Opinion ID: 396142
Heading Depth: 2
Heading Rank: 1

Heading: The Rate Comparison

Text: 18 Only two of the factors considered by the ICC-the revenue-cost ratio and the Terre Haute-Lewisport rate comparison-indicated a rate that was unreasonably high, and the Board acknowledged that rates which exceed even fully allocated costs by substantial margins do not necessarily exceed maximum reasonable rate levels solely by reason of that fact. 22 The Board further revealed its material reliance on the rate comparison by prescribing a new rate based on precisely the same disparity (in terms of percentage) that had existed between the Terre Haute and Lewisport rates prior to the series of general rate increases. 23 The validity of the Board's finding and remedy thus stands or falls with the validity of the rate comparison. 19 The Commission may rely upon comparisons with other rates in determining whether the assailed rate is reasonable. 24 For any rate comparison to have probative value, however, the rates must be comparable. The Commission and reviewing courts have consistently insisted that the complainant, who bears the onus of establishing the unreasonableness of particular rates, 25 must lay the predicate for a rate comparison by showing that the rates being compared to the assailed rate apply to routes that involve similar terrain and other transportation conditions affecting cost. 26 Once that predicate is laid, the decided ICC cases suggest (although not unambiguously) that the burden of producing evidence shifts to the carrier, who may seek to show that the compared rate is inappropriate as a benchmark because, for example, it is the result of different competitive conditions. 27 Once its probative value is properly assessed, the rate comparison becomes one of the several factors the Commission may consider in making its finding and prescribing, if necessary, a new rate. 20 The Review Board here used the comparison between the Terre Haute and the Lewisport rates both as a factor to indicate that the Terre Haute rate was unreasonably high and as the basis for its rule-of-thumb prescription of a new rate. In both instances, we conclude, the Board acted arbitrarily and capriciously. 21 There is no doubt but that the claimant, Anaconda, established that the transportation conditions (the factors affecting costs) for the two rates were substantially the same, involving as they did the same commodity and much the same track. This showing established a rebuttable presumption that the rate comparison was a valid indicator of the rate's reasonableness. Indeed, several ICC cases state that a rate is prima facie unreasonable when it exceeds another rate applying to carriage of the same commodity in the same direction over the same track for a greater distance. 28 22 The question, then, is whether the Board adequately considered the record evidence that the rates were nevertheless not comparable. The Board's expert judgment is entitled to great weight, of course, but we must first be satisfied that its judgment has been applied. We conclude the Board did not give appropriate consideration to the railroads' claim that competitive forces made the two rates not truly comparable. 23 Anaconda offered no evidence on this point. The evidence pointed to by the railroads includes the facts (1) that the rate disparity developed as the result of the decision of the Southern Territory railroads to waive totally or partially the general rate increases awarded to the Western and Eastern railroads, 29 (2) that during 1972-77 the movement of primary aluminum pig, slabs, or ingots from the Mountain Pacific to the Official Territory (in which Terre Haute is located) increased by 14 percent while the tonnage moving from that origin to the Southern Territory decreased 32%, despite the relative reduction in the Southern Territory rates, 30 and (3) that Pacific Northwest aluminum companies receive their raw materials by water-rail or water-motor carrier transport and might ship to Southern Territory plants by way of the Panama Canal and the Mississippi and Ohio rivers. 31 24 This evidence suggests, albeit somewhat tenuously, that the Lewisport rate was depressed for competitive reasons, a circumstance that would undermine the validity of the Terre Haute-Lewisport rate comparison. 32 Although the evidence is obviously circumstantial rather than direct, we do not think it can be ignored or rejected as irrelevant. The evidence may possibly be interpreted consistently with the view that the competitive circumstances surrounding the Terre Haute and Lewisport rates are similar. The Board, however, has not addressed this evidence and advanced that interpretation, and we cannot indulge in the assumption that it would do so without usurping its function. The railroads' competition claim, although not necessarily compelling, left Anaconda, as the party bearing the ultimate burden of persuasion, with the task of rebutting that claim. 33 And the Commission, once the issue of competition is raised, should explain why it finds the rates nonetheless comparable. 25 The railroads' further complaint with the Commission's reliance on the rate comparison is that, assuming some reliance was justified, the Board was arbitrary and capricious in prescribing a maximum reasonable level on the basis of the 13% disparity that had prevailed between the two rates prior to the varying territorial applications of the general rate increases. The railroads contend that where, as here, the Commission is prescribing a new rate on the basis that it represents the maximum reasonable rate, and where, as here, the level prescribed is based on the level of another rate, the prescription is invalid absent a finding the compared rate is itself at the high end of the zone of reasonableness. 34 The railroads cite for that proposition Cargill, Inc. v. Chicago, M., St. P & P. R. Co. : A comparison of the assailed rate with one other rate is no indication that the former is unreasonable, for it may well be that the latter rate is below a maximum reasonable level instead of the assailed rate being unreasonably high. 35 They also cite the statement of the Supreme Court in Youngstown Sheet & Tube Co. v. United States that rate comparisons are not a conclusive test of reasonableness of a rate under investigation. 36 26 The Board did not explain how its reliance upon the Lewisport rate in setting the maximum reasonable level of the Terre Haute rate was reconcilable with the logic of these cases, and we do not find them sufficiently distinguishable to allay our concern that the Commission may have arbitrarily departed from precedent. 37 Justifications for the Boards' determinative reliance on the Lewisport rate may exist, 38 but they do not appear in its decision. 27 The Board on remand should reexamine its use of the rate comparison, both as an indicator of unreasonableness and as a measure of the maximum reasonable Terre Haute rate.