Latin America/Pacific Coast SS Conf. v. FEDERAL MAR. COM'N

• Decision Date: 10 May 1972
• Docket Number: No. 71-1107.,71-1107.
• Citation: 465 F.2d 542
• Parties: LATIN AMERICA/PACIFIC COAST STEAMSHIP CONFERENCE and its member lines, Petitioners, v. FEDERAL MARITIME COMMISSION and United States of America, Respondents.
• Court: U.S. Court of Appeals — District of Columbia Circuit

465 F.2d 542 (1972)

LATIN AMERICA/PACIFIC COAST STEAMSHIP CONFERENCE and its member lines, Petitioners, v. FEDERAL MARITIME COMMISSION and United States of America, Respondents.

No. 71-1107.

United States Court of Appeals, District of Columbia Circuit.

Argued January 21, 1972.

Decided May 10, 1972.

Certiorari Denied October 24, 1972.

Mr. F. Conger Fawcett, San Francisco, Cal., with whom Mr. John P. Meade, Washington, D. C., was on the brief, for petitioners.

Mr. John R. Ewers, Atty., Federal Maritime Comm., for respondents. Messrs. James L. Pimper, Gen. Counsel, Federal Maritime Comm., Edward G. Gruis, Deputy Gen. Counsel, Paul J. Fitzpatrick, Atty., Federal Maritime Comm., and Irwin A. Seibel, Atty., Dept. of Justice, were on the brief for respondents.

Before TAMM and WILKEY, Circuit Judges, and MATTHEWS,^* U. S. Senior District Judge for the District of Columbia.

Certiorari Denied October 24, 1972. See 93 S.Ct. 269.

TAMM, Circuit Judge:

After nearly a decade of litigation we are called upon to examine the ramifications of the Supreme Court's decision in Federal Maritime Comm. v. Aktiebolaget Svenska Amerika Linien, 390 U.S. 238, 88 S.Ct. 1005, 19 L.Ed.2d 1071 (1968), and decide whether the Federal Maritime Commission's instant order is in accordance with relevant law and supported by substantial evidence. Answering these questions in the affirmative, we affirm the order under review.

This is a petition for review of an order of the Commission amending a dual rate contract system to permit ocean shippers and receivers to separately contract for the carriage of goods under preferential rates in each of five trade areas served by petitioner, the Latin America/Pacific Coast Steamship Conference. Petitioners' existing exclusive patronage dual rate contract requires shippers, in order to obtain lower rates, to give their exclusive patronage to petitioners in all three outbound trades served by petitioners, and similarly requires receivers, in order to obtain lower rates, to do likewise with reference to petitioners' two inbound trades.

I. History of Proceedings

A. Phase One

The long procedural tangle in the instant case had its beginning in January of 1962 when petitioner, pursuant to section 15 of the Shipping Act¹ (hereinafter the "Act"), filed for approval of Agreement No. 8660 which created the Latin America/Pacific Coast Steamship Conference, superseding ten previously independent conferences serving inbound and outbound trade between the Pacific Coast of the United States and Latin America. Dividing the trade into five areas, the agreement provided that, although all members of the conference had a vote with reference to general matters, only those carriers actively serving a particular trade area could participate in the establishment of rates and related matters affecting that area. While the Commission was considering Agreement No. 8660, petitioners filed proposed dual rate contracts² for Commission approval under section 14b of the Act.³ Under these contracts, shippers of goods in any of the outbound trade areas were committed to exclusive use of conference vessels in all three outbound trade areas, while receivers were obligated to exclusive use of conference vessels in both inbound trade areas.

After consideration of the record, the Commission rendered its decision in The Dual Rate Cases, 8 F.M.C. 16 (1964), which approved petitioners' Agreement No. 8660 and the dual rate contracts subject to the condition that petitioners offer their dual rate contracts to merchants on a separate basis in each of the five trade areas. The Commission expressed its concern stating that

if the conference is permitted to offer a single dual rate contract which includes all five of the trade areas, merchants will be forced to obligate themselves to exclusive conference patronage in trade areas not desired in order to obtain contract rates in a trade area where they feel the dual rate contract meets their needs. This seems to us neither necessary nor fair.

Id. at 50.

Petitioners and two other conferences filed petitions for review of the Commission's decision in the Ninth Circuit, which, although remanding for certain procedural infirmities, affirmed the Commission with respect to its section 14b actions. Pacific Coast European Conference v. United States, 350 F.2d 197 (9th Cir.), cert. denied, 382 U.S. 958, 86 S.Ct. 433, 15 L.Ed.2d 362 (1965). On petition for rehearing, however, the Ninth Circuit, in an unpublished per curiam opinion, set aside the five-contract separability condition imposed by the Commission.

B. Phase Two

Following remand, the Commission instituted a rule making proceeding to determine whether the "one trade-one contract" requirement should be reimposed.⁴ As a result of petitioners' challenge to the rule making format, a full evidentiary hearing was held, at the conclusion of which, the examiner, in an initial decision, upheld petitioners' dual rate contracts under section 14b. However, upon exception, the Commission once again imposed the condition that the conference offer its dual rate contract in each of the five trade areas,⁵ relying upon the failure of petitioner to meet the "public interest" standard promulgated by the Commission in Investigation of Passenger Travel Agents, 10 F.M.C. 27 (1966), and affirmed by the Supreme Court in Federal Maritime Comm. v. Aktiebolaget Svenska Amerika Linien, supra, 390 U.S. at 243, 88 S.Ct. at 1009 wherein the Court upheld the Commission's test that

conference restraints which interfere with the policies of antitrust laws will be approved only if the conferences can "bring forth such facts as would demonstrate that the restraint was required by a serious transportation need, necessary to secure important public benefits or in furtherance of a valid regulatory purpose of the Shipping Act."

C. Phase Three

The Conference, again protesting the decision moved the Commission to reopen the proceeding to afford it an opportunity to meet the new burden of proof imposed by Svenska. The Commission, acquiescing in a reopening, nevertheless, reaffirmed its previous "one trade-one contract" decision rejecting the examiner's initial decision once again. The Commission, noting that "the exclusive patronage tying arrangement embodied in a dual rate contract would clearly run counter to the antitrust laws," (J.A. 177-78) concluded, that, under Svenska, this fact standing alone rendered petitioners' dual rate contracts "contrary to the public interest," and shifted the burden to petitioners of introducing "other evidence in the record which fairly detracts from the weight of this factor antitrust conflict" by demonstrating "the necessity for this restraint in terms of legitimate commercial objectives." Federal Maritime Comm. v. Aktiebolaget Svenska Amerika Linien, supra, 390 U.S. at 244, 246, 88 S.Ct. at 1009. Examining petitioners' evidence, the Commission "remained unconvinced . . . that the present so-called single-contract system is required by some serious transportation need, necessary to secure important public benefits or in furtherance of any valid regulatory purpose of the Shipping Act." (J.A. 178). The Commission concluded that much of petitioners' evidence confused advantages attributable to the conference format with those resulting from the dual rate contracts and accordingly ruled against petitioners.

Before turning to the specific arguments advanced and issues raised on appeal, it will, in our view, facilitate matters to briefly examine the nature of the antitrust-regulatory conflict and cursorily survey the vagaries of the ocean shipping industry.

II. Accommodation of Regulatory and Antitrust Policies

Forced to steer a course between a regulatory Scylla and an antitrust Charybdis, we pause for a moment to reflect upon the rhyme and reason of our voyage.

Although the policies underlying the antitrust laws⁶ and the regulatory agency statutes are conflicting,⁷ their purposes — service to the public — are complementary. As we indicated in Northern Natural Gas Co. v. Federal Power Comm., 130 U.S.App.D.C. 220, 226, 399 F.2d 953, 959 (1968), they both attempt to "achieve the most efficient allocation of resources possible" and to "establish an atmosphere which will stimulate innovations for better service at a lower cost." See also Symposium on `Regulated' Industries and Antitrust, 32 A.B.A. Antitrust L.J. 239-41 (1966).

It is all too clear that "the general objective of the antitrust laws is promotion of competition in open markets."⁸ As Justice Black has eloquently observed, "the antitrust laws were designed to be a comprehensive charter of economic liberty aimed at preserving free and unfettered competition as the rule of trade. They rest on the premise that the unrestrained interaction of competitive forces will yield the best allocation of our economic resources, the lowest prices, the highest quality and the greatest material progress, while at the same time providing an environment conducive to the preservation of our democratic political and social institutions." Northern Pacific Railway Co. v. United States, 356 U.S. 1, 4, 78 S.Ct. 514, 517, 2 L.Ed.2d 545 (1958). The Supreme Court has "long recognized that the antitrust laws represent a fundamental national economic policy . . .," Carnation Co. v. Pacific West-bound Conference, 383 U.S. 213, 218, 86 S.Ct. 781, 784, 15 L.Ed.2d 709 (1966), and often commented upon the "indispensable role of antitrust policy in the maintenance of a free economy." United States v. Philadelphia National Bank, 374 U.S. 321, 348, 83 S.Ct. 1715, 1733, 10 L.Ed.2d 915 (1963). See Marine Space Enclosures, Inc. v. Federal Maritime Comm., 137 U.S.App.D.C. 9, 420 F.2d 577 (1969); Pacific Seafarers, Inc. v. Pacific Far East Line Inc., 131 U.S.App.D.C. 226, 237, 404 F.2d 804, 815 (1969). Indeed, they have been deemed important enough to be denominated the "Magna Charta of free enterprise." United States v. Topco...