Source: https://www.law.cornell.edu/supremecourt/text/321/67
Timestamp: 2016-02-12 16:40:01
Document Index: 280309218

Matched Legal Cases: ['§ 5', '§ 314', '§ 1', '§ 5', '§ 5', '§ 5', '§ 11', '§ 21', '§ 5', '§ 44', '§ 1', '§ 1', '§ 306', '§ 13', '§ 5']

McLEAN TRUCKING CO., Inc., v. UNITED STATES et al. | US Law | LII / Legal Information Institute
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321 U.S. 67 (64 S.Ct. 370, 88 L.Ed. 544)
McLEAN TRUCKING CO., Inc., v. UNITED STATES et al.
Argued: and Submitted Nov. 12—15, 1943.
Decided: Jan. 17, 1944.
This is an appeal from a decree of a statutory three judge court,
48 F.Supp. 933, refusing to set aside certain orders of the Interstate Commerce Commission which had authorized consolidation of seven large motor carriers.
Associated Transport, Inc., was organized in Delaware in March, 1941, to bring about the proposed merger. In July, 1941, it applied to the Interstate Commerce Commission for permission, under Section 5 of the Interstate Commerce Act, as amended, 49 U.S.C. 5, 49 U.S.C.A. § 5, 54 Stat. 898, 905, to obtain control of eight motor carriers, through purchase of their capital stock, and to consolidate their operating rights and properties into one unit within a year from the date it acquired stock control. At the same time, Associated applied for permission under Section 214 of the Motor Carrier Act of 1935, 49 U.S.C. 314, 49 U.S.C.A. § 314, 49 Stat. 543, 557, 52 Stat. 1240, 54 Stat. 924, to issue preferred and common stock to be used mainly in exchange for stocks of the eight common carriers and four associated noncarriers.
Before the Commission, approval of the applications was opposed by the Secretary of Agriculture, the Anti-Trust Division of the Department of Justice, the National Grange, four fruit growers associations and Super Service Motor Freight Company, a motor carrier.
An examiner held hearings at which evidence was introduced, and the Commission heard argument on objections to his report before finally authorizing the consolidation.
The eight carriers originally sought to be merged
were Arrow Carrier Corporation, Paterson N.J.; Barnwell Brothers, Inc., Burlington, N.C.; Consolidated Motor Lines, Inc., Hartford, Conn.; Horton Motor Lines, Inc., Charlotte, N.C.; McCarthy Freight System, Inc., Taunton, Mass.; M. Moran Transportation Lines, Inc., Buffalo, N.Y.; Southeastern Motor Lines, Inc., Bristol, Va.; and Transportation, Inc., Atlanta, Ga. The merger embraces some of the principal operators along the Atlantic seaboard from Massachusetts to Florida. Certain of them serve communities as far west as Cleveland, Ohio, Nashville, Tennessee, and New Orleans, Louisiana. But the most important effect will be to create an end-to-end consolidation from points in the far South to New England, with obviously large possibilities for through service. According to evidence before the Commission the total assets of the companies involved, as of April 30, 1941, exceed $8,000,000 and their gross operating revenues for 1940 exceeded $19,000,000. The carriers operate principally as motor vehicle common carriers of general commodities over regular routes totalling 37,884 miles. Over 13,546 miles between important service points one or more competes with others in the group.
As a result of the proposed merger Associated will be the largest single motor carrier in the United Statesat least in terms of its estimated revenuesand no other single motor carrier will compete with it throughout its service area. Nevertheless, after careful consideration and on evidence clearly sufficient to sustain it, the Commission found that on completion of the merger 'there would remain ample competitive motor-carrier service throughout the territory involved' and in addition that one or more rail carriers would offer substantial competition to Associated at all principal points. It also found that the consolidation would result in improved transportation service. Through movement of freight would be simplified and expedited, equipment would be utilized more efficiently, terminal facilities improved, handling of shipments reduced, relations with shippers and public regulatory bodies simplified, safe operation promoted, and substantial operating economies would be achieved. The Commission concluded that the applicant's assumption of the fixed charges of the carriers would not be inconsistent with the public interest, and consummation of the proposed transaction would not result in substantial injury to the carrier employees affected.
In connection with Arrow's participation, the Commission found that The Transport Company, whose stock was wholly owned by Kuhn, Loeb and Company, had an option to purchase Arrow's common stock and would receive Associated's stock therefor when the merger was effected. The stock thus received, together with 9,000 shares of Associated's common stock already held, would give. The transport Company, and through it Kuhn, Loeb and Company, 6,877 shares of Associated's preferred and 67,167 of Associated's common, a total of 13 per cent and 9.53 per cent, respectively, of the preferred and common stocks expected to be outstanding at the conclusion of the transactions.
Kuhn, Loeb and Company is represented on the boards of directors of several railroads and for years has had investment banking connections with the Baltimore and Ohio and the Pennsylvania Railroads, each operating in territory to be served by Associated. A representative of Kuhn, Loeb and Company would be one of Associated's nine directors. After examining the blocks of stock which other persons would hold on completion of the consolidation and other matters bearing on the relationship between the proposed merger and the railroads, the Commission concluded that Associated would not be affiliated with any rail carriers. With the elimination of Arrow, of course, the likelihood of any influence on Associated's policies by Transport, and thus by Kuhn, Loeb and Company and the railroads, was substantially reduced.
The pertinent provisions of the Interstate Commerce Act, which is controlling, are set forth in the margin.
'(2)(a) It shall be lawful, with the approval and authorization of the Commission, as provided in subdivision (b)
89101112131415161718192021222324252627281
The chief attack on the orders is that the Commission improperly construed the standards by which Congress intended it to determine the propriety of a consolidation; and the burden of this complaint is that it did so 'by failing to consider and give due weight to the anti-trust and other laws of the United States.' The argument seems to be that the merger, notwithstanding the Commission's approval, violates the Sherman Anti-Trust Act, 15 U.S.C.A. §§ 17, 15 note; hence the Commission is without power to approve the merger. This presupposes that Congress did not intend, by enacting the specific exemption of Section 5(11), to give the Commission leeway to approve any merger which, but for the exemption and the Commission's approval, would run afoul of the anti-trust laws. In other words, the Commission's authority is not 'exclusive and plenary,' as the Section declares, within the boundaries set by the Interstate Commerce Act, including the exemption; but it is restricted also by all the ramifications of the anti-trust laws and policies, to which the Commission must give strict regard in approving motor consolidations, as if the exemption did not exist.
Whatever may be the case with respect either to other kinds of transactions by or among carriers20 or to consolidations of different types of carriers,21 there can be little doubt that the Commission is not to measure proposals for all-rail or all-motor consolidations by the standards of the anti-trust laws. Congress authorized such consolidations because it recognized that in some circumstances they were appropriate for effectuation of the national transportation policy. It was informed that this policy would be furthered by 'encouraging the organization of stronger units' in the motor carrier industry.22 And in authorizing those consolidations it did not import the general policies of the antitrust laws as a measure of their permissibility.23 It in terms relieved participants in appropriate mergers from the requirements of those laws. Section 5(11). In doing so, it presumably took into account the fact that the business affected is subject to strict regulation and supervision, particularly with respect to rates charged the publican effective safeguard against the evils attending monopoly, at which the Sherman Act is directed. Against this background, no other inference is possible but that, as a factor in determining the propriety of motor-carrier consolidations the preservation of competition among carriers, although still a value,24 is significant chiefly as it aids in the attainment of the objectives of the national transportation policy.
The Commission found, as has been noted, that the proposed consolidation would result in improved transportation service, greater efficiency of operation and substantial operating economies. The higher load factor on trucks, reduction in the number of trucks used and the mileage traversed would lead to more efficient use of equipment and save motor fuel. Terminal facilities would be consolidated and used more effectively, through movement of freight would reduce costs and in a multitude of other ways the stability and safety of the service rendered would be enhanced.27 The Commission also considered the extent to which competition among the merging carriers would be diminished, the effects of the consolidation on competing carriers and the consequences for transportation service and motor carrier operations in general in the areas affected. It found that in each of the areas served by the present components of the merger there are from 44 to more than 100 Class I carriers, many of which were regular route common carriers of general commodities, comparable in sizeinsofar as size is disclosed by operating revenuesto some of the participants in the consolidation. Between the principal points in each of the areas served substantial competition by independent Class I carriers now exists. While none of these carriers operates a through service over the entire area to be served by Associated, the Commission found that rail carrier service competes at all the principal points to be served by Associated, and that contract carriers also offer competition.
The only relevant evidence now pointing toward affiliation of the applicant with rail carriers are the facts that Kuhn, Loeb and Company indirectly owns 9,000 shares of Associated's common stock, has one representative among the nine directors of Associated, has investment banking connections with competing rail carriers, and is represented on the boards of directors of other railroads. For present purposes we may assume that by virtue of those connections the rail carriers' interests will be the banking house's interests in directing the affairs of Associated. But aside from the proportionately small (9,000 out of 1,000,000 common shares) stock ownership and the place on the board of directors, the Commission found no connectioneither in the origins of the present proposal or in personnel, financing or otherwisebetween Kuhn, Loeb and Company and the rail carriers on the one hand and Associated on the other. This contrasts sharply with the circumstances in Transport Co., 36 M.C.C. 61, where a much larger merger of eastern motor carrier operators, sought to be consummated with at least the assistance of Kuhn, Loeb and Company, was denied approval by the Commission. And in the present merger others, not associated, so far as this record shows, with Kuhn, Loeb and Company or rail carriers would have substantial blocks of stock.28 We cannot find anything arbitrary or unreasonable in the conclusion that the consolidation as finally authorized will not result in Associated's being affiliated with a carrier by rail. It may be added that under the Commission's order in this case the relatively close holdings which will emerge from the consolidation cannot be altered without the Commission's approval. And it is the consolidation as approved which is exempted from the operation of the anti-trust laws and the prohibition against rail affiliation without approval. Any future change which may bring the consolidation into clash with either prohibition may be considered when it arises.
I agree that the standard of the 'public interest' which governs mergers and consolidations under § 5 embraces the national transportation policy contained in the Act. That declared policy calls, among other things, for the recognition and preservation of 'the inherent advantages' of motor vehicle transportation; the promotion of 'safe, adequate, economical, and efficient service' and the fostering of 'sound economic conditions in transportation and among the several carriers'; the establishment and maintenance of reasonable charges 'without unjust discriminations, undue preferences or advantages, or unfair or destructive competitive practices'to the end of 'developing, coordinating, and preserving a national transportation system' which is 'adequate to meet' the national needs. 54 Stat. 899. Those standards are specifically referred to in § 5(2)(c) where an itemization of some of the factors to which the Commission shall give weight is made. And the preamble itself states that 'All of the provisions of this Act shall be administered and enforced with a view to carrying out the above declaration of policy.'
But I am of the opinion that the concept of the 'public interest' as used in § 5 also embraces the anti-trust laws. Those laws extend to carriers as well as to other enterprises. But for the approval of the Commission the present consolidation would run afoul of the Sherman Act. United States v. Southern Pacific Co., 259 U.S. 214, 42 S.Ct. 496, 66 L.Ed. 907. And the Clayton Act (which makes specific references to common carriers) by § 11 expressly entrusts the Commission with the authority of enforcement of its provisions 'where applicable to common carriers.' 38 Stat. 734, 15 U.S.C. 21, 15 U.S.C.A. § 21. Those laws still stand. We thus have a long standing policy of Congress to subject these common carriers to the anti-trust laws. And we should remember that, so far as motor vehicles are concerned, we are dealing with transportation units whose rights of waythe highways of the countryhave been furnished by the public. These considerations indicate to me that while the power of Congress to authorize the Commission to lift the ban of the anti-trust laws in favor of common carriers is clear (New York Central Securities Corp. v. United States, 287 U.S. 12, 25, 26, 53 S.Ct. 45, 48, 77 L.Ed. 138), administrative authority to replace the competitive system with a cartel should be strictly construed. I would read § 5 of the Transportation Act so as to make for the greatest possible accommodation between the principles of competition and the national transportation policy. The occasions for the exercise of the administrative authority to grant exemptions from the anti-trust laws should be closely confined to those where the transportation need is clear.
28 U.S.C. 44, 47, 47a, 345, 28 U.S.C.A. §§ 44, 47, 47a, 345.
Compare the Interstate Commerce Act of 1887, 24 Stat. 379, and the statutes collected in Sharfman, supra note 9, with the Transportation Act of 1920, 41 Stat. 456 (see, also, MacVeagh, The Transportation Act of 1920 (1923)), the Emergency Transportation Act of 1933, 48 Stat. 211, and the Transportation Act of 1940, 54 Stat. 898, 49 U.S.C.A. § 1 et seq. See, also, Annual Reports of the Interstate Commerce Commission for 1888, pp. 2526; 1892, pp. 4755; 1893, p. 9; 1894, p. 63; 1897, pp. 4851; 1898, pp. 1822; 1900, p. 13; 1918, pp. 49; 1919, pp. 16. See, generally, Johnson, Government Regulation of Transportation (1938); Nelson, The Role of Regulation Reexamined, Transportation and National Policy, National Resources Planning Board (May, 1942) 197.
Cf. authorities cited supra notes 9 and 10. The Interstate Commerce Act of 1887, 24 Stat. 379, was in a sense a shadow cast by the coming Sherman Act, 26 Stat. 209, 15 U.S.C.A. §§ 17, 15 note. Compare Snyder, The Interstate Commerce Act and Federal Anti-Trust Laws (1904) 121122.
No motor carrier can operate in interstate commerce without a certificate of public convenience and necessity, 49 U.S.C. 306, 49 U.S.C.A. § 306, 49 Stat. 551, 52 Stat. 1238, 54 Stat. 923. Compare Monograph No. 21, Temporary National Economic Committee, 76th Cong., 3rd Sess., 268.
Even after the major shift in policy reflected in the Transportation Act of 1920, Congress left it abundantly clear that the preservation of competition and the elimination of monopolistic practices in many phases of the transportation industry was a desideratum. See e.g., 15 U.S.C. 13, 14, 1821, 15 U.S.C.A. §§ 13, 14, 1821; 38 Stat. 730 et seq., 48 Stat. 1102, 49 Stat. 15261528; In re New York, N.H. & H.R. Co., 31 I.C.C. 32, 61; Five Per Cent Case, 31 I.C.C. 351, 413, 414; and Section 5(1) of the Interstate Commerce Act, 41 Stat. 480, 481, 54 Stat. 905; and compare Chesapeake & Ohio R. Co. v. United States, 283 U.S. 35, 51 S.Ct. 337, 75 L.Ed. 824.
Cf. 49 U.S.C. 5(14)(16), 49 U.S.C.A. § 5(1416), 37 Stat. 566, 41 Stat. 482, 54 Stat. 909. In connection with the consolidation of rail and motor carriers Congress was explicit on the subject of competition in its mandate to the Commission. Fearful of the dangerous potentialities which such coordination might create (see 79 Cong.Rec. 56545655, 12206, 1222212225) Congress prescribed more rigorous requirements for that process than for simple motor carrier consolidations. For the latter approval may be granted if the Commission finds the transaction 'consistent with the public interest.' For a rail carrier to consolidate with a motor carrier, Commission approval requires a finding that the transaction will 'be consistent with the public interest and will enable such carrier to use service by motor vehicle to public advantage in its operations and will not unduly restrain competition.' Compare the language of Section 213(a) of the Motor Carrier Act of 1935, 49 Stat. 555, 556, 52 Stat. 1239, (and cf. 86 Cong.Rec. 11546) with that of Section 5 of the Transportation Act of 1940.
Cf. note 17 supra. Authorization of consolidation of rail carriers stems historically from circumstances different from those impelling the authorization of consolidation of motor carriers. Compare authorities cited in notes 9 and 10 supra with those in notes 1719 supra. This difference in origins is not entirely to be ignored simply because the same provisions of Section 5 now govern both motor carrier and rail carrier consolidations. Cf. 86 Cong.Rec. 11546. But whatever effect the difference may have, as a guide to the Commission concerning the extent to which and circumstances in which consolidation should be allowed, it cannot nullify the power given to the Commission by Section 5(11).
Cf. note 26 infra; compare also 41 Stat. 481, 482; Chesapeake and Ohio R. Co. v. United States, 283 U.S. 35, 51 S.Ct. 337, 75 L.Ed. 824; MacVeagh, The Transportation Act of 1920 (1923) 275292.
E.g., Senator Wheeler, in charge of the measure in the Senate, said: 'At present most truck operations are small enterprises. However, there are many rumors of plans for the merging of existing operations into sizable systems. In view of past experience with railroad and public utility unifications, it is regarded as necessary that the Commission have control over such developments, where the number of vehicles involved is sufficient to make the matter one of more than local importance.' 79 Cong.Rec. 56545655.
The position here taken is substantially the view which originally obtained in the Commission. Northland-Greyhound Lines, Inc., 5 M.C.C. 123; Richmond-Greyhound Lines, Inc., 35 M.C.C. 555. But that view did not long obtain. See Northland-Greyhound Lines, Inc., 25 M.C.C. 109; Richmond-Greyhound Lines, Inc., 36 M.C.C. 747. And see Meck & Bogue, Federal Regulation of Motor Carrier Unification, 50 Yale L.Journ. 1376, 13931397.