Court Opinion

ID: 3049906
Source: CourtListenerOpinion
Date Created: 2015-10-13 23:29:02.725662+00
Date Added: 2024-06-11T11:49:21.918894
License: Public Domain

FOR PUBLICATION
 UNITED STATES COURT OF APPEALS
      FOR THE NINTH CIRCUIT

DHX, INC.,                              
                          Petitioner,
                v.
                                              No. 05-74592
SURFACE TRANSPORTATION BOARD;
UNITED STATES OF AMERICA,                  STB No. WCC-105
                     Respondents,              OPINION
MATSON NAVIGATION COMPANY,
INC.; HORIZON LINES,
            Respondent-Intervenor.
                                        
        On Petition for Review of an Order of the
              Surface Transportation Board

                   Argued and Submitted
             June 4, 2007—Pasadena, California

                     Filed August 30, 2007

    Before: Sidney R. Thomas, Raymond C. Fisher, and
             Ronald M. Gould, Circuit Judges.

                  Opinion by Judge Gould

                            10967
10970                DHX, INC. v. STB

                       COUNSEL

Rick A. Rude (argued and on the brief), Falls Church, Vir-
ginia, and David E.R. Woolley (on the brief), Los Angeles,
California, for petitioner DHX, Inc.

Craig M. Keats, Deputy General Counsel, Surface Transporta-
tion Board, Washington, D.C., (argued and on the brief);
                     DHX, INC. v. STB                  10971
Ellen D. Hanson, General Counsel, Surface Transportation
Board, Jamie P. Rennert, Attorney, Surface Transportation
Board, Thomas O. Barnett, Acting Assistant Attorney Gen-
eral, Department of Justice, Gerald F. Masoudi, Deputy Assis-
tant Attorney General, Department of Justice, John J. Powers,
III, Attorney, Department of Justice and Robert J. Wiggers,
Attorney, Department of Justice, Washington, D.C., (on the
brief) for respondents Surface Transportation Board and
United States of America.

C. Jonathan Benner and Leonard L. Fleisig, Troutman Sand-
ers LLP, Washington, D.C., (argued and on the brief); Chris-
tine J. Sommer, Troutman Sanders LLP, Washington, D.C.,
(on the brief) for intervenor-respondent Horizon Lines, LLC.
Richard A. Allen and Scott M. Zimmerman, Zuckert, Scoutt
& Rasenberger, LLP, Washington, D.C., (on the brief) for
intervenor-respondent Matson Navigation Co., Inc.

                         OPINION

GOULD, Circuit Judge:

   DHX, Inc., a freight forwarder, petitions for review of a
decision by the Surface Transportation Board (“STB”) deny-
ing its complaint challenging the reasonableness of certain
rates and practices of Matson Navigation Co., Inc.
(“Matson”), and Sea-Land Service, Inc., now Horizon Lines,
LLC (“Horizon”), two water carriers operating in the noncon-
tiguous domestic trade between Hawaii and ports in the conti-
nental United States. We have jurisdiction pursuant to 28
U.S.C. §§ 2321 and 2342(5), and we deny the petition for
review.

                           I.   A

  The STB is a successor to the Interstate Commerce Com-
mission (“ICC”). In the ICC Termination Act of 1995
10972                  DHX, INC. v. STB
(“ICCTA”), Pub. L. No. 104-88, 109 Stat. 803, Congress
abolished the ICC, revised the Interstate Commerce Act, and
transferred regulatory functions under that Act to the STB.
See Redmond-Issaquah R.R. Pres. Ass’n v. STB, 223 F.3d
1057, 1059 n.1 (9th Cir. 2000). In 1976, Congress began par-
tially deregulating the industries that the ICC supervised, with
a view toward promoting competition. See H.R. Rep. No.
104-311, at 90-93 (1995), as reprinted in 1995 U.S.C.C.A.N.
793, 802-05 (“ICCTA House Report”); S. Rep. No. 104-176,
at 2-4 (1995) (“ICCTA Senate Report”). The ICCTA contin-
ued this general deregulatory trend and “significantly
reduce[d] regulation of surface transportation industries in
this country.” ICCTA Senate Report at 2.

   Prior to the enactment of the ICCTA, the ICC had regula-
tory authority over water carriers who operated along the
coasts of the continental United States or on inland water-
ways. Water carriers who operated outside of the continental
United States, however, were regulated by the Federal Mari-
time Commission. The Federal Maritime Commission had
regulatory authority over all “port-to-port” operations of carri-
ers serving the “noncontiguous domestic trade” (or the “do-
mestic offshore” trade), i.e. operations between ports in
Alaska, Hawaii, or United States territories or possessions on
the one hand, and other United States ports, including main-
land ports, on the other hand. The ICCTA centralized all regu-
latory authority relating to the noncontiguous domestic trade
with the STB. See 49 U.S.C. § 13521.

   In doing so, Congress reenacted some, but not all, of the
pre-ICCTA regulatory provisions regarding the noncontigu-
ous domestic trade. In keeping with its trend toward reducing
unnecessary regulation, Congress removed some of the regu-
latory restraints previously imposed upon water carriers.
Moreover, Congress affirmatively authorized the water carri-
ers to undertake some market-driven activities that motor and
rail carriers had already been allowed to pursue after the
enactment of earlier legislation. Thus, under the ICCTA,
                       DHX, INC. v. STB                   10973
water carriers in the noncontiguous domestic trade remain
subject to three main regulatory requirements: (1) like all
common carriers, they must “provide [ ] transportation or ser-
vice on reasonable request,” see 49 U.S.C. § 14101(a); (2)
they are required to file tariffs, see 49 U.S.C. § 13702(a) and
(b); and (3) they are required to maintain “reasonable” rates
and practices, see 49 U.S.C. § 13701(a).

   Despite these regulatory requirements, the ICCTA also
codifies a number of rate freedoms. 49 U.S.C. § 13701(d) is
a safe harbor provision, which specifies that any given rate is
deemed reasonable if it falls within a “zone of reasonable-
ness,” i.e. if it is not more than 7.5% higher or 10% lower
than what the rate was one year earlier. The ICCTA allows
carriers explicitly to offer rates that vary with the volume of
cargo offered over a specified period of time, see 49 U.S.C.
§ 13702(b)(4), and it allows carriers to enter into contracts in
which the parties can waive any or all of the rights or reme-
dies available under the Interstate Commerce Act, see 49
U.S.C. § 14101(b). Most importantly, with regard to DHX’s
petition for review, Congress repealed the statutory provisions
that had prohibited unreasonable discrimination in the non-
contiguous domestic water carrier trade when it enacted the
ICCTA. See 46 U.S.C. app. § 815 (repealed 1995).

                             I.   B

   While some shipments via water carrier are arranged
between the carrier and the shipper directly, others are han-
dled through a third-party intermediary such as a freight for-
warder. DHX is a freight forwarder, an entity that holds itself
out to the general public to provide transportation of property
for compensation, usually by assembling and consolidating
shipments to take advantage of volume rates offered by the
carrier actually hauling the goods. See 49 U.S.C. § 13102(8).
A freight forwarder “maintains the dual status of both carrier
(vis-à-vis its shippers) and shipper (vis-à-vis the underlying
carrier that it uses).” Exem. of Freight Forwarders From Tar-
10974                      DHX, INC. v. STB
iff Filing Requir., 2 S.T.B. 48, 50 (1997). Therefore, DHX is
both a user and a competitor of water carriers such as Matson
and Horizon to which it tenders traffic.

   In the water trade, freight forwarders aggregate smaller
shipments at the point of origin, buy space on a vessel, and
then provide distribution services at the destination. Freight
forwarders earn a profit when the rates they charge to individ-
ual shippers are lower than the water carrier’s rates for small
shipments, but higher than the water carrier’s rates for the
consolidated containerloads that the forwarders assemble. See
Chi., Milwaukee, St. Paul & Pac. R.R. v. Acme Fast Freight,
Inc., 336 U.S. 465, 467 (1949); N. Y. Foreign Freight For-
warders & Brokers Ass’n v. ICC, 589 F.2d 696, 699-700
(D.C. Cir. 1979). The use of a freight forwarder can benefit
the shipper by allowing it to pay rates lower than it could
obtain on its own for shipments in small lots, while also bene-
fitting the carrier, who is then free to focus its business on the
high-volume containerload traffic that is most efficient for it
to handle while the freight forwarder consolidates smaller
shipments.

   The dispute underlying this appeal is between freight for-
warder DHX and the two major water carriers currently serv-
ing the Hawaiian water trade market, Matson and Horizon.
The noncontiguous domestic trade between Hawaii and the
mainland is experiencing a relatively low volume of traffic,
resulting in excess capacity, which in turn, has exerted down-
ward pressure on rates. See generally U.S. Dep’t of Transp.,
A Report to Congress: Competition in the Noncontiguous
Domestic Maritime Trades, at III-8-14 (1997) (“DOT Report”).1
This downward pressure led to rates in 1995 that were sub-
  1
   Although the fact that there are only two major water carriers currently
operating in the Hawaiian market reflects “some concentration in trade,”
the United States Department of Transportation’s 1997 Report explains
that there has been entry into and exit from the Hawaiian water carrier
market over the years. DOT Report at III-8-14.
                       DHX, INC. v. STB                    10975
stantially below the inflation-adjusted rate levels in 1985. See
id. To address these market constraints and to maximize prof-
itable traffic, Matson and Horizon tailored their rates to attract
profitable traffic away from freight forwarders as well as to
draw traffic away from each other. To attract and keep larger
shippers like Home Depot that can provide a steady flow of
full containerload (“FCL”) traffic, the water carriers began
offering volume rates with “overflow provisions.”

   Overflow occurs when a particular shipper’s traffic for a
given shipment does not completely fill all the containers
used for that shipment. For example, Home Depot’s traffic for
a particular shipment might fill more than one full container,
but less than two. When such overflow occurs, the water car-
riers charge Home Depot a rate on the second, partially-filled
container that is lower than the rate that would apply to a
partially-filled container that is not part of a larger shipment
by using their overflow provisions. According to the carriers,
the purpose of overflow provisions is “to accommodate the
needs of those regular, high-volume shippers,” who are the
water carriers’ best customers.

   As the STB explained in its June 2005 decision, once DHX
recognized that lower rates were being charged for partially
filled containers that were part of a larger shipment under
Matson and Horizon’s overflow provisions, DHX “began to
go beyond the traditional role of a freight forwarder . . . and
to instead target the water carriers’ larger customers that
already tendered volume traffic to the carriers [directly].”
Specifically, DHX would take the same containerload traffic
of large shippers such as Home Depot, unpack the full con-
tainers, redistribute their contents, and repack them in order
to create more overflow containers than the shippers them-
selves would have tendered had they dealt directly with the
water carriers, thereby resulting in a larger number of contain-
ers subject to the lesser overflow rates. According to Matson,
at one point upwards of 98% of its revenues for overflow traf-
fic was coming from freight forwarders rather than from the
10976                 DHX, INC. v. STB
regular direct shippers that the overflow provisions were
designed to accommodate. As the STB explained in its
December 2004 decision:

    When defendants [Matson and Horizon] realized
    they were losing some of the profits from their FCL
    traffic to competitors such as DHX . . . they began
    taking specific actions designed to induce their FCL
    shippers to begin dealing directly with them again.
    Such actions included adopting tariffs setting up
    more favorable rates with specific limitations such as
    shipper name, street address, and zip code; and
    entering into agreements—typically with large ship-
    pers that own the merchandise and have their own
    logistics departments that manage the transportation
    and control the routing of their cargo—providing
    particular rates for specified periods of time.

Despite these actions, Horizon and Matson still continued to
offer substantial discounted rates to DHX and other freight
forwarders in order to attract traffic away from each other.

                            I.   C

   DHX filed a complaint with the STB in October 1999
against Matson and Horizon challenging the reasonableness
of their rates and practices. The complaint largely focused on
the increases Matson and Horizon had made to their overflow
rates, arguing that the increases should be declared unreason-
able because they exceeded the safe-harbor zone of reason-
ableness contained in 49 U.S.C. § 13701(d)(1). Matson and
Horizon promptly filed motions to dismiss. On December 21,
2001, the Board issued a decision denying the motions to dis-
miss, but agreeing with the defendants that there were “sub-
stantial shortcomings in DHX’s complaint.” The decision
further stated that DHX would “have to flesh out the specific
rates for specific shipments that it asserts are unreasonable,
                       DHX, INC. v. STB                    10977
and it will have to support with particularity its general claim
that the carriers’ practices are unlawful.”

   DHX filed an amended complaint on April 29, 2002, which
in essence argued that any rate charged to DHX was unrea-
sonable if it exceeded the rate charged to another customer.
DHX also alleged that Matson and Horizon’s tariffs did not
comport with statutory and regulatory requirements. In addi-
tion to seeking more than $19 million in damages, DHX
requested an order requiring the defendants to stop commit-
ting these allegedly unreasonable practices and to more
openly embrace DHX’s competition. All parties filed lengthy
submissions before the STB with regard to DHX’s conten-
tions. On May 14, 2003, the STB issued a decision granting
Horizon’s motion for partial dismissal of the amended com-
plaint. The STB rejected DHX’s claim that any rate charged
to DHX was per se unreasonable if it was higher than the rate
charged to another customer. The Board explained:

    DHX’s approach appears to be no more than a
    broad-ranging allegation that all of defendants’ rates
    are discriminatory. But the discrimination remedy
    was repealed as to this trade in ICCTA. Thus, DHX
    cannot possibly prevail in its argument that the
    assailed rates are unreasonable even if it did show
    that different shippers pay different rates for argu-
    ably similar services.

   While DHX’s complaint was pending before the STB,
DHX filed a civil complaint against Horizon in federal district
court in August 2002, asserting a claim for rate discrimina-
tion. In January 2003, the district court dismissed DHX’s
complaint for failure to state a claim, holding that there is no
“common law cause of action for rate discrimination against
an ocean carrier.” The district court further concluded that
because the STB has primary jurisdiction to determine the
lawfulness of a water carrier’s conduct, particularly with
regard to the reasonableness of its rates and practices, the only
10978                  DHX, INC. v. STB
relief available to DHX was whatever relief might be avail-
able under the Interstate Commerce Act as determined by the
STB.

   On December 15, 2004, the STB issued a decision denying
the remaining claims against Matson and Horizon raised in
DHX’s amended complaint. Despite the “lengthy” nature of
the amended complaint “with diffuse allegations ranging from
discrimination and improper tariff format to deceit and fraud,”
the Board explained that the “principal substantive issue that
remains to be resolved in this case is whether the actions that
defendants took to recapture traffic and profits that they had
lost to DHX constitute unreasonable practices.” The STB con-
cluded that DHX had not demonstrated that the water carriers
had engaged in unreasonable practices in violation of 49
U.S.C. § 13701(a)(1). Instead, the Board concluded that:

    [I]t is not an unreasonable practice for a carrier to act
    in a manner, as here, designed to protect its profits
    and its market share from diversion to its competi-
    tors, and the Board will not interfere with actions
    that have not been shown to be anything more than
    prudent responses to competitive threats.

In reaching its decision, the STB noted that the Matson and
Horizon had given DHX favorable treatment where it made
business sense to do so; that DHX “is itself the beneficiary of
many of the tariff provisions about which it complains”; and
“that DHX’s business [in the Hawaiian trade] has grown since
the original complaint was filed.” In addition, the STB stated
that the anti-discrimination provisions of the Interstate Com-
merce Act had been repealed for water carriers by the ICCTA,
and rejected DHX’s argument that a discrimination claim
could instead be based upon the general statement of transpor-
tation policy contained in 49 U.S.C. § 13101.

  In a motion for reconsideration, DHX argued that either the
STB had erred in finding that there was no remedy under the
                       DHX, INC. v. STB                    10979
Interstate Commerce Act for discriminatory pricing, or that
there had to be a remedy under common law for such a claim.
On June 13, 2005, the Board issued a decision denying
DHX’s petition, stating that there was no inconsistency
between its decision and the district court’s ruling concluding
there was no remedy under common law. The Board also
found no merit to DHX’s other claims of error, including its
assertions that certain of the water carriers’ tariffs were defi-
cient. This timely petition for review followed.

                               II

   We review decisions by the STB under the Administrative
Procedure Act, 5 U.S.C. § 706(2). The agency’s decision
should be affirmed unless it is “arbitrary, capricious, an abuse
of discretion,” “otherwise not in accordance with law,” or
“unsupported by substantial evidence.” 5 U.S.C.
§§ 706(2)(A), (E). “Th[is] standard is a narrow one, and the
reviewing court may not substitute its judgment for that of the
agency.” Public Util. Dist. No. 1 v. FEMA, 371 F.3d 701, 706
(9th Cir. 2004) (citing Envtl. Def. Ctr., Inc. v. EPA, 344 F.3d
832, 858 n.36 (9th Cir. 2003)); see also In re Transcon Lines,
89 F.3d 559, 563-64 (9th Cir. 1996).

   Where there is a challenge to the agency’s interpretation of
the statute that it administers, we apply the analytical frame-
work set forth in Chevron, U.S.A., Inc. v. Natural Resources
Defense Counsel, Inc., 467 U.S. 837, 842-45 (1984). See
Redmond-Issaquah R.R. Pres. Ass’n, 223 F.3d at 1061. “If the
intent of Congress is clear . . . [we] must give effect to the
unambiguously expressed intent of Congress.” Chevron, 467
U.S. at 842-43. If however, the meaning of the statute is
ambiguous, “the question for the court is whether the agen-
cy’s answer is based on a permissible construction of the stat-
ute.” Id. at 843. “[T]he court does not simply impose its own
construction on the statute. . . .” Id.
10980                  DHX, INC. v. STB
                              III

   [1] The core of DHX’s claims is that Matson and Horizon
unlawfully discriminated by not giving DHX identical rates to
those offered to direct FCL shippers such as Home Deport or
Sears. Contrary to DHX’s assertion, we conclude that Con-
gress did not intend to retain a private cause of action against
water carriers for discrimination when it enacted the ICCTA.
Prior to the ICCTA, joint rail/water and motor/water rates for
the noncontiguous domestic trade were subject to the rail and
motor anti-discrimination provisions in former 49 U.S.C.
§ 10741 (repealed 1995). Port-to-port rates were governed by
the anti-discrimination provisions of the Shipping Act of
1916, codified at former 46 U.S.C. app. § 815 (repealed
1995). When Congress enacted the ICCTA in 1995, it explic-
itly repealed the relevant Shipping Act provisions. See Pub. L.
No. 104-88, § 335(b)(4), 109 Stat. 953-54 (repealing former
46 U.S.C. app. § 815). Moreover, while Congress specifically
retained an anti-discrimination provision for rail carriers in 49
U.S.C. § 10741, it did not retain or add comparable provisions
for either water carriers or motor carriers. See ICCTA House
Report at 128, as reprinted in 1995 U.S.C.C.A.N. at 839-40
(containing a chart with the “disposition of existing provi-
sions” which shows the retention of the anti-discrimination
provision for rail carriers in 49 U.S.C. subtitle IV, part A, but
not retaining the comparable anti-discrimination provisions
for motor or water carriers in 49 U.S.C. subtitle IV, part B).

   [2] Despite this legislative history, DHX contends that an
express statutory prohibition is not necessary to support its
discrimination claims. While a cause of action may be
inferred in some situations when a statute is silent, we decline
to infer one here where there was a prior explicit provision
that Congress knowingly removed. See Fox v. Citicorp Credit
Servs., Inc., 15 F.3d 1507, 1512-13 (9th Cir. 1994) (refusing
to assume that Congress acted contrary to its intentions when
it repealed a statutory provision and enacted no substitute);
see also Union Pac. R.R. Co. v. ICC, 867 F.2d 646, 649 (D.C.
                            DHX, INC. v. STB                          10981
Cir. 1989) (holding that the agency could not use its authority
to address an unreasonable railroad practice in order to sub-
vert the statutory restriction against the agency examining the
reasonableness of a rail rate where the railroad does not have
“market dominance” over the transportation at issue).

   [3] To support its position, DHX, in part, relies on language
in the ICCTA House Report stating that carriers would be
required to file tariffs in order to “ensure that similarly situ-
ated shippers are treated the same by carriers based on the
type and volume of cargo.” ICCTA House Report at 113.
However, this language cannot support such a claim since
Congress’s clear intent in ICCTA, as well as prior legislation,2
was to move away from a regime of strict rate equalization.
See id. Indeed, on the same page of the House Report, Con-
gress discusses its desire to ensure that “price watching” not
result in other carriers “follow[ing] the rates of the highest
priced carrier,” i.e., resulting in higher rates than would other-
wise be charged so that no shipper gets the benefit of dis-
counted rates. See id. Regardless, DHX cannot rely on general
report language to create a cause of action that is not provided
for in the ICCTA. See Fox, 15 F.3d at 1512-13 (“[I]solated
statements” within legislative history “cannot reintroduce
what the Congress has eliminated.”); United States v. Rone,
598 F.2d 564, 569 (9th Cir. 1979) (“The proper function of
legislative history is to solve, and not create, an ambiguity.”).
Moreover, even if we were to view ICCTA as ambiguous, the
   2
     See, e.g., Staggers Rail Act of 1980, Pub. L. No. 96-448, § 2, 94 Stat.
1895-96. Congress made it clear that the rail anti-discrimination provision
in the Staggers Act was not to be used to preserve a regulatory regime of
strict rate equalization. See H.R. Rep. No. 96-1430, at 104 (1980) (Conf.
Rep.), as reprinted in 1980 U.S.C.C.A.N. 4110, 4136 (“[C]laims of unjust
discrimination may not be used to hamper the development of sound eco-
nomic rate and service relationships.”); see also H.R. Rep. No. 96-1035,
at 59-60 (1980), as reprinted in 1980 U.S.C.C.A.N. 3978, 4004-05 (stating
that the anti-discrimination provision “is intended to recognize any differ-
ences that would normally be recognized in unregulated service industries
as constituting a basis for price differences” that are not anticompetitive.).
10982                       DHX, INC. v. STB
STB’s conclusion that Congress repealed the prohibition
against discrimination by water carriers is entitled to defer-
ence under Chevron. Such a conclusion is also buttressed by
the Department of Transportation’s own interpretation of the
ICCTA. DOT Report at II-12 (stating that ICCTA “did not
specifically prohibit discriminatory rates [by water carriers],
as had the previous statute”).3

   [4] Nor is there any other basis, statutory or otherwise, on
which to sustain DHX’s claim of alleged discrimination. As
it did before the STB, DHX argues that it may bring an action
against Matson and Horizon for discriminatory rates and prac-
tices based on the general policy objectives set forth in 49
U.S.C. § 13101. Specifically, DHX cites to the language in
subsection (a)(1)(D) which speaks of “reasonable rates . . .
without unreasonable discrimination” and language in subsec-
tion (a)(4) that encourages “service and price competition in
the noncontiguous domestic trade.”4 As the STB stated at the
outset of its December 2004 analysis, the Transportation Pol-
icy articulated at 49 U.S.C. § 13101(a) “simply sets forth a
variety of (sometimes conflicting) policy objectives for the
agency to consider in regulating the industry.” See, e.g., Balt.
Gas & Elec. Co. v. United States, 817 F.2d 108, 112, 115
(D.C. Cir. 1987) (addressing various rail transportation poli-
cies); Global Van Lines, Inc. v. ICC, 714 F.2d 1290, 1295-96
(5th Cir. 1983) (stating that the Transportation Policy is for
general guidance and is not an independent source of rule-
making power in motor carrier cases); accord Central For-
warding, Inc. v. ICC, 698 F.2d 1266, 1283-84 (5th Cir. 1983).
The STB correctly concluded that “a claim under the general
  3
     We do not address DHX’s argument for a discrimination-based cause
of action on the basis of pre-ICCTA case law because Congress’s repeal
of the prohibition of discrimination by water carriers renders those prece-
dents inconsistent with the current statutory provisions.
   4
     While subsection (a)(4) was added in the ICCTA and is addressed spe-
cifically to water carriers, subsection (a)(1)(D) is not specific to water car-
riers, and was carried over from the Transportation Act of 1940, Pub. L.
No. 76-785, 54 Stat. 898-99.
                           DHX, INC. v. STB                         10983
Transportation Policy alone does not provide a right of action.”5
See also Trailer Bridge, Inc. v. Sea Star Lines, LLC, STB
Docket No. WCC-104, slip op. at 3 (STB served Dec. 10,
1999).

   [5] DHX’s suggestion that 49 U.S.C. § 14101(a), which
sets forth the common carrier obligation, supports a cause of
action for discrimination is similarly unavailing. Section
14101(a) simply directs all common carriers to handle the
traffic that is tendered to them. See Decatur County Comm’rs
v. STB, 308 F.3d 710, 715 (7th Cir. 2002) (“The statutory
common carrier obligation imposes a duty upon [carriers] to
‘provide transportation . . . on reasonable request.’ ”). It does
not say that they must charge every shipper the exact same
rates. Indeed, providing different customers with different
rates and services is not inconsistent with a water carrier’s
common carrier duty to provide service to each customer
upon reasonable request, if the rates charged are reasonable.
See, e.g., Am. Trucking Ass’ns, Inc. v. Atchison, Topeka &
Santa Fe Ry., 387 U.S. 397, 406 (1967) (discussing common
carrier obligations and stating “[r]ates were required to be rea-
sonable, but discrimination in the form of unequal rates as
among shippers was not forbidden” at common law).

   [6] The STB’s May 14, 2003, holding that “DHX cannot
possibly prevail in its argument that the assailed rates are
unreasonable even if it did show that different shippers pay
different rates for arguably similar services” because “the dis-
crimination remedy was repealed as to this trade in the
  5
    Moreover, as respondents point out, the language in section 13101 does
not necessarily support DHX’s argument. “Service and price competition
in the noncontiguous domestic trade,” for example, is entirely compatible
with — and indeed may require — a degree of price discrimination.
§ 1301(a)(4). Similarly, some of the policies articulated in subsection
(a)(1) — such as “sound economic conditions among carriers” and “fair
wages . . . in the transportation industry” — suggest that Horizon and Mat-
son should be allowed to take all reasonable measures to maximize their
profits.
10984                  DHX, INC. v. STB
ICCTA” is not arbitrary, capricious, or an abuse of its discre-
tion. Rather, it is supported by substantial evidence and is in
accordance with law as expressed in ICCTA and congressio-
nal intent.

                               IV

   [7] Congress’s removal of any anti-discrimination provi-
sions applicable to the water trade through its enactment of
the ICCTA does not, however, mean that the STB is without
authority to review for antitrust considerations as part of its
statutory responsibilities. To the contrary, if the STB believed
that the oligopolist shippers’ pricing was aimed at eliminating
competition in a manner harmful to consumers, the STB is
empowered to step in and regulate any such anticompetitive
behavior as part of its statutory responsibilities. See generally
Aspen Skiing Co. v. Aspen Highlands Skiing Corp., 472 US.
585 (1985) (recognizing that under certain circumstances a
refusal to cooperate with rivals can constitute anticompetitive
conduct, thereby violating section 2 of the Sherman Act); see
also MetroNet Servs. Corp. v. Qwest Corp., 383 F.3d 1124,
1132 (9th Cir. 2004) (“An offer to deal with a competitor only
on unreasonable terms and conditions can amount to a practi-
cal refusal to deal.”).

   [8] Here however, the conduct DHX complains of does not
appear to have been prompted by “anticompetitive malice,”
but rather “competitive zeal.” See Verizon Commc’ns Inc. v.
Law Offices of Curtis V. Trinko, LLP, 540 U.S. 398, 409
(2004). Indeed, Matson and Horizon have not engaged in
price discrimination because the rates they charge freight for-
warders like DHX do not result in pricing which is “at an
unprofitable level in the short run merely to exclude competi-
tion in the long run.” MetroNet, 383 F.3d at 1133. We do not,
however, address this issue further because DHX did not raise
any specific antitrust claims below. Instead, we simply note
that the STB possesses ample statutory authority to address
and remedy any oligopolist pricing concerns arising out of the
                       DHX, INC. v. STB                    10985
water carriers’ conduct under traditional antitrust principles.
Cf. 49 U.S.C. §§ 10706(a)(2)(A), 11321(a), 11324; James F.
Rill, The Evolution of Modern Antitrust Among Federal Agen-
cies, 11 Geo. Mason L. Rev. 135, 142 (2002) (noting that the
STB, while not one of the “primary federal antitrust review
agencies,” “ha[s] jurisdiction over [a] particular sector[ ]”).

                               V

   [9] It was also not arbitrary, capricious, an abuse of discre-
tion or contrary to law for the STB to conclude that DHX had
not shown that it was subjected to unreasonable rates or prac-
tices. DHX has mistakenly equated discriminatory pricing
with unreasonableness. Rates can be discriminatory without
being unreasonable, or unreasonable without being discrimi-
natory. Reasonableness denotes a range, rather than a single
fixed point. See Montana-Dakota Utils. Co. v. Nw. Pub. Serv.
Co., 341 U.S. 246, 251 (1951); accord FPC v. Conway Corp.,
426 U.S. 271, 278 (1976) (addressing price squeeze and find-
ing that a reasonable rate can be discriminatory); ICC v.
Inland Waterways Corp., 319 U.S. 671, 685 (1943). As
respondents argue, “DHX’s theory would turn all rate dis-
crimination automatically into unreasonable rates, and upset
the longstanding distinctions.” See, e.g., Davis v. Portland
Seed Co., 264 U.S. 403, 424-25 (1924) (holding that a shipper
claiming discrimination was not entitled to reparations based
on the difference between the rate it was charged and the
lower rate given to someone else, unless it could show conse-
quential damages, i.e., lost sales); see also Pennsylvania R.R.
v. Int’l Coal Mining Co., 230 U.S. 184, 199-201 (1913).

  DHX contends that the rates it was charged by Horizon and
Matson were unreasonable and that it is entitled to damages
whenever the rates it was charged were higher than the rates
paid by another shipper. DHX claims that such a calculation
constitutes “the traditional method of determining rate reason-
ableness and calculation of damages,” and that because the
STB has not replaced this traditional method with any other
10986                     DHX, INC. v. STB
rate reasonableness standards, this method along with the per-
tinent case law continues to apply. These rate reasonableness
standards, however, are from the 1930s, prior to Congress’s
significant shift toward deregulation. See, e.g., United States
v. N. Pac. Ry. Co., 288 U.S. 490, 500 (1933) (stating that rate
comparisons can be used as one test of rate reasonableness,
but cautioning that such a test should not be controlling). As
respondents persuasively argue and the history of deregula-
tion since then demonstrates, the notion that Congress has
retained an outdated, 1930s approach to rate regulation — an
approach it has labeled as “Kafkaesque,” see ICCTA House
Report at 91 — is without merit, as is the idea that the agency
has not modernized its rate criteria since the 1930s.

   [10] The bulk of the case law relied upon by DHX pertains
to railroad rates from decades earlier. Since those decisions,
the ICC and now the STB have developed a Constrained Mar-
ket Pricing (“CMP”) approach for assessing whether rail rates
are reasonable. See Coal Rate Guidelines, Nationwide, 1
I.C.C. 2d 520 (1985). Under CMP, the agency’s goal is to
determine how much a carrier would need to charge the
aggrieved shipper for its service after removing any costs
associated with inefficiencies and removing cross-subsidies
between different shippers. Under either of the approaches
used under CMP to make this determination, the STB does
not compare the challenged rate to rates charged to other ship-
pers, because railroads are expected to engage in “differential
pricing” by charging different rates to different shippers. See
Coal Rate Guidelines, 1 I.C.C.2d at 526-27.6 The Federal
Maritime Commission has used a public utility-type approach
in rate cases that assesses the carriers’ total revenues to deter-
  6
    The STB has also devised “Simplified Guidelines” that it uses in rail
rate cases for which the CMP approach is not practicable. See Rate Guide-
lines — Non-Coal Proceedings, 1 S.T.B. 1004, 1020 (1996). Under these
simplified guidelines, the STB does not directly look at the rates charged
to other shippers, but instead looks at rate markups over costs as well as
the carrier’s overall revenue needs in order to determine reasonableness.
This method also differs from the approach advocated by DHX.
                      DHX, INC. v. STB                   10987
mine whether the carrier is earning enough overall. See Gov’t
of the Territory of Guam v. Sea-Land Serv., Inc., STB Docket
No. WCC-101, at 2 (STB served Nov. 15, 2001), 2001 WL
1436500 (S.T.B.).

   When Congress transferred regulation of water carriers
engaged in the noncontiguous domestic trade to the STB with
the 1995 enactment of the ICCTA, it did not specify whether
the STB should apply the CMP approach to water carriers,
follow the approach that had been used by the Federal Mari-
time Commission, or adopt some other approach for assessing
the reasonableness of water carrier rates. The STB has
advised us that it is currently examining the issue of which
rate reasonableness analysis to employ with respect to water
carriers in the ongoing proceedings in Gov’t of the Territory
of Guam v. Sea-Land Serv., Inc., but neither of those parties
has, like DHX, “suggested that Congress intended for the
Board to revive outdated policies from the 1930s that Con-
gress has itself criticized.”

   [11] To buttress its argument, DHX points to the ICC’s use
of a rate comparison approach to assess maximum rate rea-
sonableness in motor carrier cases as late as the 1990s. The
STB, in its May 2003 decision explained why these cases and
the market cluster analysis they used were not applicable to
the noncontiguous domestic water trade:

    DHX states . . . [in its] amended complaint . . . that
    it intends to pursue its unreasonable rate claims
    based on the type of market cluster analysis set forth
    in Georgia-Pacific [Georgia-Pac. Corp.—Petition
    for Declaratory Order—Certain Rates & Practices
    of Oneida Motor Freight, Inc., 9 I.C.C. 2d 103
    (1992)]. However, the Georgia-Pacific standard was
    developed solely to determine the reasonableness of
    motor carrier rates for past shipments by defunct car-
    riers by looking at the rates of several other carriers
    in the market. Here, DHX wants to compare rates
10988                  DHX, INC. v. STB
    that one shipper pays to a carrier with those paid by
    another shipper to the same carrier. Thus, even if
    Georgia-Pacific were applicable in the noncontigu-
    ous domestic trade, DHX’s approach appears to be
    no more than a broad-ranging allegation that all of
    defendants’ rates are discriminatory. But the dis-
    crimination remedy was repealed as to this trade in
    ICCTA. Thus, DHX cannot possibly prevail in its
    argument that the assailed rates are unreasonable
    even if it did show that different shippers pay differ-
    ent rates for arguably similar services.

Moreover, as the STB explained, “in the Georgia-Pacific pro-
ceeding, the Caribbean Shippers Association, Inc. (CSA),
expressed concern that the cluster approach should not be
used to determine the reasonableness of joint motor-water
rates filed by steamship lines in the domestic offshore trade
because the water portion of this trade is not highly competi-
tive.” In response to the CSA’s concerns the ICC stated that
“the market-rate comparison approach was not an all-purpose
measure of rate reasonableness and clearly was not intended
for use in a market that is not effectively competitive.” See
Georgia-Pacific, 9 I.C.C. 2d at 806, 828. DHX’s argument
that the Georgia-Pacific market cluster analysis should be
used to determine rate reasonableness in this case is incorrect
under current case law.

   [12] DHX also contends that Matson and Horizon commit-
ted unreasonable practices by (1) targeting discounts to partic-
ular shippers, (2) following each other’s actions, and (3)
publishing incomplete or improper tariffs. The STB however,
properly concluded that DHX’s remaining unreasonable prac-
tice claims lacked merit, because it held that the actions taken
by Matson and Horizon were reasonable and prudent business
practices in dealing with a freight forwarder that is both a cus-
tomer and a competitor. As the STB stated in its December
2004 decision, “it is not a unreasonable practice for a carrier
to act in a manner, as here, designed to protect its profits and
                       DHX, INC. v. STB                   10989
its market share from diversion to its competitors, and the
Board will not interfere with actions that have not been shown
to be anything more than prudent responses to competitive
threats.”

   [13] DHX contends that it was unreasonable for Matson
and Horizon to restrict certain discounts to their direct ship-
pers by offering targeted discount rates. But that conclusion
is not compelled by the record. DHX is itself a beneficiary of
certain targeted discount rates from both water carriers
because each one is attempting to capture traffic and lure
away freight forwarder business from the other through such
discounted rates. Moreover, adopting DHX’s position would
be inconsistent with the history and purposes behind the
enactment of the ICCTA and the trend toward deregulation
which it represents. To preclude price discrimination on ship-
ping rates might deter shippers from reducing rates in
attempts to get new customers or to keep old ones, and such
a ban on discriminatory rates would be harmful to competi-
tion and contrary to the interests of consumers. To assess such
impacts requires a discriminating judgment on the industry’s
practices and economics. Congress has entrusted that respon-
sibility to the STB in the first instance, and our review of the
responsible agency’s action is necessarily limited to assessing
whether the agency has acted in a manner that is arbitrary,
capricious, an abuse of discretion, not supported by substan-
tial evidence, or contrary to law.

   Moreover, as the STB explained in its December 2004
decision, even “when motor carriers were more heavily regu-
lated the ICC explicitly rejected claims that trucking tariffs
containing rates applicable only to named shippers and receiv-
ers or to specific addresses [i.e. the same type of rates DHX
complains of] were unlawfully discriminatory.” If such carrier
practices were explicitly found to be lawful during the period
of heavier regulation proceeding the enactment of ICCTA, we
need not conclude that such practices are unlawful in the cur-
rent, less restrictive regulatory climate.
10990                  DHX, INC. v. STB
   [14] DHX next contends that Horizon and Matson engaged
in improper, anticompetitive behavior by watching and mir-
roring each other’s actions. All businesses, however, monitor
their competitors’ pricing to see whether and how they should
match or beat the discounts they are offering. Moreover, price
watching is inherent in a tariff system that statutorily requires
carriers to publish their common carrier rates. DHX itself
monitors Matson and Horizon’s tariffs to compete with them
and manipulate the water carriers’ tariffs to its own advan-
tage. As DHX acknowledges, the water carriers have used
such competitive information to reduce their rates in order to
match or undercut each other’s prices. Under such circum-
stances DHX has made no showing of anticompetitive con-
duct.

   [15] Finally, DHX argues “that even if the discounted rates
to large-volume direct shippers were not otherwise unlawful,
the manner in which they were reflected in the water carriers’
tariffs made them improper” by containing discounted rates
that are limited to a certain shipper location or zip code, for
example. However, in Rates For a Named Shipper or
Receiver, 367 I.C.C. 959 (1984), the STB’s predecessor
allowed motor carriers to express rates in that precise manner
in their tariffs. This policy was cited by Congress with
approval in the ICCTA House Report. See ICCTA House
Report at 91-92, as reprinted in 1995 U.S.C.C.A.N. at 803-04
(“The Motor Carrier Act encouraged a more competitive envi-
ronment and led the ICC to change tariff filing regulations to
permit tariff rate reductions and to allow carriers to establish
rates for named shippers.”). We reject DHX’s other argu-
ments regarding the water carriers’ tariffs, concluding that
they were properly rejected by the STB.

   We also reject DHX’s suggestion that an additional hearing
is needed before the STB to address all of its claims. The
record, developed over the course of five years, contains
extensive written evidence and argument submitted by both
parties, as demonstrated by the 2700-page, 9-volume excerpts
                       DHX, INC. v. STB                   10991
of record. We have previously held that the STB’s standard
procedures provide due process, see Lodi Truck Serv., Inc. v.
United States, 706 F.2d 898, 901 & n.5 (9th Cir. 1983), and
DHX has not shown that the STB failed to provide due pro-
cess here. See also Amador Stage Lines, Inc. v. United States,
685 F.2d 333, 335 (9th Cir. 1982).

                              VI

   [16] For the above reasons this challenge to the STB’s deci-
sions on rates of water carriers is not within the narrow cate-
gory of cases in which we are empowered to override the
agency’s knowledgeable exercise of its authority over the rea-
sonableness of rates and related practices in a regulated indus-
try. We hold that the STB’s decisions denying DHX’s
complaint challenging the reasonableness of certain rates and
practices of Matson and Horizon were not arbitrary, capri-
cious, an abuse of discretion, or unsupported by substantial
evidence. We also conclude that the STB’s decisions are in
accordance with law.

  PETITION FOR REVIEW DENIED.