Western Coal Traffic League v. U.S.

Decision Date08 December 1982
Docket Number81-4259,81-4347,81-4334,81-4357,81-4365,81-4354,81-4299,Nos. 81-4257,81-4277,s. 81-4257
Citation694 F.2d 378
PartiesWESTERN COAL TRAFFIC LEAGUE and its Members, et al., Petitioners, v. UNITED STATES of America and Interstate Commerce Commission, Respondents. to 81-4369, 81-4373, 81-4415, 81-4423 and 82-4021.
CourtU.S. Court of Appeals — Fifth Circuit

Richard A. Allen, Kathleen M. Dollar, Timm L. Abendroth, Gen. Counsels, ICC, William F. Smith, Atty. Gen., U.S. Dept. of Justice, John J. Powers, III, Antitrust Div., James H. Laskey, Washington, D.C., for respondents in all cases.

J. David Forsyth, Cicero C. Sessions, New Orleans, La., William L. Slover and Donald J. Avery, Washington, D.C., for Western Coal Traffic League and Its Members, et al.

C. Michael Loftus, Washington, D.C., for Western Coal Traffic League and Its Members, et al., Consumer Owned Power Coalition, Eastern Coal Transp. Conference, Western Coal Traffic League and Its Members.

J. Raymond Clark, Mary Todd Foldes, Washington, D.C., for Arkansas-Missouri Power Co., et al.

Edward B. Poitevent, II, New Orleans, La., for Arkansas-Missouri Power Co., et al. and Middle South Utilities.

John M. Cleary, Nicholas J. DiMichael, Washington, D.C., for Gulf States Utilities Co., et al.

David H. Baker, Dickson R. Loos, Barry Roberts, Washington, D.C., for The Aluminum Ass'n, Inc.

John Guandolo, Washington, D.C., for Consumers Power Co.

Charles J. McCarthy, Washington, D.C., for Commonwealth Edison Co., et al.

Leonard M. Trosten, Harry H. Voigt, Michael F. McBride, Daniel J. Conway, Washington, D.C., for Edison Elec. Institute.

John F. Donelan, John K. Maser, III, Washington, D.C., for American Paper Institute, Inc., The National Indus. Traffic League, Carolina Power & Light Co., et al.

John H. LeSeur, Slover & Loftus, Washington, D.C., for Consumer Owned Power Coalition, and Eastern Coal Transp. Conference.

Edmund E. Harvey, Washington, D.C., for Copper Development Ass'n, Inc.

R. Dennis Wright, Mark G. Flaherty, Kansas City, Mo., for Nebraska Public Power Dist.

Harold E. Spencer, Richard S.M. Emrich, Chicago, Ill., for International Minerals & Chemical Corp. and The Fertilizer Institute.

John R. Molm, Atlanta, Ga., for Alabama Power Co., et al.

John L. Oberdorfer, Harvey J. Baker, Washington, D.C., for National Coal Ass'n & Chemical Mfrs. Ass'n.

Paul M. Donovan, Gerald L. Richman, Washington, D.C., for The Chlorine Institute, Inc.

Mike Miller, Fargo, N.D., John I. Finsness, Director of Traffic, North Dakota Pub. Serv. Comm., Daniel S. Kuntz, Asst. Atty. Gen., Bismarck, N.D., for The North Dakota Public Service Comm., et al.

Martin W. Bercovici, Lawrence P. Halprin, Washington, D.C., for The Committee on Transp. and Distribution of the Society of Plastic Ind., Inc.

Dennis N. Barnes, Howard T. Weir, Washington, D.C., for Electric Fuels Corp.

Frederick W. Claybrook, Jr., Herbert J. Martin, Karen Shoos Lipton, Washington, D.C., for American Iron and Steel Institute.

David A. Sutherlund, Washington, D.C., for Coastal States Energy Co. and National Ass'n of Mfrs.

Frederick P. Furth, Bruce J. Wecker, San Francisco, Cal., for Kellogg Co.

John J. Powers, III, James H. Laskey, Antitrust Div., U.S. Dept. of Justice, Kenneth P. Kolson, Timm L. Abendroth, Washington, D.C., for U.S.A. and I.C.C.

Michael Boudin, Washington, D.C., Walter J. Suthon, III, New Orleans, La., James R. Atwood, Washington, D.C., for The Ass'n of American Railroads.

Jones, Walker, Waechter, Poitevent, Carrere & Denegre, New Orleans, La., for Middle South Utilities.

Petitions for Review of Orders of the Interstate Commerce Commission.

Before BROWN, RUBIN and REAVLEY, Circuit Judges.

ALVIN B. RUBIN, Circuit Judge:

The Railroad Revitalization and Regulatory Reform Act of 1976 (the 4R Act) 1 was designed to eliminate needless regulatory restraints on railroads and to prescribe ratemaking practices that would both encourage effective competition and protect consumers. 2 As one of its measures to achieve this, Congress limited the authority of the Interstate Commerce Commission to suspend a railroad rate on the basis that it is unjustly or unreasonably high. The Commission now has no jurisdiction to review any rate unless it finds that the rail carrier defending the rate can exclude effective competition for the transportation to which the rate applies. The carrier's power to exclude such competition is called "market dominance."

The Commission has adopted what it terms guidelines, but considers to be regulations, for deciding whether a carrier has market dominance. Under the guidelines, the Commission may consider evidence that other carriers or modes of transportation compete for the same movement of the product to which the rate applies. Evidence is also admissible that transportation of substitute products (product competition) or transportation of the same product from other places (geographic competition) provides less direct, but potentially equally effective, competition. When such evidence is considered, the number of rates immunized from regulation is increased.

Several organizations representing businesses and consumers that would be adversely affected by increases in various rail rates challenge the validity of the regulations on the ground that they exceed the Commission's statutory authority and on the further ground that the regulations do not comply with the Commission's statutory mandate to promulgate standards and procedures that facilitate market dominance determinations.

They also challenge other Commission decisions in the same regulations. The Commission has announced that user investments in rail-related facilities will not create a presumption of market dominance. Evidence of investments made in the future will not be admitted to show market dominance; evidence of past investments will be admitted but will create no presumption. In addition the Commission has abandoned the presumptions of market dominance formerly drawn from market share data and from cost/price ratios.

The Commission is joined in defending its actions by the Department of Justice and a number of intervenors including the Association of American Railroads and several railroad companies.

We conclude that the statute limits the definition of market dominance to transportation of the same product from the same origin to the same destination. The Commission's definition of market dominance is, therefore, invalid. Because

the Commission must reconsider its definition, and must revise the standards and procedures adopted to implement it, any evaluation of those standards and procedures in their present form is unnecessary. We conclude, however, that the Commission did not exceed its statutory authority in adopting guidelines that describe the kind of evidence it will consider and the weight it will give such evidence.

I.

We preface the factual background with a review of established precepts. The administrative agency charged with executing a statute has primary responsibility for determining the scope of its authority. 3 A reviewing court may not set aside the agency's interpretation of the statute that authorizes it to act merely because the judges would have interpreted the statutory language differently. 4 When, pursuant to congressional mandate, an agency adopts regulations to implement the statute it is charged with administering, the agency's interpretation of the statute is entitled to even greater weight. 5 Such regulations can be set aside only if the agency has exceeded its statutory authority or if its regulations so far depart from the statutory purpose that they can be stigmatized as "arbitrary or capricious," or "an abuse of discretion," or "otherwise not in accordance with law." 6

These terms are necessarily imprecise for they do not express a formula. When Congress has chosen an administrative agency to fulfill both executive and quasi-legislative functions, a court reviewing the agency's reading of the governing statute must take into account both the congressional grant of discretion to the agency and the agency's expertise. Judicial review is not to be exercised with the zeal of a pedantic schoolmaster who grades papers for a single correct answer, but with the respect that is due responsible and experienced government officials themselves charged with duties of national importance.

Nonetheless, a reviewing court has the duty to determine whether an agency has transgressed the bounds fixed by Congress, 7 else both judicial review and the constitutional stricture that ultimate legislative power not be delegated would both be meaningless. "[C]ourts are not bound to accept the administrative construction of a statute regardless of consequences." 8 While administrative agencies are expert in technical problems within their jurisdiction, they enjoy no special skill in statutory interpretation, an area in which courts are

                the final authority. 9   For these reasons a court reviewing an agency's interpretation of its governing statute is not subject to the same constraints that apply when it reviews the procedures the agency adopts to fulfill its mandate. 10
                
II.

For almost a century railroad rates, unlike prices charged in most sectors of the American economy, have been stringently regulated. Tariff rates could be changed only after the long delay occasioned by administrative litigation and review under the substantive standards of the Interstate Commerce Act. In 1976 Congress found that, due in no small part to excessive regulation, railroad facilities had deteriorated, return on investment was far below the cost of capital, and a succession of major railroad bankruptcies had occurred. 11

At the same time, the central premise of maximum rate regulation, that the railroads had a transportation monopoly requiring control lest it become a monster, had itself become outdated. Although railroads...

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