Court Opinion

ID: 9474376
Source: CourtListenerOpinion
Date Created: 2023-08-05 04:55:48.276141+00
Date Added: 2024-06-11T17:44:03.127197
License: Public Domain

*681CUDAHY, Circuit Judge,
dissenting:
I agree that the Commission has considerable discretion to grant or deny reciprocal switching arrangements or joint use agreements. But it cannot do so without close attention to the competitive effects of its decision and a plausible explanation why competition will be advanced (or at least not suppressed) through its resolution of the problem before it. The cause of deregulation, which the Staggers Act seeks to further, is based fundamentally on the premise that competition and the market forces which it unleashes can bring about adequate service at reasonable rates better than excessive reliance on direct regulation.1 See Conference Committee Report on the Staggers Act, H.R.Rep. No. 1430, 96th Cong., 2d Sess. 80 (1980). I think any denial of reciprocal switching, where the operational facts make it feasible, is prima facie anti-competitive and requires a better justification than the Commission has furnished here.
“[Ajdditional rail competition is a clear public benefit ... one which is endorsed by rail transportation policy announced in the Staggers Act. Under the Staggers Act, competition is normally presumed to be in the public interest, and the proponent bears a light burden on this issue.”
Delaware & Hudson Ry. Co. v. Consolidated Rail Corp., 367 I.C.C. 718, 723 (1983). See also H.R.Rep. No. 1035, 96th Cong., 2d Sess. 67 (1980) (“[Reciprocal switching has been limited- [in the past] to situations where competition between rail carriers is not threatened. The Committee intends for the Commission to permit and encourage reciprocal switching as a way to encourage greater competition.”); S.Rep. No. 470, 96th Cong., 1st Sess. 41 (1979) (“As the Government moves toward significantly less regulation of the services offered by railroads, the Government should encourage, rather than discourage, competition among railroads.”).
The physical and operational facts here are simple. Central ships grain from its elevator in Fort Wayne, Indiana to its elevator in Camilla, Georgia on the Southern. The Southern tracks do not directly serve the Camilla elevator. But the Seaboard, which does serve the Camilla elevator, connects with the Southern only 1.3 miles from the elevator. This 1.3 miles of Seaboard track may be regarded therefore as analogous to a “bottleneck” or an “essential facility” which controls rail access to the Central elevator and in this case serves to deny access there to the Southern. See United States v. Terminal Railroad Association, 224 U.S. 383, 410-11, 32 S.Ct. 507, 515-16, 56 L.Ed. 810 (1912); MCI Communications Corp. v. AT & T, 708 F.2d 1081, 1132-33 (7th Cir.), cert. denied, 464 U.S. 891, 104 S.Ct. 234, 78 L.Ed.2d 226 (1983) (setting forth standards of essential facility doctrine).2 As a result of the Seaboard’s ownership of the connecting track, Central States must resort to truck transportation to complete the carriage to its elevator, thereby presumably adding to the delivered cost of the grain. Central sought before the Commission to either (1) require the Seaboard to complete the carriage from the Southern-Seaboard junction to the Central elevator (reciprocal switching) or (2) allow the Southern to use the Seaboard tracks to deliver the grain to the Central elevator (joint use of terminal facilities).
To grant either of Central’s requests would increase railroad access to Central’s elevator from one railroad to two. As noted, prima facie at least, this amounts to an increase in competition3 and there is a burden on the Commission and on the Seaboard to show why the public interest would not thereby be served. Certainly, I do not understand why forcing Central to *682use trucks, at an increase in cost (potentially imposed on all Central’s customers), is in the public interest.
The frailty of the Commission’s position is demonstrated by its reliance on the transparent fiction that Central’s elevator, even though it is admittedly in Camilla, is outside the Camilla terminal, because the Seaboard calls its station there “Wooda-cre.”
In geographic areas where reciprocal switching is feasible, it provides competition to the benefit of shippers served. (House Report, Interstate and Foreign Commerce Committee No. 96-1035, May 16, 1980, page 67 (emphasis supplied)).
A “geographic area” in the contemplation of Congress was territory having political, economic and legal definition (within which presumably reciprocal switching would be operationally and economically feasible). The Commission here has permitted congressional intent to be frustrated by the Seaboard’s creation of a station name for tariff purposes. Nothing in the record indicates that “Woodacre” has any reality for any purpose relevant to reciprocal switching or joint use of track. “Woo-dacre” is merely a device which proves handy here to fence out competition for rail traffic to certain shippers in Camilla — a city of approximately 5,500 people. By way of contrast the Chicago switching district contains 116 separate stations, the Philadelphia terminal contains 57 separate stations, the Atlanta Terminal District contains 5 stations and the Jacksonville Terminal District includes 9 separate stations. Petitioner’s Brief at 14; Reply Brief at 9. Camilla’s apparent two stations should not, therefore, be permitted to defeat clear congressional policy. Moreover, while the ICC claims that the existence of the separate Woodacre station makes reciprocal switching impractical, the Seaboard has a reciprocal switching arrangement with the Southern leading to the Escambia Treating Company — an adjacent facility to Central. Central States Enterprises, Inc. v. Seaboard Coast Line Railroad Company, ICC Decision No. 38891 (May 17, 1984) (Chairman Taylor, dissenting).
In addition, the Commission relied heavily on the Seaboard’s “revenue inadequacy” to buttress its result. In my view, this “revenue inadequacy,” is factually and legally irrelevant. Based on 1980 data, the Commission found the Seaboard revenue inadequate in 1981. Railroad Revenue Adequacy — 1980 determination, 365 ICC 285 (1981). That determination found 34 of the 37 Class I railways revenue inadequate because they were earning less than a 12 per cent return on their investment. Far from finding the Seaboard teetering on the brink of bankruptcy, the ICC found that railroad to be revenue inadequate because it was only earning a 7 per cent return on its capital. Moreover, the Southern Railway Company, the company that would apparently benefit immediately from Central’s proposal, was also found revenue inadequate in the same determination. Later studies by the ICC have found almost all of the Class I railways in America to be revenue inadequate. Railroad Cost of Capital —1982 Ex Parte No. 436 (July 22, 1983) (Petitioner’s Brief at 16). It makes no sense to argue that all the railroads that fall within this broad determination of revenue inadequacy must be sheltered from competition and this is clearly not what Congress intended. See House Report, supra, at 67.4
In any event, the Seaboard’s needs for revenue are irrelevant here because, according to the Commission’s findings, if denied reciprocal switching, Central will not use the Seaboard for incoming grain shipments. Instead, it will continue to ship by the Southern and by truck (at increased cost). The only effect on the Seaboard *683presumably will be some loss of potential outbound shipments if reciprocal switching is not granted. The ultimate effect of maintenance of forced inefficiencies in the system (as by the unnecessary unloading and truck carriage here) is to reduce rail revenues in general.
I cannot believe it was the intent of Congress in the Staggers Act to protect the revenues of a particular railroad by refusing to liberate its “captive” shippers in situations where competition would otherwise be appropriate. Here the Commission apparently seeks to maintain or enhance the Seaboard’s revenues by forcing unnecessary and uneconomic costs on Central. This sort of effort to protect what is called the public interest by restraining competition in the interest of particular carriers and against the interest of shippers is reminiscent of the “bad old days” before deregulation sought to unleash market forces. The Commission itself has said:
We will not artificially and unnecessarily restrict the action of the marketplace by placing too great an emphasis on the harm to individual carriers. The preservation of corporate entities is not the same as the preservation of competition or essential service.
Railroad Consolidation Procedures, General Policy Statement, 363 ICC 784, 788 (1981).
In the proceeding before us, the Commission has attempted to justify its remarkable conclusions by observing that:
The interest of a single shipper is not necessarily synonymous with the public interest. (Emphasis in the original)
Central States v. Seaboard, supra, at 3. But the Commission has missed the point that the interest of a single shipper in competition is no different in principle from the interest of a thousand shippers in competition. In neither case may the interest in competition be overlooked in favor of the interest of some carrier in potential or hoped-for revenues to be realized by keeping a shipper captive. To suppress competition is to increase costs and degrade service. Here Central and its customers are cut off from direct rail delivery of shipments arriving over the Southern. The need to unload and transship by truck obviously increases costs and impairs services — and to no one’s benefit. These are real costs to society without offsetting benefits.
In its persuasive order in Delaware and Hudson Ry. Co. v. Consolidated Rail Corp., 367 I.C.C. 718 (1983) the Commission said:
If [a grain elevator] contends that Conrail’s joint rate cancellations have effectively cut off its Port Richmond facility from any grain sources other than those on Conrail’s lines D & H’s [reciprocal switching] service will provide [the grain elevator] with increased sources of supply and competitive rates and services.
367 ICC, at 724.
In the case before us the Commission has contradicted the Delaware & Hudson decision in order to elevate the purported revenue needs of a carrier enjoying a protected position over the public interest in competition.
I would therefore remand this case to the Commission for careful reexamination in light of the paramount interest under the Staggers Act in furthering competition among carriers. I respectfully dissent.

. This dissenting opinion is not intended to express any view of the merits of "deregulation” either generally or in specific circumstances but merely to insist that this process be undertaken consistently with its own premises.

. I do not suggest, of course, that the Seaboard track is necessarily an "essential facility” for antitrust purposes but the analogy seems useful for analysis of competitive impacts.

. I also note that competition may be potential as well as actual.

. The Staggers Act reflected Congress’ belief that both revenue needy railroads and the public would be better served by the invisible hand of market forces than by the visible hand of regulatory intervention. The Act therefore removed rate ceilings, expedited procedures for the abandonment of unprofitable lines and included Several provisions for furthering growth and competition. See Conference Committee Report, supra, at 80 (“A number of provisions are included to foster greater competition by simplifying coordination, minor merger procedures, entry and reciprocal switching agreements.”).