel or modify agreements became 'unjustly discriminatory and unfair.' The bill was promptly reported out of the Merchant Marine and Fisheries Committee with a report that set forth in extenso the recommendations in the 1914 report of the investigation of the shipping industry. H.R.Rep. No. 659, 64th Cong., 1st Sess. 27-31. The debate in the House centered on the ship purchase and lease provisions of the bill, and the bill passed the House with no detailed consideration of the regulatory provisions. In the Senate, the hearings before the Committee on Commerce were also concerned primarily with the ship purchase and lease provisions, as were the floor debates. Once again, the Committee report set forth the recommendations arising out of the 1914 investigation. S.Rep. No. 689, 64th Cong., 1st Sess. 7-11. With no relevant amendment to the regulatory portions of the bill, H.R. 15455 passed the Senate and became law in September of 1916. 39 Stat. 728.
As enacted, then, the statute provided for the following scheme of regulation. Carriers subject to the Act must file with the Board copies of agreements establishing (inter alia) preferential or cooperative arrangements. Such of these as the Board finds 'to be unjustly discriminatory or unfair * * * or to operate to the detriment of the commerce of the United States, or to be in violation of this Act,' it may disapprove, cancel or modify; all others it must approve, and those approved are exempt from the antitrust laws (§ 15). As to any 'rate, fare, charge, classification, tariff, regulation, or practice' of carriers that the Board finds to be unjust or unreasonable, it may take corrective measures (§ 18). As an exception to, or qualification upon, this scheme, certain practices were specifically outlawed and may not, therefore, be approved by the Board: to allow deferred rebates, use fighting ships,
'* * * Retaliate against any shipper by refusing, or threatening to refuse, space accommodations when such are available, or resort to other discriminating or unfair methods, because such shipper has patronized any other carrier or has filed a complaint charging unfair treatment, or for any other reason. * * *.'
and treat or contract with shippers in certain unfair or unjustly discriminatory ways; violation of this provision is a misdemeanor punishable by a fine of up to $25,000 (§ 14).
The form that this regulation takes, considered in light of its legislative background, makes clear the congressional purpose. It was found that abuses and discriminations were inherent in the international shipping trade when it was conducted on the basis of cooperation among competitors. It was further found that the alternative to cooperation was cut-throat competition leading to monopoly and, more particularly, working to the serious detriment of American carriers and shippers and to the advantage of their foreign competitors. The conclusion was that the system of cooperation must be domesticated and exposed to, and policed by, a continuing process of regulation. Only the flagrant abuses were flatly prohibited. The pervading purpose of the Shipping Act is to be found in a statement made in the House debate by Representative Burke, a majority member of the Alexander Committee during both the investigation and the consideration of the various bills:
'Your committee at the conclusion of such hearings and after consideration and due deliberation made its report to Congress upon the subject with many valuable recommendations. Among the recommendations made in such report to Congress were that laws should be passed prohibiting the grossest and most vicious of such unfair practices * * *.
'It was found by your committee that many of the unfair practices had become so firmly established and contained in many instances elements of usefulness that, with the exception of some of the more prominent ill practices, it was considered that a system of regulation and control of water transportation would be for the best interest of both the public and those interested in water transportation.' 53 Cong.Rec. 8095.
It is important to keep in mind the relation of this scheme of regulation to the antitrust laws. Prior to the enactment of the Shipping Act, the ocean transportation industry was, of course, subject to the antitrust laws, and, indeed, as has been noted, proceedings under the Sherman Act had been brought against several conferences by the Government. Congress might have provided that, in addition to being subjected to the general surveillance involved in a comprehensive pattern of regulation, the steamship owners must continue to confrom to the affirmative policy in favor of a high level of competition that underlies the antitrust laws. Such was the condition in which legislation had placed the railroads. They were subject to both Interstate Commerce Commission regulation and the outlawry of the Sherman Act. United States v. Trans-Missouri Freight Ass'n, 166 U.S. 290, 17 S.Ct., 540, 41 L.Ed. 1007; United States v. Joint Traffic Ass'n, 171 U.S. 505, 19 S.Ct. 25, 43 L.Ed. 259. Not until 1920 were agreements among rail carriers excepted from the antitrust laws. § 407, Transportation Act of 1920, 41 Stat. 456, 480, amending § 5 of the Interstate Commerce Act, 24 Stat. 379, 380, 49 U.S.C.A. § 5. With respect to ocean transportation, however, Congress from the beginning chose to exempt agreements among carriers and between carriers and shippers from the antitrust laws. They thus rejected court-determined competition and preferred to rely upon regulation under an expert administrative agency.
It is in the light of this background that we must consider § 14 Third of the Shipping Act of 1916, which both the Court of Appeals and this Court have construed as prohibiting the dual-rate contract system. The section imposes a heavy fine for conduct it makes criminal and so should be strictly construed. See Yates v. United States, 354 U.S. 298, 304-305, 77 S.Ct. 1064, 1069, 1 L.Ed.2d 356. It deserves narrow construction also on the ground that it is an undoubted exception to a comprehensive and complex scheme of regulation by the Board. For it must be construed not as though it were an isolated piece of writing but as part of a reticulated scheme of government for the shipping industry. No form of conduct should be brought within its terms that was not designed to be included. As the foregoing survey of the legislative history demonstrates, there is no evidence of such purpose with respect to the dual-rate contract system. The evidence in fact points to the intention of its exclusion.
Under no fairly applicable meaning of the word 'retaliation' can the conclusion of the Court of Appeals, that the initiation and maintenance of a dual-rate contract system is retaliation, be sustained. It is clear from the congressional history that the framers of the legislation were concerned with certain forms of conduct, notably refusal of available accommodations, directed against shippers because they had previously done such things as shipping by an independent line or publicly filing complaints against carriers. The very concept of retaliation is that the retaliating party takes action against the party retaliated against after, and because of, some action of the latter. In the dual-rate contract system, there is nothing of this 'getting even'; the parties simply enter into an agreement that is designed to guide their future conduct but in no way depends upon or arises out of past conduct. It does violence to the English language-and certainly to the duty of reading congressional language in context-to characterize such a contractual arrangement as 'retaliation.' As conduct relating to the competitive struggle between carriers combined in a conference and those who prefer to stay out-yes; as an act of reprisal-no.
But if the dual-rate contract system is not 'retaliation,' then it does not violate § 14 Third, for it seems evident that that section was directed only at retaliation. It is, indeed, rather inartfully drawn, but under the circumstances, and particularly in light of the legislative background, its ambiguities should be resolved in favor of the narrower construction. The recommendation of the Alexander Committee, supra, a body on which Congress placed an extraordinarily high degree of reliance with respect to the regulatory aspects of the Shipping Bill, contemplated nothing but 'retaliation.' When, four months later, the recommendation had been put into the language of proposed legislation, it took substantially the form it takes in the statute as enacted. No doubt, the intention to limit the application of the provision to 'retaliation' is not so clear in the statutory language as it was in the recommendation; however, since there is no evidence of purposefulness in this change, and no apparent reason for it, the alternation in language should not be regarded as having effected a decisive change in the substance of the provision. Attaching such drastic significance to this change in wording has no supporting reason and is contradicted by the underlying philosophy of the legislation. This conclusion is emphasized by the fact that after the change the Committee Reports in both Houses of Congress quoted the language of the recommendation in support of the proposed legislation without qualification. And in the House debate, when Representative Alexander was briefly summarizing the provisions of the bill, he said, in describing the provision that became § 14 Third nothing more than that it 'forbids retaliation against shippers who patronize other carriers, or complain of unfair treatment by refusing, or threatening to refuse, space accommodations when available, or by other unfair practices * * *' 53 Cong.Rec. 8080. Surely, when there is nothing in the legislative history to suggest that Congress wished to prohibit the dual-rate contract system of which they were fully aware, and everything to suggest that § 14 Third was designed to respond solely to an entirely different problem, that section cannot be stretched to embrace that practice and thereby to undercut the rationale of the legislation.
The Court's construction makes of the latter portions of § 14 Third a general catchall. The relevant words, as abstracted from the entire provision, would be these: 'No common carrier by water shall, directly or indirectly * * * resort to * * * discriminating or unfair methods * * * for any * * * reason.' Such a provision even if it be limited to conduct designed to 'stifle' competition would not only make the remainder of § 14 redundant but would be inconsistent with the whole philosophy, not to say the language, of much of the regulatory portion of the Shipping Act. There is nothing in the words of the statute or in its congressional background to indicate that Congress intended to bury such a broad prohibition in the third portion of a four-part penal section. Moreover, as noted above, the most probable explanation for the generality of the language in § 14 Third is that Congress sought to cover forms of retaliation that shippers had been afraid to bring to the legislators' attention.
Nor is there any merit to the suggestion that if Congress made 'deferred rebates' unlawful, the practice of dual-rate contract although not specifically prohibited-should also be unlawful because it has 'the same objectionable purpose and effect.' This mode of approach is a judicial utilization of the salesmanship that offers something as 'just as good.' This Court certainly has not the power to say that conduct is unlawful simply because it is 'just as bad' as some conduct that Congress has specifically prohibited. The principal basis that the Alexander Committee set forth for its conclusion that deferred rebates were objectionable was precisely that the rebates were deferred. The Committee, in outlining the objections that had been made to steamship agreements, noted that '(b)y deferring the payment of the rebate until three or six months following the period to which the rebate applies ship owners effectively tie the merchants to a group of lines for sucessive periods.' Report, supra, at 307. The Committee recited the contention that 'the ordinary contract system does not place the shipper in the position of continual dependence that results from the deferred rebate system' (ibid.); it is not unlikely that they had in mind the dual-rate contract system. This Court in Swayne & Hoyt, Ltd., v. United States, 300 U.S. 297, at page 307, note 3, 57 S.Ct. 478, at page 482, 81 L.Ed. 659, adopted that point of view when it said: 'The Committee recognized that the exclusive contract system does not necessarily tie up the shipper as completely as 'deferred rebates,' since it does not place him in 'continual dependence' on the carrier by forcing his exclusive patronage for one contract period under threats of forfeit of differentials accumulated during a previous contract period.'
Twice this Court has rejected the contention that it now accepts. Twice this Court has held that the Shipping Act of 1916 did not render illegal per se a dual-rate contract system enforced by a combination of steamship carriers essentially like the one now before the Court, whereby lower rates are tied to an agreement for exclusive carriage. Such were the decisions, upon full consideration, in United States Navigation Co. v. Cunard S.S.C.o., 284 U.S. 474, 52 S.Ct. 247, 76 L.Ed. 408, in 1932 and again in Far East Conference v. United States, 342 U.S. 570, 72 S.Ct. 492, 96 L.Ed. 576, in 1952 by a wholly differently constituted Court. In both these cases the claim was that such a dual-rate system constituted a combination in violation of the Sherman Act, for which relief by way of an injunction could be had by a competing carrier outside the conference, as in the Cunard case, and by the United States, as in the Far East Congerence case, under § 4 of the Sherman Act. The immediate issue in both cases was, of course, the applicability of the principle of 'primary jurisdiction'-that is, whether the legality of a dual-rate system could be adjudicated by a United States District Court without a determination by the Federal Maritime Board as to whether 'the matters complained of' (United States Navigation Co. v. Cunard S.S.C.o., supra, 284 U.S. at page 478, 52 S.Ct. at page 248) and whether the dual-rate system 'on the merits' (Far East Conference v. United States, supra, 342 U.S. at page 573, 72 S.Ct. at page 493) offend the Shipping Act of 1916. The doctrine of 'primary jurisdiction' was recognized by Mr. Chief Justice Taft as an achievement whereby its author, Mr. Chief Justice White, 'had more to do with placing this vital part of our practical government on a useful basis than any other judge.' (257 U.S. xxv.) The Court's opinion makes of it an empty ritual.
By virtue of these two decisions, an independent shipowner who claimed to be hurt by the operation of a dual-rate contract system, employed as a competitive measure against him by a shipping conference, could not bring his complaint to court as might a manufacturer hurt by an analogous combination competitor. Such a shipowner would have to appeal to the Federal Maritime Board, as did Isbrandtsen. The ensuing Board proceedings would probably be similar to those in this case. On Isbrandtsen's protests, filed January 12, 1953, and amended on January 19, hearings were conducted before a Board Examiner from October 5 to December 23, 1953, in which was compiled a record of over 4,500 pages of testimony and over 150 exhibits. The examiner rendered his recommended decision on September 13, 1954, but on October 6 the Board remanded the record for supplemental findings of fact; these supplemental findings were served on January 17, 1955. Eleven months later the Board filed its detailed, comprehensive report approving the conference's dual-rate system (as amended in accordance with the Board's report) as not unjustly discriminatory or unfair, nor likely to operate to the detriment of the commerce of the United States, nor in violation of the Shipping Act. But all this elaborate process and determination are legally meaningless. The agency is made to serve as a circumlocution office. The sole function of this carnival of procedural emptiness is that of a formal preliminary to a suit in a federal court. For such a suit, the Court now holds, is to proceed in complete disregard of all the hearing, weighing and interpreting of evidence before the Board. The Court is to make a ruling of law with entire indifference to all the findings of the expert body set up to make appropriate findings on the basis of the law's policy. Surely it is a form of playfulness to make resort to the Board a prerequisite when the judicial determination of law could have been made precisely as though there had been no proceeding before the Board. This is to make a mockery of the doctrine of primary jurisdiction and to interpret the decisions in the Cunard and Far East Conference cases as utterly wasteful futilities.
Until today the doctrine of 'primary jurisdiction' was not an empty ritual. Its observance in scores of cases was not a wasteful futility. In denying to the District Courts jurisdiction in situations like those in the Cunard and Far East Conference cases the doctrine of primary jurisdiction was not devised for the purposeless delay of giving the same jurisdiction to Courts of Appeals, on condition that they use the administrative agency as a sterile conduit to them. Such a view would denigrate and distort the significance of one of the most important movements in our law. Legal scholars have rightly compared it to the rise of equity, a view endorsed by this Court through Mr. Chief Justice Stone, himself a scholar. See United States v. Morgan, 307 U.S. 183, 191, 59 S.Ct. 795, 799, 83 L.Ed. 1211. The utilization of these administrative agencies is a legislative realization, judicially respected, that the regulatory needs of modern society demand law-enforcing tribunals other than the conventional courts. The doctrine of primary jurisdiction, based as it is on the discharge of functions for which courts normally have neither training and experience nor procedural freedoms, is an essential aspect of this modern administrative law. It is a means of achieving the proper distribution of the law-enforcing roles as between administrative agencies and courts. It gives these agencies the necessary scope for exploring a wide realm of facts, not to be confined within the exclusionary rules of evidence controlling proceedings in courts, to weigh such facts with an expert's understanding and to choose between allowable inferences where wise choice so often depends on informed judgment. These agencies do not supplant courts. They are subject to what may broadly be called the judicial Rule of Law. Appeal lies to courts to test whether an agency acted within its statutory bounds, on the basis of rational evidence supporting a reasoned conclusion, and ultimately satisfies the constitutional requirement of due process. Within these limits, a large range of discretion is entrusted to administrative agencies to make effective the social and economic policies adopted by Congress in the myriad concrete situations calling for their application. Whether rates are reasonable, whether discriminations are fair, whether particular combined economic arangements are justified, whether practices that would, for industry generally, fall afoul the Sherman Act are permissible under a legislative regime for a particular industry that to that extent supersedes the antitrust laws-these and like questions come within the operation of the doctrine of primary jurisdiction, and it limits the power of courts to pass on their merits.
Contrariwise, where a decision of a case depends on determination of a question of law as such, either because of explicit statutory outlawry of some specific conduct or by necessary implication of judicial power because not involving the exercise of administrative discretion or the need of uniform application of specialized competence, the doctrine of primary jurisdiction has no function, because there is no occasion to refer a matter to the administrative agency. Great Northern R. Co. v. Merchants Elevator Co., 259 U.S. 285, 42 S.Ct. 477, 66 L.Ed. 943 (reaffirmed in United States v. Western Pacific R. Co., 352 U.S. 59, 69, 77 S.Ct. 161, 167, 1 L.Ed.2d 126); Texas & Pacific R. Co. v. Gulf, C. & S.F.R. Co., 270 U.S. 266, 46 S.Ct. 263, 70 L.Ed. 578; Civil Aeronautics Board v. Modern Air Transport, Inc., 2 Cir., 179 F.2d 622, 624-625; see Davis, Administrative Law, 666-668. The course of decisions was accurately summarized in Montana-Dakota Utilities Co. v. Northwestern Public Service Co., 341 U.S. 246, 254, 71 S.Ct. 692, 696, 95 L.Ed. 912: '* * * we know of no case where the court has ordered reference of an issue which the administrative body would not itself have jurisdiction to determine in a proceeding for that purpose.' It would be a travesty of law and an abuse of the judicial process to force litigants to undergo an expensive and merely delaying administrative proceeding when the case must eventually be decided on a controlling legal issue wholly unrelated to determinations for the ascertainment of which the proceeding was sent to the agency. Such, however, is the result in this case.
The Cunard and Far East Conference decisions mean nothing if they do not mean that the denial of jurisdiction to the District Courts to entertain the suits in those cases and their reference to the Federal Maritime Board, and the holding that the complaints against the dual-rate system in those two cases must be passed on by the Board, constituted the plainest possible recognition that it was for the Board to approve or disapprove the dual-rate contract system complained of, and, therefore, that the practice was not illegal as a matter of law that is, by virtue of a statutory condemnation. In both cases the Court's attention was directed to the claim of per se illegality. In both cases the plaintiffs urged that, since the dula-rate contract system violated § 14, the Board was without power to approve it. Brief for Petitioner, pp. 47-56, United States Navigation Co. v. Cunard S.S.C.o., 284 U.S. 474, 52 S.Ct. 247, 76 L.Ed. 408; Brief for United States, pp. 22-23 (incorporating by reference Brief for United States, pp. 21-45, A/S J. Ludwig Mowinckels Rederi v. Isbrandtsen Co., 342 U.S. 950, 72 S.Ct. 623, 96 L.Ed. 706); Far East Conference v. United States, 342 U.S. 570, 72 S.Ct. 492, 96 L.Ed. 576. See, also, United States Navigation Co. v. Cunard S.S.C.o., 284 U.S. 474, 478, 52 S.Ct. 247, 248, 76 L.Ed. 408 (argument of petitioner's counsel). And in Far East Conference, the claim that now prevails was a main ground of dissent. See 342 U.S. at pages 578-579, 72 S.Ct. at page 496. When an issue is squarely and fully presented to the Court and its disposition is essential to the result reached in a case, the issue is decided, whether the Court says much or little, whether the opinion is didactic or elloptical. Otherwise very few opinions in which Mr. Justice Holmes spoke for the Court, in most instances tersely and often cryptically, would have formulated decisions.
Nor can these cases be distinguished on their facts. The complaints in both cases alleged that the conferences had initiated the dual-rate contract system in order to eliminate competition. See United States Navigation Co. v. cunard S.S.C.o., 284 U.S. 474, 479-480, 52 S.Ct. 247, 248, 76 L.Ed. 408; Transcript of Record, p. 6, Far East Conference v. United States, 342 U.S. 570, 72 S.Ct. 492, 96 L.Ed. 576. And the dual-rate agreement involved in Far East Conference was, if anything, more coercive and more closely analogous to a system of deferred rebates than is the one involved in the cases before the Court. It provided (§ 4) that if a shipper violated the agreement, the agreement was void, and the shipper became liable to pay 'additional freight on all commodities theretofore shipped with such carriers for a period not exceeding twelve months immediately preceding the date of such shipment, at the non-contract rate or rates * * * .' Id., at 18. Such an accumulation of potential liability was much more likely to result in 'continual dependence' on the conference than is the liquidated damages provision in the agreement before us. The latter provides for damages of 50 percent of the freight that would have been paid under the agreement (i.e., at the lower, or contract rate) for the shipment made in violation of the agreement; the agreement does not become void on account of a single violation. There is no basis for concluding that these damages are unreasonably high or that they do not bear a rational relation to the actual loss a carrier sustains when he is denied a shipment to which his contract entitles him.
Since this Court has twice rejected the theory that dual-rate contract systems violate § 14 of the Shipping Act, and since there is nothing in that statute or its legislative history to suggest that those cases were wrongly decided in the light of new knowledge not before the Court when they were decided, the question in this case is, as it was in the earlier two cases, one lying within the Board's administrative discretion. As I see no reason for overturning the detailed, well-reasoned report of the Board in these proceedings, I am of opinion that the decision of the Court of Appeals should be reversed.

## Notes

* ↑ 39 Stat. 728, 733, as amended, 46 U.S.C. § 812, 46 U.S.C.A. § 812.
* ↑ See, e.g., agreements set forth at pp. 262-263 of Hearings before the House Committee on the Merchant Marine and Fisheries in the Investigation of Shipping Combinations, 62d Cong.
* ↑ Respondent Isbrandtsen, in its petition to the Court of Appeals to review the order of the Federal Maritime Board stated (at par. 10b) that '(o)f the about one hundred seventeen steamship freight conferences organized pursuant to Section 15 of the Shipping Act, and subject to the jurisdiction of the Board, about sixty-two conferences presently employ that system * * *.' See, also, Marx, International Shipping Cartels, 207.
* ↑ 4 F.M.B. 706, 737, 739-740, 1956, A.M.C. 414, 451, 454.
* ↑ On appeal, the very limited decrees obtained by the Government against some members of two of the conferences were reversed, 239 U.S. 466, 36 S.Ct. 212, 60 L.Ed. 387; United States v. American Asiatic S.S.C.o., 242 U.S. 537, 37 S.Ct. 233, 61 L.Ed. 479, and the suits directed to be dismissed on the score of mootness because of World War I.
* ↑ It is worth noting that in §§ 14, Fourth and 15 the statute speaks in terms of 'unjust' discrimination, a standard to which it was quite clearly the legislative purpose for the Board to give substance and meaning. Congress had no intention of condemning all of the practices described by the very general language of the two provisions; it relied on the Board to prevent only those that are unwarranted by the competitive situation in which they are found. But in § 14, Third no such qualification was adopted, for the kind of 'discriminating and unfair methods' toward which Congress was directing its attention had been clearly identified (i.e., by retaliation against shippers), and they were to be flatly prohibited irrespective of the circumstances in which they might be practiced.
* ↑ '(The) differences in origin and function (between court and agency) preclude wholesale transplantation of the rules of procedure, trial, and review which have evolved from the history and experience of courts. Thus, this Court has recognized that bodies like the Interstate Commerce Commission, into whose mould Congress has cast more recent administrative agencies, 'should not be too narrowly constrained by technical rules as to the admissibility of proof,' Interstate Commerce Commission v. Baird, 194 U.S. 25, 44, 24 S.Ct. 563, 568, 569, 48 L.Ed. 860, should be free to fashion their own rules of procedure and to pursue methods of inquiry capable of permitting them to discharge their multitudinous duties. Compare New England Divisions Case, 261 U.S. 184, 43 S.Ct. 270, 67 L.Ed. 605. To be sure, the laws under which these agencies operate prescribe the fundamentals of fair play. They require that interested parties be afforded an opportunity for hearing and that judgment must express a reasoned conclusion. But to assimilate the relation of these administrative bodies and the courts to the relationship between lower and upper courts is to disregard the origin and purposes of the movement for administrative regulation and at the same time to disregard the traditional scope, however far-reaching, of the judicial process. Unless these vital differentiations between the functions of judicial and administrative tribunals are observed, courts will strary outside their province and read the laws of Congress through the distorting lenses of inapplicable legal doctrine.' Federal Communications Comm. v. Pottsville Broadcasting Co., 309 U.S. 134, 143-144, 60 S.Ct. 437, 441-442, 84 L.Ed. 656.
* ↑ The Court in the Cunard case discussed the claim in the following terms:
'It is said that the agreement referred to in the bill of complaint cannot legally be approved. But this is by no means clear. * * * (W)hatever may be the form of the agreement, and whether it be lawful or unlawful upon its face, Congress undoubtedly intended that the Board should possess the authority primarily to hear and adjudge the matter. For the courts to take jurisdiction in advance of such hearing and determination would be to usurp that authority. Moreover, having regard to the peculiar nature of ocean traffic, it is not impossible that, although an agreement be apparently bad on its face, it properly might, upon a full consideration of all the attending circumstances, be approved or allowed to stand with modifications.' 284 U.S. at page 487, 52 S.Ct. at page 251.
It may be noted that, after this Court ordered the dismissal of the complaints in the Cunard and Far East Conference cases, the complaining party in neither case initiated proceedings before the Board concerning the dual-rate system involved. The Government has, however, intervened in Board proceedings involving the systems of other conferences, as it did in the instant case.
This work is in the public domain in the United States because it is a work of the United States federal government (see 17 U.S.C. 105).
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