Southern Motor Carriers Rate Conference v. U.S.

• Decision Date: 18 October 1985
• Docket Number: No. 84-8499,84-8499
• Citation: 773 F.2d 1561
• Parties: SOUTHERN MOTOR CARRIERS RATE CONFERENCE, et al., Petitioners, v. UNITED STATES of America and Interstate Commerce Commission, Respondents.
• Court: U.S. Court of Appeals — Eleventh Circuit

Page 1561

773 F.2d 1561

SOUTHERN MOTOR CARRIERS RATE CONFERENCE, et al., Petitioners, v. UNITED STATES of America and Interstate Commerce Commission Respondents.

No. 84-8499.

United States Court of Appeals Eleventh Circuit.

Oct. 18, 1985.

Patrick McEligot, Bryce Rea, Jr., Washington, D.C., for petitioners.

Catherine G. O'Sullivan, Marion L. Jetton, Dept. of Justice, Antitrust Div., Washington, D.C., for U.S.

Laurence H. Schecker, I.C.C., Washington, D.C., for I.C.C.

Petition for review of an order of the Interstate Commerce Commission.

Before TJOFLAT and VANCE, Circuit Judges, and ATKINS ^*, District Judge.

ATKINS, District Judge:

Petitioners, Southern Motor Carriers Rate Conference, et al. (SMCRC), seek review of a final order of the Interstate Commerce Commission (ICC) promulgating general rules relieving all motor carriers of property and all freight forwarders of the statutory requirement that their tariffs be filed at least 30 days before they become effective. SMCRC urge that such rules (a) exceed the statutory authority of the ICC, and (b) are arbitrary and capricious.

SMCRC contend that the rules promulgated will deprive interested persons of their statutory right to file protests against carriers' tariffs. They also argue that they will make it impossible for the ICC to reject tariffs that violate the ICC's tariff filing requirements or to exercise its discretion to suspend the effectiveness of tariffs that appear to be unjust, unreasonable, discriminatory, predatory, or destructively competitive.

We find that (1) the plain language of the Interstate Commerce Act, 49 U.S.C. Sec. 10762(d)(1) (1982), empowers the ICC to reduce the notice period for filing tariffs without limitation upon a finding that "cause" exists, (2) the ICC had ample reasons for its finding that cause existed for reducing the notice period, (3) the ICC rules do not abolish the procedure for protest and suspension of independently filed rate increases, and (4) the refusal to suspend rate decreases was rational and in accordance with the law. Accordingly, we affirm.

I. Statutory Background

Motor carriers of property are subject to licensing and rate regulation under the Interstate Commerce Act, 49 U.S.C. Sec. 10101, et seq. (1982). Following enactment of the Motor Carrier Act of 1935, Ch. 498, 49 Stat. 543-567 (1935) (codified as amended at 49 U.S.C. Sec. 10762 (1982)), the ICC tightly controlled entry into the motor carrier industry "on the premise that the public interest in maintaining a stable transportation industry so required," United States v. Drum, 368 U.S. 370, 374, 82 S.Ct. 408, 410, 7 L.Ed.2d 360 (1962) (footnote omitted).

The ICC also closely regulated motor carrier rates, which were set primarily through collective pricing decisions made in what are known as "rate bureaus." The ICC discouraged rate competition, disallowed rate reductions even when needed to balance a carriers' traffic flow, and relied largely on comparisons with the rates of competing carriers in determining whether motor carriers' rates were just and reasonable. See, e.g., Carbon Blacks, Southwest to Central and Midwest, 66 M.C.C. 163 (1955). This rigid ratemaking regulation, combined with the inherent tendency of collective ratemaking to generate "rates that will be compensatory for even the least efficient ... carrier," resulted in a system under which "consumers los[t] the benefit of price competition." H.R.Rep. No. 96-1069, 96th Cong., 2d Sess. 27 (1980), U.S.Code Cong. & Admin.News 1980, pp. 2283, 2309.

Against a background of relaxed standards set by the ICC for entry into the motor carrier industry, an encouragement of rate competition and rate innovation, Congress enacted the Motor Carrier Act of 1980, Pub.L. No. 96-296, 94 Stat. 793 (codified as amended at 49 U.S.C. Sec. 10101(a)(2) (1982) (hereinafter referred to as the "1980 Act"). Congress specifically intended to relax entry regulation and to encourage rate flexibility and competitive pricing in the motor carrier industry. See H.R.Rep. No. 96-1069, 96th Cong., 2d Sess. 12 (1980).

In enacting the new motor carrier policy, Congress noted that "[i]t is clearly the Committee's intent that the Commission must recognize the importance of competition and efficiency in motor carrier operations as the most desirable means for achieving national transportation goals and objectives." H.R.Rep. No. 96-1069, 96th Cong., 2d Sess. 12 (1980), U.S.Code Cong. & Admin.News 1980, p. 2294. Specifically, in the rate area Congress' actions furthered its intent that the Commission continue to reduce the potential for regulatory interference with individual motor carrier pricing initiatives. See 49 U.S.C. Sec. 10101 et seq.

The 1980 Act did not alter the longstanding requirement that carrier rates be reasonable. Id. The new law did, however, effect fundamental changes in the carriers' ratemaking procedures and the Commission's regulatory procedures to reflect Congress' plainly expressed intent that "motor carriers [be given] greater freedom to set rates in the response to market demands," H.R.Rep. No. 96-1069, 96th Cong., 2d Sess 4 (1980), U.S.Code Cong. & Admin.News 1980, p. 2286.

The major change in the carriers' ratemaking procedures resulted from the 1980 Act's substantial reduction in the role of collective bargaining. In Section 14 of the 1980 Act (principally codified at 49 U.S.C. Sec. 10706(b)), Congress restricted rate bureau activities to encourage "competitive pricing" and to "put a greater burden upon individual carriers to determine their own cost structures and the most optimum rates from their individual company point of view to offer the shipping public." H.R.Rep. No. 1069, 96th Cong., 2d Sess. 28 (1980), U.S.Code Cong. & Admin.News 1980, p. 2310. Congress also established a Motor Carrier Ratemaking Study Commission to report to Congress and recommend further legislative changes. 49 U.S.C.A. Sec. 10706. ¹

The 1980 Act also reduced the Commission's authority to interfere with independently established motor carrier pricing initiatives. Historically, the Commission has had (and continues to have) two principal avenues by which it can enforce the rate provisions of the Act. First, it must adjudicate formal complaints alleging that motor carrier rates currently in effect are not reasonable. Southern Railway v. Seaboard Allied Milling Corp., 442 U.S. 444, 454, 99 S.Ct. 2388, 2394, 60 L.Ed.2d 1017 (1979). Second, the Commission has the discretion to suspend (i.e., enjoin) and/or investigate proposed rates before they become effective. The most significant change that the 1980 Act made to the Commission's regulatory authority was the creation of a "zone of rate freedom" (ZORF) 49 U.S.C. Sec. 10708(d). While not altering the Commission's duty to adjudicate formal complaints concerning rate reasonableness, Congress sharply curtailed the Commission's discretion to suspend individually set rates that fell within the liberally defined ZORF. In short, ZORF was designed to encourage individual marketplace pricing. The congressional report states:

The new zone of rate freedom in subsection (d)(1) applies only to rates proposed by individual carriers.... This section must be read in conjunction with Section 14, which specifically prohibits collective ratemaking for rates established pursuant to this new subsection....

The thrust of this new subsection is to provide for more pricing freedom and less government regulation and to balance freer entry into the industry, freer expansion of the industry, and the additional competition that will result from other provisions of the bill. The concept, then, is to spur competition both in service and in pricing. Plainly, the intent is to give the carriers and the shipping public the ability to structure their transportation systems and needs around a variety of service and price options. Another anticipated impact is that, by separating the new pricing flexibility from collective ratemaking with its attendant antitrust immunity, the carriers will establish many of their rates independently of one another. This will create a more competitive motor carrier system.

H.R.Rep. No. 96-1069, 96th Cong., 2d Sess. 24, 25 (1980), U.S.Code Cong. & Admin.News 1980, pp. 2306, 2307.

1. Statutory Authority to Reduce Notice Period

Since the inception of motor carrier regulation, the Interstate Commerce Act has provided that motor carriers must file tariffs with the Commission 30 days in advance of the effective date of the tariff. See Motor Carrier Act of 1935, ch. 498, 49 Stat. 543-567 (1935) (codified as amended at 49 U.S.C. Sec. 10762(d)(1) (1982). The 1935 Act provided that the Commission could reduce the notice period, or modify other tariff filing provisions of the Act:

The Commission may, in its discretion and for good cause shown, allow such change [in tariffs] upon notice less than that herein specified or modify the requirements of this section with regard to posting and filing of tariffs either in particular instances or by general order applicable to special or peculiar circumstances or conditions.

49 U.S.C. Sec. 317 (1935).

In 1978, Congress recodified the Interstate Commerce Act, but the recodification was not meant to effect any substantive changes. Enacting Section 217(c) as 49 U.S.C. Sec. 10762(d)(1). The new language still enabled the Commission to reduce the notice period for filing tariffs, but now read:

The Commission may reduce the notice period of subsections (a) and (c) of this section if cause exists. The Commission may change the other requirements in this section if cause exists in particular instances or as they apply to special circumstances.

49 U.S.C. Sec. 10762(d)(1).

2. The Proceedings Before the ICC

In July 1983, the ICC proposed to reduce the notice period for independently filed motor carrier rates from the 30 days specified in 49 U.S.C. Sec. 10762(c)(3), to one day for rate reductions, and five days for rate increases. 48...