Opinion ID: 411639
Heading Depth: 2
Heading Rank: 2

Heading: Effect of the ICC Limitation Provision

Text: 125 It is not enough, however, to conclude that Agreement 10140 falls within the literal language and implicates the central policies of section 15; we must also be satisfied that our interpretation of section 15 does not violate Section 33 of the Shipping Act, which provides: 126 This [Act] shall not be construed to affect the power or jurisdiction of the [ICC], nor to confer upon the [FMC] concurrent power or jurisdiction over any matter within the power or jurisdiction of such [ICC]. 127 46 U.S.C. Sec. 832. The question, therefore, is whether FMC authority to approve ocean carrier agreements that contemplate the fixing of joint through intermodal rates will interfere with the exercise of ICC jurisdiction in violation of section 33. 60 128 The Department's argument here parallels its argument that section 15 simply does not reach the approval of joint intermodal through rates, see Part III.A. supra. It is in one respect an improvement, however, for the present argument has the virtue of relying on a statutory provision--section 33--that under certain factual considerations can operate to limit the Commission's jurisdiction. 61 On the facts before us, however, we find no indication that the Commission has transgressed that limit. To explain that conclusion we must briefly review ICC and Commission regulatory practice with respect to joint through intermodal ratemaking. 129 Both the ICC and the Commission accept the filing of joint intermodal through rates by carriers subject to their respective jurisdictions, with the requirement that the filing carrier set forth the division of the total rate it is to receive. 62 Neither agency, however, claims the authority to disprove or suspend the rates charged by carriers subject to the jurisdiction of the other. In Pennsylvania v. ICC, supra, we specifically upheld the ICC's decision to require that the inland portion of the joint rate be set out separately and to limit its substantive regulation to the inland rate. 561 F.2d at 291. We noted that any attempt by the ICC to regulate the foreign segment of the joint rate would plainly usurp[ ] the FMC's jurisdiction under the Shipping Act. Id. 130 Because the ICC specifically allows inland carriers to participate with individual ocean carriers and conferences of such carriers, 63 and because the ICC asserts substantive regulatory jurisdiction over only the inland portion of an overall intermodal through rate, we are not convinced that Commission approval of joint through rates invades ICC jurisdiction or otherwise interferes with the exercise of ICC power. The Department, however, suggests that 131 the power to approve agreements fixing both the overall rate and the ocean carrier division necessarily entails the power to approve fixing the inland division as well. 11 It further follows that the existence of such a power conflicts with the ICC's authority to regulate the inland carriers, and cannot be reconciled with section 33 of the Shipping Act. 132 Pet.Br. at 13. We would work the formula differently. The object of Agreement 10140 is to reduce the differential between intermodal and all-water rates for Gulf/U.K. traffic. Common sense would suggest, and at oral argument counsel for the Justice Department agreed, that ratemaking proceeds in this order: First, the all-water conference carriers publish a tariff under their own conference agreement, see note 7 supra, for a particular cargo movement. Then, pursuant to Agreement 10140, the intermodal carriers decide whether to adopt that rate. For each carrier that decision will depend upon its ability to obtain a favorable rate from an inland carrier. In the Department's symbols this process is best described by the equation of c (total joint rate) minus b (inland division) equals a (ocean division). Agreement 10140 does not fix inland rates. 133 Even if it could be said that the ocean carriers somehow do collectively determine inland rates, it remains that no inland division of a joint rate can exist without ICC approval. Divisions of joint rates by carriers subject to ICC jurisdiction ... must be reasonable, 49 U.S.C. Sec. 10701(a), and the ICC has power to prescribe ... the division of joint rates, and the conditions under which those routes must be operated, 49 U.S.C. Sec. 10705. 134 Unable to point to any specific ICC regulatory function that FMC approval of joint through intermodal rates would impede, the Department argues that such approval frustrates the ICC's ability to protect the interests of the public. Pet.Br. at 21. The fixing of through intermodal rates, the argument runs, deprives Gulf/U.K. shippers of price competition between inland carriers, whereas if the Commission were limited to approval of proportional ocean rates, shippers could negotiate their own inland rate and get a better overall price. We agree with the Commission and intervenors that this contention exalts form over substance. The Department acknowledges that the Commission could take jurisdiction over an agreement that eliminated intermodal transit's price advantage over all-water transit if such an agreement were limited to the fixing of the intermodal carriers' proportional ocean rates. See Pet.Br. at 20, Pet.Rep.Br. at 19-20. Assuming the Department is right in saying this arrangement would permit Gulf/U.K. shippers to drive a better bargain with inland carriers, we fail to see how the shipper's lot would be improved with respect to the overall rate, for the intermodal ocean carriers can then agree to charge a correspondingly higher ocean rate to advance the goal of reducing price competition between intermodal and all-water carriers. See generally Overland & OCP Rates, supra, 12 F.M.C. at 216. 135 In light of the above we conclude that Agreement 10140 was an agreement subject to section 15 filing and approval or disapproval by the Commission. Moreover, nothing in section 33 would counsel a different interpretation, for there is no practical conflict between ICC and Commission jurisdiction over the filing of the joint intermodal through rates; the Commission's approval of the Agreement leaves the ICC's jurisdiction over inland carriers and inland rates unimpaired. IV. ADEQUACY OF HEARING 136 Two issues remain: whether the Commission's decision not to hold an evidentiary hearing was an abuse of discretion and, given the absence of such a hearing, whether under the applicable standard of judicial review its approval of Agreement 10140 was justified. 137 We consider these issues against the background of section 15's directive that the Commission disapprove, cancel, or modify any agreement ... contrary to the public interest. 64 This language requires that the Commission consider the antitrust implications of all agreements submitted to it for approval. 65 Once it appears that an agreement entails an antitrust violation, this alone will normally constitute substantial evidence that the agreement is 'contrary to the public interest,' unless other evidence in the record fairly detracts from the weight of this factor. FMC v. Aktiebolaget Svenksa Amerika Linien, supra, 390 U.S. at 246, 88 S.Ct. at 1010. The proponents of an anticompetitive agreement must therefore show it is required by a serious transportation need, necessary to secure important public benefits, or in furtherance of a valid regulatory purpose of the Shipping Act, id. at 243, 88 S.Ct. at 1008, and the Commission must  'scrutinize the agreement to make sure that the conduct ... legalized [through section 15 approval] does not invade the prohibitions of the antitrust laws any more than is necessary to serve the purposes of the regulatory statute.'  United States Lines v. FMC, supra, 189 U.S.App.D.C. at 370, 584 F.2d at 528 (quoting Volkswagenwerk v. FMC, supra, 390 U.S. at 274 n. 21, 88 S.Ct. at 936 n. 21). A. Procedural Adequacy 138 In the administrative proceeding, the proponents of Agreement No. 10140 submitted affidavits and memoranda in support of an extension of the Agreement. The Department's protest was filed in response to these submissions and in response to the Commission's notice in the Federal Register. The notice directed persons submitting comments and requests for hearing to set forth with particularity facts and arguments concerning approval, modification, or disapproval of the Agreement. See note 13 supra. 66 139 The Department did not deny or otherwise respond to the factual showing made by the proponents of the Agreement. The Department's request for hearing proceeded not on the claim that proponents' factual assertions were in any respect inaccurate, then, but on the theory that any agreement amounting to a serious, per se violation of the antitrust laws requires a pre-approval evidentiary hearing, and that price-fixing, clearly an object of Agreement 10140, was of that serious nature. App., at 102-03. 140 The Commission acted well within its discretion in deciding [t]he [Department's] protest raises no issues of law of fact that require further examination in an evidentiary hearing. 67 Although section 15 indicates that approval of an agreement can occur only after notice and hearing (see note 64 supra ), this requirement may be satisfied by something less time-consuming than courtroom drama. Marine Space Enclosures, Inc. v. FMC, 137 U.S.App.D.C. 9, 420 F.2d 577, 589 (1969). The formal evidentiary hearings that the Administrative Procedure Act requires in instances where the agency must have a hearing on the record are not required in Commission hearings inasmuch as Shipping Act Sec. 15 lacks that stipulation. United States Lines v. FMC, 189 U.S.App.D.C. 361, 378, 584 F.2d 519, 536 (1978) (citing United States v. Florida East Coast R. Co., 410 U.S. 224, 234-38, 93 S.Ct. 810, 815-17, 35 L.Ed.2d 223 (1973)). The Commission thus enjoys flexibility in structuring Section 15 hearings in light of the circumstances of the case and the nature of the issues involved. Id. 378-79, 584 F.2d at 536-37. It need only conduct whatever proceedings are necessary to secure sufficient information so that its final decision will reflect 'a consideration of the relevant factors.'  Seatrain International, S.A. v. FMC, 189 U.S.App.D.C. 388, 392, 584 F.2d 546, 550 (1978) (quoting Citizens to Preserve Overton Park, Inc. v. Volpe, 401 U.S. 402, 416, 91 S.Ct. 814, 823, 28 L.Ed.2d 136 (1971)). 141 The Justice Department's comments, while placing the Commission on notice of some of the antitrust questions raised by the Agreement, gave no promise that the Department would make any contribution toward the case's factual development. Moreover, no shipper affected by the Agreement in its nearly three years of operation had objected to it, even though the Agreement was placed under Commission review on several prior occasions. See note 12 supra. And the Agreement was extended only temporarily, for the relatively short term of 18 months, see United States Lines v. FMC, supra, 584 F.2d at 529-30. We do not doubt that a full-blown evidentiary hearing conceivably might have sharpened the issues or otherwise have contributed to reasoned decisionmaking. But the costs of any adversary hearing loom large in contrast to these speculative benefits. In view of these circumstances, we cannot say the Commission abused its discretion in deciding to dispose summarily of the Department's legal and policy arguments. 68 B. Substantive Adequacy 142 The final question is whether, given the absence of an evidentiary hearing, the Commission was justified in concluding on the record before it that the proponents of Agreement 10140 had shown that their anticompetitive agreement was required by a serious transportation need, necessary to secure important public benefits, or in furtherance of a valid regulatory purpose of the Shipping Act. FMC v. Aktiebolaget Svenska Amerika Linien, supra, 390 U.S. at 243, 88 S.Ct. at 1008. The agency's decision to treat the Department's antitrust objections summarily requires that we closely scrutinize its conclusions, Gulf State Utilities Co. v. FPC, 411 U.S. 747, 763, 93 S.Ct. 1870, 1880, 36 L.Ed.2d 635 (1973), and examine the supporting findings and assumptions with especial care, United States v. FCC, supra, 96-97. We thus examine in some detail the links in the Commission's chain of reasoning, recognizing, of course, that the agency's findings and conclusions must be affirmed unless arbitrary, capricious, an abuse of abuse of discretion, or otherwise not in accordance with law, 5 U.S.C. Sec. 706(2)(A), i.e., we are not to supplant the agency's judgment with our own. New York Shipping Association, Inc. v. FMC, 202 U.S.App.D.C. 253, 628 F.2d 253, 258 (1980); United States Lines v. FMC, 189 U.S.App.D.C. 361, 584 F.2d 519, 526 (1978).
143 The Commission has concluded that Agreement 10140 merited an extension for another 18 months because it is not more restrictive of competition than is reasonably necessary to accomplish proponents' legitimate objectives: 69 144 [w]ithout the stabilizing influence of [Agreement 10140,] uncontrolled rate cutting is likely to develop which would result in service disruptions and the probable elimination of some carriers from the trade--conditions which the Shipping Act was intended to eliminate. 70 145 The Commission saw no anticompetitive effect of major significance to counteract this stabilizing influence: 71 The Agreement's members faced competition from six independent all-water liner services and one independent minibridge service as well as from a number of unregulated tramp operators. 72 Moreover, the Commission noted that the intermodal carriers' right to pursue independent action on 48 hours' notice (see TAN 11 supra ) 146 permits some rate competition to exist between Proponents. Although Seatrain and USL have generally maintained rate parity with the conference carriers, they have and will 147 ... adjust [their] rates as [they deem] necessary to meet the demands of shippers, competition from independent lines, or competition from members of the Gulf/United Kingdom Conference. 73 148 The Department contends the Commission's reasoning is arbitrary for failing to pay adequate heed to the Agreement's effect on prices and for treating the survival of ocean carriers as a legitimate objective under the Shipping Act. Pet.Br. at 35, 37-38a. Neither argument is persuasive. The Commission was aware that proponents carry about 65% of the goods moving in the traditional liner cargo market and that they quote prices 10-15% above those of the independent carriers. 74 We are not in position to quarrel with the Commission's judgment that Agreement 10140's prevention of uncontrolled rate cutting and its consequences would justify the higher prices that customers of Agreement members must pay. Nor can we say the Commission was wrong in considering the importance of preserving carrier capacity, which it could relate to adequate service and, in turn, to the public interest factors of a serious transportation need, an important public benefit, or a valid regulatory purpose of the Shipping Act. The Commission has rationally related its judgmental conclusions to its factual finding that absent the Agreement uncontrolled rate cutting is likely to develop. See Burlington Truck Lines, Inc. v. United States, 371 U.S. 156, 168, 83 S.Ct. 239, 245, 9 L.Ed.2d 207 (1962). In these instances we perceive the Commission exercising an expert judgment to which we must defer. 75 But we must also be satisfied, before we affirm the Commission's order, that the factual predicate of its conclusion is also adequate. It is to that inquiry we now turn.
149 Although Commission orders are not subject to the provision of the Administrative Procedure Act requiring that agency decisions be supported by substantial evidence on the record considered as a whole, United States Lines, supra, 189 U.S.App.D.C. at 368, 189 n.35, 584 F.2d at 526, courts have routinely assumed that Commission orders are subject to some kind of substantial evidence standard, 76 presumably on the theory that an agency decision that is not based on substantial evidence should be overturned as arbitrary and capricious or as an abuse of discretion. See Pacific Legal Foundation v. DOT, 193 U.S.App.D.C. 184, 593 F.2d 1338, 1343 n. 35, cert. denied, 444 U.S. 830, 100 S.Ct. 57, 62 L.Ed.2d 38 (1979). 77 Substantial evidence generally has meant such relevant evidence as a reasonable mind might accept as adequate to support a conclusion. But this does not go so far as to justify orders without a basis in evidence having rational probative force. Consolidated Edison Co. v. NLRB, 305 U.S. 197, 229, 230, 59 S.Ct. 206, 216, 217, 83 L.Ed. 126 (1938). Another way of stating this standard is to ask whether the record contains data sufficient to support an informed conclusion. We thus examine the record support for FMC's factual conclusions. 150 The central premise of the Commission's ultimate finding that Agreement 10140 is not contrary to the public interest is that there is a need to alleviate disruptive pressures in the Gulf/U.K. trade. That such pressures exist was inferred from the practices of the Baltic Shipping Company, a Soviet flag controlled carrier with a demonstrated policy of predatory pricing. 78 There is record evidence to support the Commission's finding that Baltic Shipping Company does indeed undercut its competitors' prices by as much as 25-30%. 79 There is a dearth of evidence, however, to support the Commission's related prediction that absent a rate agreement it would be 151 especially difficult for Seatrain and USL to resist lowering their rates to meet the aggressive pricing policies of Baltic Shipping Company on high value container cargo in the absence of a rate agreement. Such cargo is incremental to Seatrain and USL's intermodal service, but it is the mainstay of the conference carriers' operation. If a rate war developed between intermodal carriers and the all-water carriers, it is unlikely that the conference could survive. 80 152 These recitations are ample in rhetoric, but 'sparing in detail.'  81 The supporting evidence consists solely of the unsubstantiated opinion of the proponents' affiant, the Secretary of Agreement 10140. 82 As we said in United States v. CAB, supra, 511 F.2d at 1326: 153 questions as to probable competitive behavior and its probable effects are susceptible to determination in the light of business and economist testimony and exhibits, and cross-examinations concerning analyses and underlying assumptions. Such matters are not to be determined exclusively by reasoning in the abstract, based upon logical speculation. 154 This is not to say that a full-scale evidentiary inquiry was required in this case. We have already held that the Commission did not err in failing to hold a formal hearing on the Department's written submissions. But it was incumbent upon the Commission to secure an adequate data base for its predictions as to trade disruptions in the absence of Agreement 10140. It was not entitled to accept at face value the conclusory predictions of the Agreements' proponents. While we recognize that agency expertise is to be accorded deference and that the Commission can correct present errors, neither of these principles can substitute for the adequate evidentiary basis upon which the Commission's findings must rest. 83 155 We therefore remand the case to the Commission so that it can reconsider, in light of sufficient data, its prediction that the absence of Agreement 10140 would result in trade disruption sufficiently serious to justify the Agreement's anticompetitive effects. 84 The Commission should elicit from proponents whatever specific evidence there may be to support that prediction, and should permit the Department an appropriate opportunity to evaluate that evidence. 85 We leave it to the judgment of the Commission to determine the form of the procedures to be employed on remand. City of Huntingburg, Indiana v. FPC, 162 U.S.App.D.C. 236, 498 F.2d 778, 789 (1974). V. CONCLUSION 156 The Commission has jurisdiction under section 15 of the Shipping Act to review a rate agreement between all-water carriers and rail/ocean carriers who service the same trade. This falls within the scope of section 15 as an agreement between persons subject to the Act that affects competition in connection with ocean transportation. Commission jurisdiction over the agreement does not conflict with ICC jurisdiction over land carriage, for the ICC retains power over inland rates. 157 The Department of Justice, suing in its law enforcement capacity, may challenge the order approving this agreement by invoking the Hobbs Act's judicial review provision in favor of a party aggrieved. The Department qualifies as such a party because it participated below and because the Commission approval of the rate agreement directly interferes with the Department's statutory duty to enforce the antitrust laws. The Department's simultaneous statutory involvement in the defense of Commission orders is at most a surface anomaly that does not materially interfere with an effective agency defense. Nor is there otherwise any persuasive indication that Congress meant to preclude the Department from seeking judicial review of the orders of Hobbs Act agencies. And, this case is constitutionally justiciable inasmuch as there is concrete adverseness between the parties and the controversy is of the sort traditionally resolved by courts. 158 Although the Commission was not required to hold an adversarial evidentiary hearing in this case, it was required to marshal sufficient data to support its factual, predictive conclusions. Because the Commission did not base its expert judgment on a set of sufficient and specific facts, but instead relied solely on the unsubstantiated conclusions of the Agreement's proponents, we remand to the Commission for elicitation of pertinent facts and reconsideration of the factors relevant to the public interest. 159 Judgment accordingly. 160