Opinion ID: 426192
Heading Depth: 1
Heading Rank: 2

Heading: Product and Geographic Competition

Text: 38 The petitioners challenge the validity of the ICC's regulations allowing consideration of product and geographic competition. They contend that the regulations exceed the ICC's statutory authority. 39 We begin, as we must, with a recognition of the limited role this Court plays in reviewing an administrative agency's construction of its statutory authority and the regulations promulgated pursuant thereto. Far removed from the practical realities of the day-to-day regulation of this nation's railroads, we must defer to the agency's interpretation of the statute and affirm that interpretation if it has a reasonable basis in law. See Aberdeen & Rockfish Railroad Co. v. United States, 682 F.2d 1092, 1096 (5th Cir.1982), quoting Volkswagenwerk Aktiengesellschaft v. FMC, 390 U.S. 261, 88 S.Ct. 929, 935, 19 L.Ed.2d 1090 (1968). That the members of this Court might have construed the statute differently is inconsequential. Batterton v. Francis, 432 U.S. 416, 97 S.Ct. 2399, 2405, 53 L.Ed.2d 448 (1977). Moreover, when an agency, pursuant to congressional mandate, has adopted regulations designed to effectuate its statutory duties, this Court will not set aside such regulations unless the agency has exceeded its statutory authority or if its regulations so far depart from the statutory authorization that they can be interpreted as arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law. 5 U.S.C. Sec. 706(2)(A); Batterton v. Francis, 97 S.Ct. at 2405-06. 40 As we have seen, the 4R Act clearly evinces Congress' intent to deregulate the railroad industry only in areas in which effective competition exists. In both the 4R Act and the Staggers Act, Congress stressed its conviction that competitive forces, rather than regulations should be used to set price and service levels where effective competition prevails. Nonetheless, Congress clearly intended to retain the protections of ICC rate regulation in areas in which no effective competition prevails. In determining whether the ICC's decision to consider product and geographic competition exceeds its statutory authority, we must recognize Congress' stated policy of deregulating rail rates only in areas in which effective competition exists. [W]e must not be guided by a single sentence or member of a sentence, but look to the provisions of the whole law, and to its object or policy. 10 See Philbrook v. Glodgett, 421 U.S. 707, 95 S.Ct. 1893, 1898, 44 L.Ed.2d 525 (1975). 41 The 4R Act does not contain a detailed congressional formula for determining market dominance. Instead, it contains a generally phrased test designed to achieve a stated goal--deregulation of rail rates subject to effective competition. Congress not only expected but required the ICC to undertake the task of developing standards and procedures for determining whether and when a [railroad] possesses market dominance. Quite clearly, the ICC was given broad statutory authority to prescribe standards and procedures to be utilized in facilitating railroad rate deregulation. Well-established precedent requires us to uphold the ICC's regulations unless they are arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law. 5 U.S.C. Sec. 706(2)(A). 42 The regulations adopted by the ICC in Ex Parte No. 320 (Sub. No. 2) cannot be considered arbitrary, capricious, an abuse of discretion, or inconsistent with law. Adopted pursuant to congressional mandate, the regulations reflect considered judgment in light of practical experience. Although the ICC's decision to consider product and geographic competition depart from prior ICC decisions, none can doubt the ICC's authority to change its mind in light of experience. American Truck Associations v. Atchison T. & S.F. Railroad Co., 87 S.Ct. at 1613 (1967). Certainly, regulatory agencies are neither required nor supposed to regulate the present and the future within the inflexible limits of yesterday. Id. 43 The ICC advanced the following reasons in support of its decision to consider product and geographic competition in making the market dominance determination. 44 We believe that [our prior] interpretation was unnecessarily restrictive. There is no evidence in the 4R Act that we consider only direct competition from other carriers or modes. Since the traffic to which the rate applies faces competition from other sources or destinations of the same product or from substitute products the carriers transporting that traffic face indirect competition from other carriers .... [E]ffective competition from other carriers or modes of transportation, for the traffic to which the rate applies means that, if a carrier raises the rate for such traffic, then some or all of that traffic will be lost to other carriers or modes. 45 Additionally, the ICC responded to the contention that its new regulations were unmanageable by stating: 46 In general, geographic or product competition will be deemed to be present if it is established that alternative supplies of the same or a close substitute product exist and that carriers transporting these same or close substitute commodities from the various sources to the various destinations compete with one another for the traffic in question. Whether such competition is judged to be effective will depend on evidence concerning the substitutability of one supply source or destination for another or one product for another. If, in a particular case, the Commission finds that the evidence submitted is inconclusive, then such evidence will be given minimal weight in our determination of market dominance. We believe that this is an improvement over our 1976 position that evidence of geographic and product competition be always and automatically excluded from every proceeding. 47 365 I.C.C. at 130. 48 Indeed, nothing in the 4R Act evinces congressional intent to preclude consideration of indirect competition. As we have seen, Congress simply sought deregulation of rail rates subject to effective competition. Refusing to set forth a rigid standard for determining when effective competition exists, Congress authorized the ICC to establish appropriate standards and procedures for determining when market forces suffice to regulate rail rates. The ICC is in the best position to determine whether product and geographic competition play a role in the day-to-day fluctuations in rail rates and whether consideration of such evidence is feasible within the requirements of the 4R Act. See Vermont Yankee Nuclear Power Corp. v. Natural Resources Defense Council, Inc., 435 U.S. 519, 98 S.Ct. 1197, 1202, 55 L.Ed.2d 460 (1978). Nothing in the 4R Act requires the ICC to make its decisions in a regulatory vacuum ignoring the practical effects of indirect competition. Undoubtedly, if the ICC was required to ignore the effects of indirect competition, certain rates would become subject to regulatory intervention even though the rate is governed by market forces. Such a result flies in the face of Congress' stated policy of deregulation of rates subject to effective market control. As the Final Conference Report to the Staggers Act emphasized, Whenever there is effective competition, such competition should continue to function as the regulator of the rate rather than the Commission. Hence, we cannot conclude that the ICC exceeded its statutory authority by adopting regulations that will allow it to consider the effects of indirect competition on rail rates in determining whether market dominance exists under the 4R Act. The ICC's interpretation of the 4R Act, when viewed with the deferential attitude required under existing precedent, certainly has a reasonable basis in law. See Aberdeen & Rockfish Railroad Co. v. United States, 682 F.2d at 1096. 49 We also note that we find nothing inconsistent with this result in the Staggers Act. Indeed, the Staggers Act reflects a reinforced congressional intent to allow the ICC to continue to promulgate standards and procedures for making the market dominance determination. The Conference Commission Report specifically stated that Congress' action was not intended in any way to restrict the ability of the Commission to apply this concept, both in its regulations and individual cases. H.Rep. No. 96-1430, 96th Cong.2d Sess. 88-89 (1980), U.S.Code Cong. & Ad.News 1980, 4120. This is particularly significant, since Congress was aware of the ICC's stated intent to consider product and geographic competition when the Staggers Act was debated. See I.C.C. at 736-77.