Crounse Corp. v. I.C.C.

• Decision Date: 23 January 1986
• Docket Number: Nos. 84-3743,s. 84-3743
• Citation: 781 F.2d 1176
• Parties: CROUNSE CORPORATION, et al., Petitioners, v. INTERSTATE COMMERCE COMMISSION and United States of America, Respondents. through 84-3753, 84-3842 and 84-3868.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 1176

781 F.2d 1176

54 USLW 2411

CROUNSE CORPORATION, et al., Petitioners, v. INTERSTATE COMMERCE COMMISSION and United States of America Respondents.

Nos. 84-3743 through 84-3753, 84-3842 and 84-3868.

United States Court of Appeals, Sixth Circuit.

Argued April 29, 1985.

Decided Jan. 23, 1986.

A. Duncan Whitaker, P.C., Alan M. Wiseman, Robert M. Bruskin, Roxann E. Henry, Howrey & Simon, Washington, D.C., John J. Naughton, Chicago, Ill., for petitioners.

Richard A. Zellner (argued), Mark Staib, Hahn, Loeser, Freedheim, Dean & Wellman, Cleveland, Ohio, for Crounse Corp., Water Transport Assoc., Ohio River Co., M/G Transport Services, Canal Barge Co., Dixie Carriers, Inc., Valley Line Co., S.C. Loveland Co., SCNO Barge Lines, National Marine Service, American Waterways Op., PPG Industries and Interstate Power Co.

James F. Bromley, Macleay, Lynch, Bernhard & Gregg, Washington, D.C., for Tampa Electric, Gatliff Coal and TECO Transport & Trade.

Peter A. Gabauer, Washington, D.C., for National Coal Ass'n and Mining and Reclamation Counsel of America.

R. Eden Martin (argued), Washington, D.C., for CSX Corp. and American Commercial Lines.

Herbert S. Sanger, Jr., Gen. Counsel, James E. Fox, Assoc. Gen. Counsel, Brent R. Marquand (argued), Gregory R. Signer, T.V.A., Knoxville, Tenn., for Tennessee Valley Auth.

Gordon P. McDougall, Washington, D.C., for Patrick W. Simmons.

Ray H. Walton, Commerce Counsel, North Dakota Public Service Com'n, Bismarck, N.D., for State of N.D.

John A. Vuono, Richard R. Wilson, Vuono, Lavelle & Gray, Pittsburgh, Pa., for PPG Industries, Inc.

William L. Slover, C. Michael Loftus, Donald G. Avery, Kevin J. Dowd, Slover & Loftus, Washington, D.C., for Nat'l Assoc. of Wheat Growers and National Grange.

Richard A. Allen, Office of Gen. Counsel, I.C.C. John J. McCarthy (argued), Catherine G. O'Sullivan, Margaret G. Halpern, Dept. of Justice, Antitrust Div., Washington, D.C., for respondents.

Charles H. White, Jr. (argued) Arnall, Golden & Gregory, Washington, D.C., for CSX and American Commercial Lines, Inc.

Before KENNEDY and KRUPANSKY, Circuit Judges; and TIMBERS, ^* Senior Circuit Judge.

CORNELIA G. KENNEDY, Circuit Judge.

In this appeal, petitioners ¹ contest the August 27, 1984 decision of the Interstate Commerce Commission (Commission or ICC) approving the acquisition by CSX Corporation, the nation's second largest railroad, of American Commercial Lines, Inc. (ACL), which owns the nation's largest bargeline, American Commercial Barge Lines (ACBL). Petitioners and intervenors claim that the ICC erred in holding that the transaction violates neither the Panama Canal Act, 49 U.S.C. Sec. 11321, nor section 11344 of the Interstate Commerce Act, 49 U.S.C. Sec. 11344. We find that neither statute prohibits the transaction and, therefore, we uphold the ICC's interpretation and application of the statutes. We also find that the ICC took the requisite "hard look" at the potential consequences of the merger in its Environmental Assessment of the proposed transaction. We therefore affirm the Commission's order.

Liquid chemicals, farm products and coal are the three principal commodities served by railroads and bargelines. Over its 27,000 route miles, CSX--the largest railroad east of the Mississippi River--transports 47.9% of the chemicals, 31.6% of the farm products and 48.3% of the coal moved by all Class I railroads in the East. ACBL, the nation's largest bargeline, covers 7,500 water route miles and is the only for-hire water carrier which is among the top three for-hire bargelines in each of the three principal commodity markets. In some areas, CSX and ACBL routes parallel each other to a significant degree.

On November 4, 1983, CSX and ACL jointly filed with the ICC an application for CSX to acquire control of ACL and ACBL. In support of the application, the companies asserted that the transaction would achieve substantial public benefits in the form of reduced costs, innovative joint marketing and ratemaking opportunities and other benefits of integrated operations. The companies claim they would be able to offer shippers more efficient, better coordinated, intermodal services, which would expand shippers' marketing options. In this way, the consolidation would allegedly make CSX and ACL more competitive, thereby enhancing the overall competitiveness of the market.

Various parties participated in the public hearings held before an Administrative Law Judge between February 22 and May 11, 1984. Numerous shippers, states, utilities, water carriers and labor organizations opposed the application on various grounds. Some shippers and states supported the application. The ALJ made no findings of fact, nor did he prepare a recommended decision. He simply oversaw the hearings. With the benefit of the record generated by the hearings, the ICC heard oral argument on June 21, 1984. On August 27, 1984, in a lengthy written decision, the ICC approved the acquisition subject to certain oversight and reporting conditions which the ICC imposed as a precaution, to enable it to take corrective action against unforeseen anticompetitive effects.

Essentially, petitioners object to the Commission's decision on the ground that it eviscerates the Panama Canal Act, 49 U.S.C. Sec. 11321, which prohibits railroad ownership of bargelines except under certain specified conditions. Petitioners do, however, suggest various other grounds for reversal: that the Commission arbitrarily and capriciously concluded that the merger would not result in any reduction of competition prohibited by the Interstate Commerce Act, 49 U.S.C. Sec. 11344; that the Commission denied the public a full and fair hearing by deciding the case without the benefit of an initial ALJ decision; that the Commission has no authority to impose oversight conditions in a Panama Canal Act case; that the Commission failed to impose protective conditions for the benefit of employees of other railroads; and that the Commission failed to assess the potential environmental effects as thoroughly as is required by the National Environmental Policy Act of 1969, 42 U.S.C. Sec. 4321. We address each of these issues in turn.

Yielding to public concern over the anticompetitive effects of some rail-barge consolidations, Congress passed the Panama Canal Act (the Act) in 1912. The Act generally proscribes railroad ownership of or interest in a water carrier on a water route with which the railroad does or may compete for traffic. The proscription, however, is not absolute. The Commission may authorize the acquisition of such an interest

when the Commission finds that ownership, operation, control, or interest will still allow that water common carrier or vessel to be operated in the public interest advantageously to interstate commerce and that it will still allow competition, without reduction, on the water route in question.

49 U.S.C. Sec. 11321(b).

Only a finding of competition between the acquiring railroad and the acquired bargeline triggers the statutory prohibition and necessitates inquiry into the applicability of the exception. 49 U.S.C. Sec. 11321(a). If the Commission finds no such competition, the Act does not preclude the merger. See generally American Waterways Operators, Inc. v. United States, 386 F.Supp. 799 (D.D.C.1974).

Upon examination, the Commission determined that CSX and ACL do compete, within the meaning of the Act. The Commission then analyzed the merger in terms of the above exception's two prongs--the public interest prong and the competition prong. Viewing the two prongs as closely related, the Commission found that the public interest prong was satisfied by a showing that the CSX-ACL combination would not be able to flout the public interest by engaging in anticompetitive behavior ultimately allowing it to charge supracompetitive prices. In the Commission's view, a finding that that particular harm would not ensue sufficiently ensured the continued operation in the public interest contemplated by the statute. Nonetheless, the Commission also pointed out that anticipated improvements in operating efficiency and quality of service also indicated that the water carrier would continue to be operated in the public interest.

Leaving the public interest prong and turning to competition, the Commission analyzed the competitive nature of the barge industry and concluded that the merger would not be harmful to competition on the waterways. The Commission conceded that the merger could harm individual competitors but, rejecting its own precedent in Illinois Central Railroad Co.--Control--John I. Hay Co., 317 I.C.C. 39 (1962), ruled that harm to competitors is not harm to competition within the meaning of the statute. The Commission also rejected Hay's holding that the exception required not only a finding that competition would not be reduced among water carriers, but also a finding that competition would not be reduced between water carriers and railroads, including competition between the acquired carrier and the acquiring railroad. The Commission therefore looked only at the effect the merger would have on competition among water carriers, and ignored the effect on rail-barge competition. ² The Commission found that the competitive structure of the barge market is such that the merger does not threaten to harm competition between water carriers.

In petitioners' view, the Commission has misinterpreted the Act. According to petitioners, the Act reflects Congress' desire to implement a policy of strict rail-barge separation, subject to only the narrowest exceptions. Petitioners argue that nothing could be further from the narrow exception contemplated by Congress than this merger of giants in their respective modes of transportation. Petitioners also argue that the exception provided for in the Act requires consideration of the effect on rail-barge competition, not just barge-barge competition.

Zealously as petitioners...