U.S. v. C. A. B.
| Decision Date | 05 December 1969 |
| Docket Number | No. 21,706,Nos. 73--2276,No. 73--2276,74--1900,No. 74--1900,Nos. 73--2276 and 74--1900,s. 73--2276,s. 73--2276 and 74--1900,73--2276,21,706 |
| Citation | 167 U.S.App.D.C. 313,511 F.2d 1315 |
| Parties | , 1975-1 Trade Cases 60,279 UNITED STATES of America, Petitioner, v. CIVIL AERONAUTICS BOARD, Respondent, American Airlines, Inc., Trans World Airlines, Inc., United Air Lines, Inc., Braniff Airways, Inc., Northwest Airlines, Inc., Intervenors. UNITED STATES of America, Petitioner, v. CIVIL AERONAUTICS BOARD, Respondent, American Airlines, Inc., Trans World Airlines, Inc., United Air Lines, Inc., Braniff Airways, Inc., Northwest Airlines, Inc., Intervenors. . Argued 25 Nov. 1974. Decided 23 April 1975. Robert B. Nicholson, Atty., Dept. of Justice, with whom Thomas E. Kauper, Asst. Atty. Gen., Howard E. Shapiro and William T. Clabault, Attys., Dept. of Justice, were on the brief, for petitioner in Glen M. Bendixsen, Associate Gen. Counsel, with whom Richard Littell, Gen. Counsel, O. D. Ozment, Deputy Gen. Counsel, and Robert L. Toomey, Atty., Civil Aeronautics Board, were on the brief for respondent, Civil Aeronautics Board. Edmund E. Harvey, Washington, D.C., for intervenors, American Airlines, Inc., Trans World Airlines, Inc., and United Air Lines, Inc. James M. Verner, Washington, D.C., was on the brief for intervenor, Northwest Airlines, Inc. B. Howell Hill and Alexander E. Bennett, Washington, D.C., were on the brief for intervenor, Braniff Airways. Before LEVENTHAL and WILKEY, Circuit Judges, and RICHEY, * United States District Court Judge for the District of Columbia. Opinion for the Court filed by Circuit Judge WILKEY. WILKEY, Circuit Judge: We are again faced with a challenge to the regulatory response of an administrative agency to the fuel crisis of late 1973. In this case the petitioner is the United States, acting through the Antitrust Division of the Department of Justice, and the administrative agency under review is the Civil Aeronautics Board. The United States argues that the Board, faced with a decrease of fuel for commercial aeronautical use, instinctively reacted anticompetitively by permitting three major air carriers to agree among themselves |
| Court | U.S. Court of Appeals — District of Columbia Circuit |
Robert B. Nicholson, Atty., Dept. of Justice, with whom Thomas E. Kauper, Asst. Atty. Gen., Howard E. Shapiro and William T. Clabault, Attys., Dept. of Justice were on the brief, for petitioner in Nos. 73--2276 and 74--1900.
Glen M. Bendixsen, Associate Gen. Counsel, with whom Richard Littell, Gen. Counsel, O. D. Ozment, Deputy Gen. Counsel, and Robert L. Toomey, Atty., Civil Aeronautics Board, were on the brief for respondent, Civil Aeronautics Board.
Edmund E. Harvey, Washington, D.C., for intervenors, American Airlines, Inc., Trans World Airlines, Inc., and United Air Lines, Inc.
James M. Verner, Washington, D.C., was on the brief for intervenor, Northwest Airlines, Inc.
B. Howell Hill and Alexander E. Bennett, Washington, D.C., were on the brief for intervenor, Braniff Airways.
Before LEVENTHAL and WILKEY, Circuit Judges, and RICHEY, * United States District Court Judge for the District of Columbia.
Opinion for the Court filed by Circuit Judge WILKEY.
We are again faced with a challenge to the regulatory response of an administrative agency to the fuel crisis of late 1973. In this case the petitioner is the United States, acting through the Antitrust Division of the Department of Justice, and the administrative agency under review is the Civil Aeronautics Board.
The United States argues that the Board, faced with a decrease of fuel for commercial aeronautical use, instinctively reacted anticompetitively by permitting three major air carriers to agree among themselves as to the number and scheduling of flights in twenty major markets. The United States wants each carrier to decide on its own which flights to eliminate and when to schedule those flights remaining. The Board rejected unilateral reductions as being inconsistent with the public interest because the Board thought that it would have left lightly traveled markets with little or no service and would have resulted in the 'bunching' of flights at peak demand times.
We hold that, while there were emergency conditions that provided a justification for the Board's summary course in approving capacity reduction agreements in October 1973, its continuance of that approach in its July 1974 order did not have a legally adequate predicate, and therefore must be set aside. The Board's approval of voluntary anticompetitive agreements, which confers an immunity against antitrust liability, must rest on a justification of serious transportation need or important public benefits, with need for a Board showing of an appropriate factual predicate. In this case, the record presents little more than speculation, under emergency conditions, that competitive market response would be wasteful of energy. There was no subsequent procedure, either for a hearing or an experiment in certain markets, no system for testing or opportunity for considered examination of the Board's underlying factual assumptions as to the consequence of the competitive alternative.
The essential facts of this case are rather complex. Faced with a national fuel shortage, on 12 October 1973 the Energy Policy Office, acting pursuant to authority granted by the Economic Stabilization Act Amendments of 1973, 1 issued EPO Regulation 1, which established a program of mandatory allocation for middle distillate fuels, which includes jet aviation fuel. 2 Under the program air carriers were to receive jet fuel at 1972 levels of consumption, which was expected to be between ninety and ninety-three percent of consumption for the period 1973--74. If fuel stocks were not adequate to acclocate on the basis of 1972 levels (as turned out to be the case), carriers were to be allocated fuel in proportion to those levels.
The same day the Board sua sponte authorized all certificated route and supplemental air carriers to engage in 'discussions to consider adjustment of schedules to the extent necessary to accommodate the fuel allocation program . . ..' 3 As a result of these discussions, American Airlines, Inc. (American), United Air Lines, Inc. (United), and Trans World Airlines, Inc. (TWA) reached four agreements to reduce capacity in twenty markets for a six-month period beginning 1 November 1973, the effective date of the fuel allocation program. The agreements were submitted on 23 October 1973 to the Board for approval, along with the request that the approval schedule be accelerated in light of the perceived need to act by 1 November. 4 The Board gave interested parties until 29 October to comment on the application. During that period the Departments of Justice and Transportation and Braniff Airways, Inc. (Braniff) filed answers opposing the application, while Delta Air Lines, Inc. (Delta), though opposing capacity agreements in principle, answered that it would not oppose approval under certain conditions.
The Department of Justice's answer contains essentially the same argument it makes now before this court: the carriers had not made any showing that the agreements, anticompetitive on their face, were strictly required in order to secure substantial public benefits. The Department of Transportation made an analogous argument, although it did not oppose continued multilateral discussions. Braniff opposed the agreements out of a fear that reducing consumption in markets subject to the agreements would make more fuel available in non-agreement markets, where competitors such as Braniff would be experiencing fuelshortage problems.
On 31 October 1973 the Board approved the four capacity limitation agreements. It is this order, Order 73--10--110, which is the subject of No. 73--2276. 5 Although the agreements were set to terminate on 28 April 1974, United, American, and TWA on 6 February requested an extension of its agreements through 14 June. At that time they also requested the extension of a four-market capacity limitation agreement entered into on 23 May 1973 and approved by the Board on 27 July 1973. 6 This four-market agreement was prompted by economic factors unrelated to the fuel crisis and was approved only through 15 March 1974. The Air Line Pilots Association (ALPA) petitioned for review of that order arguing (1) that the CAB should not have granted interim approval to the agreement without holding an evidentiary hearing to determine whether the anticompetitive effects of the agreement outweighed other public interest considerations and (2) that the CAB should have required labor protective arrangements as a condition for interim approval. Both these arguments were recently rejected by this court. 7
The Board did not act to approve or disapprove this request for an extension until 24 July, three months after the twenty-market agreement by its own terms expired, and four months after the interim approval on the four-market agreement had expired. In the interim on 5 April the carriers asked approval of six agreements, which, but for the fact that they did not cover one of the twenty-four markets previously subject to the two sets of agreements, were virtually identical to the expired agreements. These agreements were to stay in effect until 14 December 1974.
The Departments of Justice and Transportation again opposed approval on the grounds that the agreements were anticompetitive. In addition, they argued that the Arab oil boycott had been lifted, and as a result the fuel shortage was easing. On 24 July 1974 the Board by a vote of 3--2 approved the 5 April agreements under certain conditions. This order, Order 74--7--105, is the subject of No. 74--1900. It approved all the capacity reduction agreements on the basis of the need to conserve jet aviation fuel. As a result, the extension of the four-market agreement lost its differing character and entered the mainstream of this controversy. 8
More recently, the Board has authorized the carriers to submit requests for an extension 9 and on 22 November an appropriate agreement was submitted covering the period through 14 June 1975. Again the Board granted interim approval of the agreement 10 with the net effect that the agreements authorized by the orders under review are still in effect. Although no one has suggested mootness, we have held in the past that as long as reductions in service authorized by an order under review are still in effect, there remains a live controversy which we are permitted to adjudicate. 11 In addition, review of these expired orders is proper because the Board's orders have clearly shown themselves to be 'capable of repetition' and their period of effectiveness is so short they would otherwise evade our review. 12
Section 412(a) of the Federal Aviation Act requires that air carriers submit all agreements affecting air transportation entered into with any other air carrier relating, inter alia, to
. . . preserving and improving safety, economy, and efficiency of operation, or for controlling, regulating, preventing, or otherwise eliminating destructive, oppressive, or wasteful competition, or for regulating stops, schedules, and character of service, or for other cooperative working arrangements. 13
The agreements previously mentioned were filed as required by section 412(a) and the orders approving these agreements were entered pursuant to section 412(b), which provides:
The Board shall by order...
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