356 U.S. 481 (1958), 73, Federal Maritime Board v. Isbrandtsen Co., Inc.

Docket Nº:No. 73
Citation:356 U.S. 481, 78 S.Ct. 851, 2 L.Ed.2d 926
Party Name:Federal Maritime Board v. Isbrandtsen Co., Inc.
Case Date:May 19, 1958
Court:United States Supreme Court
 
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Page 481

356 U.S. 481 (1958)

78 S.Ct. 851, 2 L.Ed.2d 926

Federal Maritime Board

v.

Isbrandtsen Co., Inc.

No. 73

United States Supreme Court

May 19, 1958

Argued December 11, 1957

CERTIORARI TO THE UNITED STATES COURT OF APPEALS

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Syllabus

The Federal Maritime Board issued an order approving a rate system proposed by a shipping conference of 17 common carriers by water serving the inbound trade from Japan, Korea, and Okinawa to ports on the Atlantic and Gulf Coasts of the United States. Under the proposed system, a shipper who signed an exclusive patronage contract with the conference would pay less than the regular freight rates charged to all others. The Court of Appeals set aside the Board's order on the ground that this system of dual rates was unlawful under § 14 of the Shipping Act of 1916.

Held: the judgment is affirmed. Pp. 482-500.

(a) In § 14, Congress flatly prohibits certain specific conference practices having the purpose and effect of stifling the competition of independent carriers. In addition to these specific abuses, § 14 also forbids "resort to other discriminating or unfair methods," and this, in the context of § 14, must be construed as constituting a catch-all clause by which Congress meant to prohibit other practices not specifically enumerated but similar in purpose and effect to those which were enumerated. Pp. 491-493.

(b) Since the Board found that the proposed rate system was required to meet the competition of a certain independent carrier in order to obtain for Conference members a greater participation in the cargo moving in this trade, it follows that the system was a "resort to other discriminating or unfair methods" to stifle outside competition in violation of § 14. P. 493.

(c) Previous decisions in United States Navigation Co. v. Cunard S.S. Co., 284 U.S. 474, and Far East Conference v. United States, 342 U.S. 570, cannot be read as having passed on the construction of § 14 Third. Pp. 496-499.

99 U.S.App.D.C. 312, 239 F.2d 933, affirmed.

Page 482

BRENNAN, J., lead opinion

MR. JUSTICE BRENNAN delivered the opinion of the Court.

The Isbrandtsen Co., Inc., filed a petition in the United States Court of Appeals for the District of Columbia Circuit to review, under 5 U.S.C. § 1034, an order of the Federal Maritime Board1 approving a rate system proposed by the Japan-Atlantic and Gulf Freight Conference

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(the Conference).2 Under the proposed system, a shipper would pay less than regular [78 S.Ct. 854] freight rates for the same service if he signs an exclusive patronage contract with the Conference. Contract rates would be set at levels 9 1/2 percent below noncontract rates. The Court of Appeals3 set aside the Board's order on the ground that this system of dual rates was illegal per se under § 14 of the Shipping Act, 1916, 39 Stat. 733, as amended, 46 U.S.C. § 812 Third.4 We granted certiorari. 353 U.S. 908.

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The Conference is a voluntary association of 17 common carriers by water serving the inbound trade from Japan, Korea, and Okinawa to ports on the United States Atlantic and Gulf Coasts. Five of the carriers are American lines, eight are Japanese, and four are of other nationalities. The Conference presently operates under a Board-approved Conference Agreement made in 1934. Prior to World War II, the Conference had no direct liner competition and little tramp competition.

After the war, Isbrandtsen entered the trade as the sole non-Conference line maintaining a regular berth service in the Japan-Atlantic trade. From 1947 to early 1949, Isbrandtsen operated from Japan to Atlantic Coast ports via the Suez Canal. Since 1949, Isbrandtsen has operated an approximately fortnightly service from Japan to United States Atlantic Coast ports via the Panama Canal as part of its Eastbound, Round-the-World Service.5

Although Conference membership is open to any common carrier regularly operating in the trade, Isbrandtsen has refused to join. Isbrandtsen's practice, between 1947

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and March 12, 1953, was to maintain rates at approximately 10 percent below the corresponding Conference [78 S.Ct. 855] rates. The general understanding of shippers and carriers in the trade was that Isbrandtsen underquoted Conference rates by 10 percent. This practice of undercutting Conference rates during the years 1950, 1951, and 1952, captured for Isbrandtsen 30 percent of the total cargo in the trade, although Isbrandtsen provided only 11 percent of the sailings.6

Since outbound tonnage from the United States exceeds the inbound tonnage, the Japan-Atlantic and Gulf trade is presently overtonnaged, and both Isbrandtsen and Conference vessels have had substantial unused cargo space after loading cargoes in Japan. Total sailings in the trade rose from 109 in 1949 to more than 300 in 1953. (Cf. Note 6, supra.) The reentry of the Japanese lines in the trade after World War II, four in 1951 and four in 1952, greatly contributed to the excess of tonnage. For the years 1951, 1952, and the first 6 months of 1953, the Japanese lines carried approximately 15 percent, 49 percent, and 66 percent, respectively, of the trade's total liner cargo. For the years 1950, 1951, 1952, and the first 6 months of 1953, American flag lines, including

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Isbrandtsen but excluding two others, carried 53 percent, 46 percent, 34 percent, and 21 percent respectively.

When, in late 1952, Isbrandtsen announced a plan to increase sailings from two to three or four sailings a month, the Conference foresaw a further increase in Isbrandtsen's participation which, because of the nationalistic preference of Japanese shippers, would probably be at the expense of the non-Japanese Conference lines. To meet this outside competition, the Conference first attempted, in November of 1952, a 10-percent reduction in rates, but Isbrandtsen answered with a reduction of its rates 10 percent under the Conference rates.

On December 24, 1952, the Conference proposed the dual rate system and filed its plan with the Board as required by the Board's General Order 76, 46 CFR § 236.3, which permitted proposed rate changes to become effective after 30 days unless postponed by the Board on its own motion or on the protest of interested persons. Protests were filed by Isbrandtsen and the Department of Justice. The Secretary of Agriculture intervened as an interested commercial shipper opposed to the proposal. On January 21, 1953, the Board ordered a hearing on the protests but refused, pending the Board's determination, to suspend operations of the dual rate system. Isbrandtsen therefore filed a petition in the United States Court of Appeals for the District of Columbia Circuit for a stay of the Board's order insofar as it authorized the Conference to institute the dual rate system. The court announced on February 3, 1953, that the Board's order [78 S.Ct. 856] would be stayed, and the stay was entered on March 23, 1953.7

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The Conference response to the stay was to open rates to allow each line to fix its own rates. At a meeting on March 12, 1953, the Conference voted to open Conference rates on 10 of the major commodities moving in the trade. The action was primarily directed at Isbrandtsen's competition; the Board found that "it was hoped that the rate war would lead to Isbrandtsen's joining the Conference or to the institution of the dual rate system or other system." On succeeding dates in the spring of that year, the Conference opened rates on most of the major items in the trade. In the resulting rate war, the level of rates dropped to about 80 percent and later to about 30 percent to 40 percent of the pre-March 12 rates. In some instances, rates fell below handling costs. Isbrandtsen attempted to keep on a competitive basis in the rate war but, when pegging of minimum rates in May did not improve its position, in July, it set its rates at 50 percent of the pre-March 12 Conference rates. Since that date, Isbrandtsen has carried little cargo in the trade. Meanwhile, the Board proceeded with the hearing and issued its report on December 14, 1955, followed, on December 21, 1955, and January 11, 1956, by orders approving the proposed dual rate system.8 The question for our decision is whether the Court of Appeals correctly set aside the Board's orders.

It has long been almost universal practice for American and foreign steamship lines engaging in ocean commerce to operate under conference arrangements and agreements. At least by 1913, it was recognized that such agreements might run counter to the policy of the antitrust laws; several cases were pending against foreign and domestic water carriers for alleged violations of the

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Sherman Act. The House Committee on Merchant Marine and Fisheries of the 62d Congress, of which committee Representative J. W. Alexander was Chairman, undertook an exhaustive inquiry into the practices of shipping conferences. The work of this Committee is set forth in two volumes of hearings,9 a volume of diplomatic and consular reports, and a fourth volume containing the Committee's report, known as the Alexander Report.10 Contemporaneously a British inquiry was conducted by the Royal Commission on Shipping Rings. The Royal Commission's report was available to the House Committee, and was considered by it in formulating recommended legislation. See Hearings at 369.

Both inquiries brought to light a number of predatory practices by shipping conferences designed to give the conferences monopolies upon particular trades by forestalling outside competition and driving out all outsiders attempting to compete. The crudest form of predatory practice was the fighting ship. The conference would select a suitable steamer from among its lines to...

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