Seatrain Intern., S.A. v. Federal Maritime Com'n

Decision Date12 April 1979
Docket NumberNo. 77-1542,77-1542
Citation598 F.2d 289,194 U.S.App.D.C. 370
Parties, 1979-1 Trade Cases 62,572 SEATRAIN INTERNATIONAL, S.A., Petitioner, v. FEDERAL MARITIME COMMISSION and United States of America, Respondents, Japan/Korea-Atlantic and Gulf Freight Conference, Intervenor.
CourtU.S. Court of Appeals — District of Columbia Circuit

Neal M. Mayer and Paul D. Coleman, Washington, D. C., were on the supplemental brief for petitioner.

Joseph N. Ingolia, Gen. Counsel, Edward G. Gruis, Deputy Gen. Counsel, and C. Jonathan Benner, Atty., Federal Maritime Commission, Washington, D. C., were on the supplemental brief for respondent Federal Maritime Commission.

John H. Shenefield, Asst. Atty. Gen., and Barry Grossman and Robert J. Wiggers, Attys., Dept. of Justice, Washington, D. C were on the supplemental memorandum for respondent United States of America.

Charles F. Warren and George A. Quadrino, Washington, D. C., were on the supplemental brief for intervenor.

Supplemental Opinion on Remand

Before WRIGHT, Chief Judge, and McGOWAN and ROBINSON, Circuit Judges.

Opinion for the court filed by Chief Judge J. SKELLY WRIGHT.

J. SKELLY WRIGHT, Chief Judge:

Petitioner Seatrain International, S.A. (Seatrain) challenges an order of the Federal Maritime Commission (FMC) that followed a remand from this court under Section 15 of the Shipping Act of 1916. 1 We remanded the record in this case for consideration of the antitrust implications of an 18-month extension of the authority of the Japan/Korea-Atlantic & Gulf Freight Conference (JKAG) to establish "intermodal" service between Asian ports and Inland points in the United States. 2 Although the challenged authority for combined land and water carriage has now expired, petitioner argues that this court should vacate the Commission's order as not satisfying the terms of the remand. We agree.

I

Acting under Section 15, which requires FMC approval of all services offered by shipping conferences, the Commission granted JKAG authority for intermodal service to Atlantic and Gulf Coast ports for three 18-month periods after 1973. 3 In 1977 the Conference, which had not initiated any service under its intermodal authority, requested an indefinite extension of that authority. 4 JKAG also requested deletion of the Commission's requirement that a Conference tariff would supersede an intermodal tariff filed independently by a member of JKAG only when both offered "comparable rates, terms, and conditions of carriage." 5 Objections were filed by Seatrain 6 and by Lykes Brothers Steamship Company (Lykes), 7 the only member of JKAG that did not also belong to the Trans Pacific Freight Conference of Japan & Korea (TPF), a competing conference serving Pacific Coast ports under its own intermodal tariff. 8 In May 1977 the Commission approved an 18-month extension of JKAG's authority, but refused to remove the provision on superseding tariffs. 9

Seatrain petitioned this court for review of the FMC's order. In an opinion issued July 28, 1978 this panel found no "indication in the Commission's decision that it considered the antitrust implications of extending JKAG intermodal tariff authority," and remanded the record for "further consideration" of competition questions. 10 Although we saw no need for a full evidentiary hearing on remand, we ordered the agency to "conduct whatever proceedings are necessary for it to secure sufficient information so that its final decision will reflect 'a consideration of the relevant factors.' " 11

The Commission affirmed its May 1977 extension of authority in an order (hereinafter referred to as Order on Remand) issued November 24, 1978, the expiration date for the intermodal authority that was the subject of the May 1977 order. 12 The FMC had conducted no further proceedings, noting that its decision

relies on information available to it at the time of its earlier Order. This Order should be considered a restatement and amplification of considerations which led us to conditionally approve the Agreement in our Order of May 18, 1977. * * * ( 13

The Commission conceded that its May 1977 order had approved "the concerted fixing of rates by Conference members" which is a "violation of the antitrust laws," 14 but the agency presented no new analysis of the antitrust implications of approving JKAG's request. Instead, the substance of the Order on Remand merely listed the positive features of the FMC action that, under the controlling Supreme Court cases, 15 would justify such an anticompetitive arrangement.

The primary benefit cited by the agency was the greater efficiency of intermodal service. 16 The Commission also argued that JKAG's recent loss of trade to TPF's intermodal service demonstrated a transportation need for its action. 17 The FMC defended its grant of authority to the Conference, rather than to individual lines, because the shipping conferences, " 'as the dominant commercial units in this trade, * * * should be at the forefront in stimulating and encouraging improvements in transportation.' " 18 After all, the FMC pointed out, of the 13 JKAG members, only Lykes had established independent intermodal tariffs. Finally, the Commission stressed the limitations on its action: the restriction of JKAG's authority to 18 months and the provision that Conference intermodal tariffs would supersede only "comparable" individual tariffs. 19

Five days after issuing the Order on Remand the Commission rejected JKAG's request for another extension of its intermodal authority (hereinafter referred to as Fifth Extension Order). 20 Although that action is not directly before us on review, it is clearly relevant to any consideration of the Order on Remand and contrasts sharply with that decision. In the Fifth Extension Order the Commission emphasized that JKAG still had not issued an intermodal tariff. 21 The FMC reviewed the Conference's pricing alternatives for intermodal offerings, concluding that "the prospects of immediate viable conference intermodal service appear slim." 22 In contrast to its contention in the Order on Remand that conferences would spearhead introduction of intermodal service, the Commission held that "individual carriers (must) take the lead in marketing a service that may prove beneficial to shippers and commerce. A continuation of the conference's intermodal authority may delay those individual efforts and resultant benefits." 23

II

Because the 1977 grant of intermodal authority has terminated and JKAG's request for an additional extension was denied, respondents argue that we should not reach the merits of the case. We do not find this case moot. As Justice McKenna wrote in Southern Pacific Terminal Co. v. ICC, 219 U.S. 498, 515, 31 S.Ct. 279, 55 L.Ed. 310 (1911), when questions are likely to arise repeatedly, "their consideration ought not to be, as they might be, defeated, by short term orders, capable of repetition, yet evading review * * *." 24 Even though the JKAG order has expired, it raises questions about the nature of the Commission's proceedings on remand and its analysis of antitrust issues that will likely recur. The use of short term orders should not frustrate judicial review. Accordingly, we will consider the Order on Remand under the principles outlined in United States Lines, Inc. v. FMC 25 for review under the Administrative Procedure Act (APA) and Section 15 of the Shipping Act.

As we stated in United States Lines , 26 we must undertake a "searching and careful" inquiry 27 to determine whether the agency action is "arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law." 5 U.S.C. § 706(2)(A) (1976). A court may not, of course, substitute its judgment for the agency's, but must determine whether the agency has "adequately considered all relevant factors" 28 and if there is "a rational connection between the facts found and the choice made." 29

We must also apply to this case our understanding of the FMC's obligation under Section 15 of the Shipping Act to consider possible anticompetitive consequences of its actions. In Isbrandtsen Co. v. United States, 93 U.S.App.D.C. 293, 299, 211 F.2d 51, 57 (1954), this court held that the FMC can exercise its statutory power to grant antitrust immunity to shipping conferences only after

scrutiniz(ing) the agreement to make sure that the conduct thus legalized does not invade the prohibitions of the anti-trust laws any more than is necessary to serve the purposes of the regulatory statute. * * *

(Footnote omitted.) As set forth by the Supreme Court last Term,

the Commission Must "consider the antitrust implications of an agreement before approving it," FMC v. Seatrain Lines, Inc., 411 U.S. 726, 739, (93 S.Ct. 1773, 1782, 36 L.Ed.2d 620) (1973), and should approve an anticompetitive agreement only if it is " 'required by a serious transportation need, necessary to secure important public benefits or in furtherance of a valid regulatory purpose of the Shipping Act.' " FMC v. Svenska Amerika Linien, 390 U.S. 238, 243, (88 S.Ct. 1005, 1009, 19 L.Ed.2d 1071) (1968). * * * ( 30

Antitrust considerations thus must be fully considered and anticompetitive agreements can be approved only if there are "serious" and "important" advantages for the public.

III

The Order on Remand is inadequate on two independent grounds: (A) the agency's action was flawed by its refusal to consider events after the May 1977 order was issued, and (B) the Commission's antitrust analysis incorrectly gauged the public benefits of extending JKAG's intermodal authority and the transportation needs served by such action.

A

JKAG's intermodal authority was granted after a proceeding designed to enhance administrative "flexibility" while providing concerned parties an opportunity to present their views to the Commission. 31 Our prior opinion directed the Commission to conduct any proceedings Necessary to establish the factual basis for its action. This direction...

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