Appeal from the District Court of the United States for the Southern District of New York.
Mr. Charles B. Cotterill, of New York City, for appellants.
Mr. Robert L. Pierce, of Washington, D.C., for appellees the United States and Interstate Commerce Commission.
Messrs. Luther M. Walter, Nuel D. Bel. nap, and John S. Burchmore, all of Chicago, Ill., for intervener, National Industrial Traffic League.
Mr. Justice RUTLEDGE delivered the opinion of the Court.
Appellants are motor carrier associations who seek to put into effect proposed rate schedules in order to meet [321 U.S. 194, 195] rail competition. The schedules cover transportation of hard surface floor covering, e.g., linoleum, from points in New England and Middle Atlantic states to various destinations in Middle Western states. The Interstate Commerce Commission, three Commissioners dissenting, rejected the schedules. 34 M.C.C. 641. In so doing it upheld the previous conclusion of its Division 3. 31 M.C.C. 193. A three-judge District Court, 28 U.S.C. 47, 28 U.S.C.A. 47, sustained the Commission's decision. 48 F.Supp. 432. The appeal, under 28 U.S.C. 47a, 345, 28 U.S.C.A. 47a, 345, brings the decree here for review. Eastern-Central is the principal appellant. We think the judgment must be reversed.
When the schedules were filed, the motor carriers' rates on carpeting generally were based on minimum weights varying between 16,000 and 20,000 pounds, roughly approximating a truckload. Below this weight the rate was equivalent to 70 per cent of first class. Above it the rate varied somewhat, in the neighborhood of 45 to 50 per cent of first class. Corresponding rail rates then were 70 per cent of first class for shipments of less than 30,000 pounds, (less than carload lots) and 45 per cent for larger shipments. Thus, the differential according to weight was geared in the one case to rail carload capacity and in the other to truckload capacity. 1
Conceiving that these structures gave the railroads an undue competitive advantage on larger shipments, appellants proposed specific rates designed to enable them to [321 U.S. 194, 196] compete with the railroads for such shipments. They sought to utilize a new minimum weight. The rates tendered were approximately the equivalent of 70 per cent of first class for shipments of less than 20,000 pounds, 47. 5 per cent for 20,000 to 30,000 pounds, and 45 per cent for 30,000 pounds or more. The schedules therefore substantially put rail and motor rates on the same plane for less than 20,000 and more than 30,000 pounds; but placed motor rates substantially lower than rail rates for shipments of 20, 000 to 30,000 pounds.
Certain western rail carriers protested. Thereupon the proposed rates were made the subject of investigation and suspension proceedings. 49 U.S. C. 316(d), (g), 49 U.S.C.A. 316(d, g), 49 Stat. 558-560, 54 Stat. 924. Hearings were begun before Division 3. While they were pending appellants agreed to make applicable in connection with their proposed rate, minimum 30,000 pounds, a tariff provision that such shipments 'must be received at and transported from the point of origin from one shipper in one day and on one bill of lading.' 2 The rail protestants therefore presented no evidence and after the hearing withdrew their protest. While the proceedings were pending the rail carriers also reduced their rates minimum 30,000 pounds to 42.5 per cent of first class.
The hearings continued and appellants presented evidence which showed, among other things, that one motor carrier, Brady Transfer and Storage Company, of Fort Dodge, Iowa, had received 'since these rates were suspended, four loads from the Western Trunk Line Territory, instead of 398, and three of those we haven't collected the charges on, because the rate was too high ....' It appeared too that the eastbound movement consists largely of dairy products, requiring refrigeration. The [321 U.S. 194, 197] bulk of the westbound movement is frozen or salted fish.
Division 3 made findings and conclusions first that, based upon the costs proven and comparison with motor carriers' rates on numerous commodities, the proposed rates 45 per cent were 'just and reasonable provided the minimum that is applicable in connection therewith is reasonable.' Accordingly it examined the reasons advanced in support of the proposed minimum of 30,000 pounds.
On this, it found in No. M-14453 that linoleum shipments which move by rail to the Ohio points generally are consigned to warehouses having rail sidings, while linoleum is tendered to the appellant motor carriers in quantities weighing from 18,000 pounds upward. If found also, and the finding is not questioned, that it is physically impossible to load 30,000 pounds of linoleum into a single unit of equipment operated by appellants. While some of it can transport 25,000 pounds, 'the normal trucking load of linoleum approximates 22,000 pounds.' Rejecting appellants' contention based on Carpets and Carpeting from Official to Southern Territory, 237 I. C.C. 651, the Division stated:
The Division then found that, on the record, a reasonable truckload minimum on linoleum is 20,000 pounds and there was no showing of operating economies which would result if the proposed rates were restricted to apply only when 30,000 pounds are tendered. It concluded that the proposed schedules 'are just and reasonable and otherwise lawful except to the extent that they propose to establish a minimum of 30,000 pounds; that the proposed minimum of 30,000 pounds is unjust and unreasonable; and that a minimum of 20,000 pounds would be just and reasonable.' The proposed schedules therefore, to the extent found not just and reasonable, were ordered cancelled 'without prejudice to the establishment ... of truckload rates on linoleum, minimum 20,000 pounds, which are not less than 45 per cent of the corresponding first-class rates.' 31 M.C.C. 193.
Thereafter oral argument was had before the full Commission. At this stage the National Industrial Traffic League intervened and supported the Division's position. 5 [321 U.S. 194, 199] The Commission affirmed the Division's findings 'that the proposed rates 45 and 47.5 per cent of first class are not unjust or unreasonable except to the extent that the proposed rates, 45 per cent of first class, are subject to a minimum of 30,000 pounds.' Both rates, it said, 'are within the zone of reasonableness.' But 'the proposed rates, minimum 30,000 pounds, would give an unjust advantage to shippers of 30,000 pound lots and be unjustly discriminatory to shippers of 20,000-pound lots.' Since at that time the tariffs disclosed appellants' rates were either 45 or 47.5 per cent of first class, minimum 20,000 pounds, no order for the future was made. The Commission, in concluding its discussion, said:
The District Court, sustaining the Commission's findings and decision, 6 held that the extent to which competi- [321 U.S. 194, 200] tion should be recognized in arriving at just rates is a matter, within reasonable limits, for the expert judgment of the Commission and that, in exercising its discretion, that body had met the requirements of Section 216(i) of the Motor Carrier Act. 7 49 U.S.C. 316(i), 49 U.S.C.A. 316(i).
Notwithstanding the apparent difference between the Division and the full Commission, in the former's view that the proposed rate minimum 30, 000 pounds is unreasonable and the latter's that it is both unreasonable and unduly discriminatory, the net effect is that the rate is unlawful, as a matter of policy which condemns all volume minimum rates unless it is clearly shown they will operate at costs per 100 pounds less than the costs incurred at reasonable loading capacity rates. [321 U.S. 194, 201] Whether this policy is now intended to apply to all forms of transportation, rail, motor and water, without regard to competitive conditions affecting two or more of them, is not clear from the abbreviated reports made in this case. But their casting of the matter in terms of unqualified policy, dependent only upon proof of the required reduction in operating costs, gives both appearance and substance to the view this may be true, if not with respect to all carriers, then certainly with reference to motor carriers. If so the effect will be, as appellants urge, not to make reduction in costs merely one factor, nor indeed even the most important factor, in determining the reasonableness and discriminatory or contrary character of rates. It will be rather to make reduction in costs the exclusive criterion, eliminating all other considerations, including competitive conditions amounting to necessity. That is true, notwithstanding the Commission's report, immediately prior to stating its adoption of the policy announced by the Division, gave expression in an abstract way to a directly contrary principle, namely, 'the extent to which competition between carriers may render discrimination and prejudice not unlawful must be decided upon the facts in each case.' 8 The latter statement, taken [321 U.S. 194, 202] literally, squarely contradicts the policy unless indeed the statement was intended to qualify it in situations not indicated or contained an implicit limitation from context that the only 'facts in each case' which would be material are those which would prove a reduction in costs.
That the purpose was not to qualify the policy seems apparent, not only from the latter's unqualified formulation and adoption and from the failure to intimate in what types of situation the qualification might operate, but also from two other considerations. One is that the statement was followed immediately by the broad and conclusive declaration, in general terms, without supporting data or reasons, except as supplied by the policy itself, that 'the competition between rail and motor carriers for linoleum traffic does not constitute such a dissimilarity in circumstances and conditions as to render legal the proposed discrimination.' The statement was not limited to the particular competitive situation. In terms it applied to all between rail carriers and motor carriers. In short, the policy, and therefore the single factor that there was no evidence to show reduction in cost, was the sole criterion of decision. Other facts, including competitive disadvantage, became irrelevant. And the significance of the pol- [321 U.S. 194, 203] icy's application becomes more manifest by virtue of the fact that the case, though presented and decided on its own record, was regarded and determined as a test case. 9 Finally, the Commission's review of its previous decisions, upon which appellants relied, shows, we think, that its purpose, in the case of motor carriers at any rate is to adhere strictly to the policy and, in the manner made, may be taken to indicate that it contemplates no departure whatever. If so, the effect of the decision is not merely to adopt 'a policy of administration,' as the Commission and the intervenors before it assert; but is rather to adopt, as a rule of law, the principle that only upon a showing of reduction in operating costs may a volume minimum rate be found reasonable and not unduly discriminatory.
The Commission considered chiefly previous decisions in Carpets and Carpeting from Official to Southern Territory, supra; Molasses from New Orleans, La., to Peoria and Pekin, Ill., 235 I.C.C. 485; and Petroleum Rail Shippers' Ass'n v. Alton & S.R.R., 243 I.C.C. 589. In the Molasses case, notwithstanding the Commission's previous refusal to authorize rail volume rates for more than carload lots at less than carload rates, it approved a multiple car rate, minimum 1,800 tons, on molasses which was lower than the carload rate. The effect was to authorize a lower rate to a number of carloads tendered as a single shipment. The departure was made to enable the [321 U.S. 194, 204] rail carriers to meet water competition. However, there was a showing that in the circumstances a material saving in costs per 100 pounds would be made in transporting such multiple-car shipments. In the Petroleum Shippers' case the Commission considered authorizing multiple-car rates on petroleum, but declined to do so upon finding that the record did not establish existence of a substantial cost saving in such shipments.
In the Carpets and Carpeting case the Commission approved certain rates subject to a minimum weight of 30,000 pounds on linoleum. In doing so, it said:
And in Peanut Butter from Montgomery, Ala., to Georgia, 22 M.C.C. 375, Division 2, although declaring in one breath that motor carriers should not maintain volume rates subject to minimum weights greater than equipment generally available can transport, in the next noted that the national motor-freight classification is replete with such ratings, refused to condemn them and said that if they were restricted to apply only when tendered by one shipper, in one day and on one bill of lading, they would be 'in consonance with Carpets and Carpeting from Official to Southern Territory, supra.' [321 U.S. 194, 205] III.
These cases disclose departures, though tentatively made, from the Commission's long-standing10 policy in the same respect, adopted when its powers extended only to rail carriers. Influenced primarily by the desire to secure shipping advantages for the small shipper equal to those given the large one and thus to enforce the policy of the interstate commerce legislation against undue discrimination, the Commission at first declined to adopt wholesale rates. 11 The major departure was in allowing lower rates for carload lots than for less-than-carload shipments. This was justified by the difference in costs. Accordingly, the structure became fixed with this as the major and for long the only differential; and with it the principle that such a saving in operations alone justifies a differential. That policy received judicial approval12 and remained controlling so long as the Commission had authority only over railroads.
But with the evolution of other forms of carriage, particularly motor carriage, and the Commission's acquisition of control over their rates and operations, a new situation arose. The Commission's task no longer was merely the regulation of a single form of transport, to secure reasonable and nondiscriminatory rates and service. It became, not merely the regulator, but to some extent the [321 U.S. 194, 206] coordinator of different modes of transportation. With the addition of motor and water carriage to its previous jurisdiction over rails, it was charged not only with seeing that the rates and services of each are reasonable and not unduly discriminatory, but that they are coordinated in accordance with the National Transportation Policy, as declared by the later legislation. 13 This, while intended to secure the lowest rates consistent with adequate and efficient service and to preserve within the limits of the policy the inherent advantages of each mode of transportation, at the same time was designed to eliminate destructive competition not only within each form but also between or among the different forms of carriage.
Necessarily the impact of these changes brought problems the Commission previously had not faced. Necessarily too the Commission in facing them, including those of adjustment among the various forms of transportation, called upon its previous experience in the railroad field for guidance to its judgment. But that experience could not apply fully to the other and different forms of carriage. Nor could it do so always when the interests of two or more [321 U.S. 194, 207] were found in conflict. Each form of transportation presents, by reason of its peculiar operating conditions, its own problems for the function of rate making. And each, by virtue of competition with others, presents additional complications arising from the varied circumstances of their operation. Hence, in such situations, principles previously established for application within a single form of transportation cannot always be transplanted to control its relations with another or those of both with the public generally, without consequences unduly harmful to one or to the public interest.
Thus, in the problem presented by this case, application of the principle that volume minimum rates will be allowed only when geared to a capacity loading which makes possible a real saving in costs of operation, may be made within either the railroad area or the motor area without substantial disturbance or difficulty. Each has its unit of carriage or loading and that unit has a substantial relation to costs; hence, upon the long-established railroad principle, to reasonableness and the discriminatory or nondiscriminatory character of rates. But, as between rails and motors, the two units are different. And the two forms of carriage compete, unless the lower rates geared to the respective units are of a character that each forces the other form of carriage from the field. The junction of difference in available units, with rates geared to them, and the fact of competition or competitive possibility produces or may produce consequences neither the character of the unit nor the fact of competition, nor both together, could create in either form of service taken alone. In short, the very fact a rail carload is 30,000 pounds and a truckload 20,000, with rates respectively tied to these weights, may make a life-or-death difference in the competitive struggle, with consequences affecting not only the carriers but the public interest as well. And appellants' [321 U.S. 194, 208] argument that a 30,000-pound minimum is necessary to meet rail competition is necessary to meet rail competition is at least consonant with the frequent recognition, both by the Commission and by this Court, that there are occasions when it is appropriate for the former to consider a carriers' need to meet other carriers' competition as a factor justifying what otherwise would be an unreasonable or an unduly discriminatory rate.