U.S. v. Federal Maritime Commission

• Decision Date: 29 December 1980
• Docket Number: No. 79-1325,79-1325
• Parties: UNITED STATES of America, Petitioner, v. FEDERAL MARITIME COMMISSION, Respondent, Sea-Land Service, Inc., Black Sea Shipping Co., et al., Intervenors.
• Court: U.S. Court of Appeals — District of Columbia Circuit

Page 247

655 F.2d 247

210 U.S.App.D.C. 134

UNITED STATES of America, Petitioner, v. FEDERAL MARITIME COMMISSION, Respondent, Sea-Land Service, Inc., Black Sea Shipping Co., et al., Intervenors.

No. 79-1325.

United States Court of Appeals, District of Columbia Circuit.

Argued May 23, 1980.

Decided Dec. 29, 1980.

Robert J. Wiggers, Atty., Dept. of Justice, Washington, D. C., with whom Sanford M. Litvack, Asst. Atty. Gen., and Barry Grossman, Atty. Dept. of Justice, Washington, D. C., were on the brief, for petitioners.

Carol J. Neustadt, Atty. Federal Maritime Commission, Washington, D. C., with whom Brien E. Kehoe, Gen. Counsel, Federal Maritime Commission and Edward G. Gruis, Deputy Gen. Counsel, Federal Maritime Commission, Washington, D. C., was on the brief, for respondent.

Francis W. Fraser, Washington, D. C., with whom Donald J. Brunner, Washington, D. C., was on the brief for intervenor, Sea-Land Service, Inc. Paul J. McElligott, Washington, D. C., also entered an appearance for intervenor, Sea-Land Service, Inc.

Stanley O. Sher, Washington, D. C., with whom John R. Attanasio, Washington, D. C., was on the brief for intervenor, Black Sea Shipping Co., et al.

Before WRIGHT, Chief Judge and WALD, Circuit Judge and MARKEY ^*, Chief Judge, United States Court of Customs and Patent Appeals.

Opinion PER CURIAM.

Concurring opinion filed by Chief Judge MARKEY, U.S. Court of Customs and Patent Appeals.

PER CURIAM.

This case involves a dispute between the Antitrust Division of the Department of Justice ("the Department" or "Justice") and the Federal Maritime Commission ("FMC" or "Commission") over the merits of a revenue pooling arrangement. The Department petitions under the Hobbs Act ¹ for review of an order entered by the Commission approving a pooling agreement among ten lines in the westbound container trade between Italy and the United States' north Atlantic coast. The Department argues that the Commission's order approving the agreement is not supported by substantial evidence on the record; the Commission maintains the opposite. Two intervenors ² filed in support of the Commission's order, arguing that the Department lacks standing to challenge the FMC order and that no justiciable case or controversy exists. We conclude that the Department has standing to bring this suit and that a justiciable case or controversy exists, but that the Commission's order was supported by substantial evidence. Therefore, we affirm the Commission's order approving the revenue pooling agreement.

I. BACKGROUND

Section 15 of the Shipping Act, 1916, 46 U.S.C. § 814, allows the Commission to approve various types of anticompetitive agreements, including revenue pooling arrangements, if, after "notice and hearing," the Commission concludes the agreement is neither "unjustly discriminatory or unfair" as between specified classes, "detriment(al) (to) the commerce of the United States," in violation of some other provision of the Act, nor "contrary to the public interest." Once approved, agreements are exempted from the provisions of the antitrust laws. 46 U.S.C. § 814; FMC v. Pacific Maritime Association, 435 U.S. 40, 45, 98 S.Ct. 927, 931, 55 L.Ed.2d 96 (1978); Volkswagenwerk v. FMC, 390 U.S. 261, 271, 88 S.Ct. 929, 935, 19 L.Ed.2d 1090 (1968).

The instant case arose out of a revenue pooling agreement filed with the FMC for approval pursuant to section 15 of the Shipping Act, 1916, 46 U.S.C. § 814, by ten members of the West Coast of Italy, Sicilian and Adriatic Ports North Atlantic Range Conference ("WINAC"). The agreement, docketed as Agreement No. 10286, assigns a specific percentage of the revenues earned by pool members to each member carrier, and provides a penalty for any carrier whose earnings exceed its maximum pool share. J.A. 587-91 (text of agreement); 661-62 (testimony of Luigi Scaffardi, describing operation of pool agreement). Notice of the filing and an invitation to interested parties to comment was published in the Federal Register on March 8, 1977, 42 Fed.Reg. 10347. Justice filed a protest with the Commission, attacking the agreement as anticompetitive. J.A. 8-9. ³

A hearing on the merits of the pool arrangement was held before a FMC Administrative Law Judge ("ALJ"). The proponents of the pool argued that it was needed to alleviate the problems of "overtonnaging" ⁴ and "malpractices" ⁵ which existed on the eastbound Italy-north Atlantic route. They produced statistics which showed that in an average month, 7,500 TEU's ⁶ of container space was available on the route though only 4,250 TEU's of cargo moved over it, resulting in an overtonnaging rate of 76 percent. They further showed that this rate was not likely to decline significantly despite the lack of profits because government controlled carriers, motivated by concerns apart from immediate profit-seeking, carried a majority of the cargo moved by the container carriers. J.A. 104-05. ⁷ The proponents also presented a witness Mr. Scaffardi, a former director of one of the lines that had left the trade and a consultant to one of those remaining, who estimated the level of rebating at 10 to 15 percent of the gross freight. No evidence of specific instances of rebating was produced; instead, an explanation of why such information was almost impossible to obtain was provided. ⁸ However, some evidence was produced that tended to show the departure of the private lines from the route was due to the extent of the rebating practiced. J.A. 120, 202, 656.

The Department presented one witness at the hearing, Dr. Dolan, an economist. This witness both attacked the need for the pool by pointing out deficiencies in the proponents' evidence, and claimed that market mechanisms would better solve any problems that existed. Dolan attacked the proponents' overtonnaging argument by claiming that the evidence was too incomplete to demonstrate that overtonnaging in fact existed. He argued it was possible that the excess capacity on the eastbound routes was caused by an excess of demand for westbound cargo space that a trade imbalance existed. If that was the case, economic efficiency demanded that the westbound shippers cover any shortfalls in revenue. J.A. 321-22. Moreover, Dolan pointed out that no evidence had been presented to demonstrate that such a short-fall existed; no one had testified that the route was in fact unprofitable. As for the proponents' argument that widespread rebating justified the pool, he stressed that the proponents' witness had admitted on cross-examination that he had "no proof whatsoever" of recent malpractices. J.A. 171.

Finally, Dolan testified that competitive pricing would solve these problems, if they existed, more effectively and with fewer detrimental side effects than the pooling arrangement. He argued that government sponsored carriers would react to market forces as did privately owned ones, and would reduce their excess capacity in the absence of a pool. J.A. 313-14. Rebating would be reduced along with the excess capacity; shippers and consumers would be relieved of the burden of subsidizing excess capacity through the pool. J.A. 344-45.

The ALJ approved the pool arrangement with several modifications, "persuaded by the arguments of the proponents as to public interest and that based on inferences generally or, as here, on the Commission's special familiarity with the WINAC trade in the shipping industry (the ALJ), may and does draw inferences on these points from the incomplete evidence that was available." J.A. 523. Justice filed exceptions to this opinion; the FMC affirmed it in an order issued January 26, 1979. J.A. 543. This case is a petition for review of that order.

II. JUSTICIABILITY

Before reaching the merits of this dispute, we must address the claims of the intervenors ⁹ that we lack appellate jurisdiction to review a Maritime Commission order at the behest of the Department of Justice in its role as the enforcer of the antitrust laws. The Department argues that jurisdiction exists under the Administrative Orders Review ("Hobbs") Act, 28 U.S.C. §§ 2341-2351. The intervenors counter this argument by contending that the Hobbs Act does not authorize this petition for review and that, notwithstanding statutory authorization, the Department's petition does not present an Article III "case or controversy." Each argument will be considered separately.

A. The Hobbs Act

Section 4 of the Hobbs Act provides that "(a)ny party aggrieved by ("a final order reviewable under (the Act)") may ... file a petition to review the order in the court of appeals wherein venue lies." Id. § 2344. There is no dispute but that the Commission's approval of Agreement No. 10286 was a final order reviewable under the Act, see id. § 2342(3), and that the Department has complied with all of the Act's procedural requirements. The only statutory question going to justiciability is whether the Act affords the Department of Justice the status of a "party aggrieved" entitled to seek review under the Act.

The Department contends that it was an "aggrieved" party in the ordinary sense of those words. It appeared in the proceeding before the Commission; the final order was adverse to the Department's interpretation of the law. The intervenors argue that no legally cognizable injury can be traced to the Commission order because neither the United States nor the Department of Justice is injured in its proprietary character by the order. Furthermore, they argue, neither can purport to represent the public interest in this litigation, as Congress by statute delegated the function of determining that interest to the Commission; by definition, then, the "public interest" requires upholding the Commission's order.

A panel of this court decided this jurisdictional question very recently in another case between the FMC and Justice, United States v. FMC, No. 79-1229 (D.C.Cir. December 19, 1980). In a lengthy and well-reasoned opinion, the court...