Icc v. J-T Transport Co., Inc., 368 U.S. 81 (1961)

Author: Justice Frankfurter

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Icc v. J-T Transport Co., Inc., 368 U.S. 81 (1961)


These are appeals from the judgment of a District Court setting aside an order of the Interstate Commerce Commission denying an application for a contract carrier permit. The application sought authority to transport canned goods under continuing contracts with three Arkansas canning companies to points in 33 States and to return from those points with canned goods and canning materials such as cans, lids, and corrugated boxes. It was opposed by two groups of railroads, one motor contract carrier and 25 motor common carriers, authorized to undertake transportation in the territory proposed.

The trial examiner’s recitation of facts, as adopted by the Commission, may be briefly summarized. Each of the supporting shippers does a substantial volume of business with small-lot purchasers. These customers maintain low inventories, necessitating a transportation service capable of effecting multiple pickups and deliveries on short notice. Each shipper has engaged in private carriage for this purpose, sending only single-lot full truckloads by common carrier. The Steele Canning Company’s private equipment was furnished in part through a lease of the applicant’s trucks. When a strike of its drivers occurred, it sought to contract with the applicant for its independent services. The other shippers, who, before the strike, sold much of their goods through Steele, now wish to expand their sales to individual customers, and desire the same type of service from the applicant.

Under its temporary authority, the applicant has been offering several stops in transit at the truckload rate, and assessing no stop-in-transit charge, thus rendering in effect a less than truckload service at truckload rates.

Existing motor carriers possess the authority and equipment to provide service to a substantial number of the points involved, either directly or by joint-line operations. Although few have previously participated in this particular transportation, each displays a desire to obtain the traffic; so do the protesting railroads, which have recently experienced a sharp decline in canned goods tonnage. The motor carriers are willing and able to provide multiple pickups and deliveries where authorized.

The shippers asserted a preference for the applicant’s services on two specific grounds. First, they contended that existing carriers were unable to furnish multiple pickup and delivery service with sufficient expedition. Second, they maintained that the less than truckload rates charged by common carriers were prohibitive in light of the small profit from a canned goods shipment allowed by competitive conditions. Accordingly, they asserted that, if the permit were denied, they would resort to private carriage.

On the first point, the Commission concluded that the type of service required by the shippers was not substantially different from that offered by available motor common carriers. Its treatment of the third and fourth criteria in § 209(b) of Part II of the Interstate Commerce Act, added by 71 Stat. 411 (1957), 49 U.S.C. § 309(b), a treatment attacked and invalidated in the District Court, was animated by the same policy preference for preserving available common carriage that characterized its disposition of the J-T Transport application, reviewed here today, ante, p.81, supra. The pertinent portion of its report is as follows:

Aside from evidence pertaining to rates, the record is devoid of any substantial showing of dissatisfaction on the part of the shippers with existing service. Complaints about joint-line service, slow transit time, and inability to arrange multiple pickups and deliveries are of a general nature, and are not substantiated by reference to specific instances. Although protestant motor carriers, especially those operating over regular routes, may be hindered in some instances by their authorities and the nature of their operations from achieving complete flexibility in effecting multiple pickups and deliveries, the supporting shippers have failed to show that they have been unable to obtain reasonably adequate service upon request. . . . In the absence of a more positive showing that existing service will not meet shipper’s reasonable transportation needs, we are not warranted in finding that a new service should be authorized or that the supporting shippers will be adversely affected by a denial of this application.

81 M.C.C. 35, 41-42 (1959).

This conclusion was attacked and set aside in the District Court on much the same grounds as those leading to a similar result in the J-T Transport case, supra. Little need be added here to what I said there. Suffice it to say that the Commission made the findings required of it by § 209(b), and that each was supported by substantial evidence. Although its evaluation of those findings and the conclusion that it drew from them{1} may be different from those we might have reached were we on the Commission, it is not for a reviewing court to upset the Commission’s informed judgment on the factors it has been asked by Congress to consider. United States v. Pierce Auto Freight Lines, 327 U.S. 515, 535-536; Bass v. United States, 168 F.Supp. 1, 4 (W.D.Va.1958), aff’d per curiam, 358 U.S. 333; and see Secretary of Agriculture v. Central Roig Ref. Co., 338 U.S. 604.

There is, however, an additional issue in this case that differentiates it from J-T Transport, supra. It is whether the Commission is required in an application proceeding to consider evidence that the rates of available common carriers are so high as to make transportation costs prohibitive for a supporting shipper.

Before reaching that issue, it is necessary to dispose of a contention that prevailed in the District Court and is pressed here, that the Commission must consider in every application evidence of mere rate advantages resulting from economies inherent in contract carrier operations. Section 209(b) makes no such requirement.

In Schaffer Transp. Co. v. United States, 355 U.S. 83, 91-92, we recognized and impliedly approved the longstanding Commission practice of ignoring rate advantages offered by an applicant over available motor carriers. The Commission has consistently ruled that a shipper dissatisfied with existing common carrier rates cannot, on that ground alone, successfully support an application for a contract carrier permit, and that its remedy lies in attacking the rates under § 216 of the Act. See, e.g., Dixon & Koster Contract Carrier Application, 32 M.C.C. 1, 4 (1942); James F. Black Extension of Operations -- Prefabricated Houses, 48 M.C.C. 695, 708-709 (1948); Joseph Pomprowitz Extension -- Packing House Products, 51 M.C.C. 343, 350 (1950). That is what it ruled in this case, see 81 M.C.C. at 42-43.

This consistent Commission practice rests on relevant transportation policy considerations. If rate advantages resulting from inherent economies were made a determining factor, the Commission would have to permit protestants to challenge the cost justification of an applicant’s proposed rates. This the Commission has never permitted, see Omaha & C.B. R. & Bridge Co. Common Carrier Application, 52 M.C.C. 207, 234-235 (1950), largely because at the application stage there is as yet no revealing record of profit or loss derived from the proposed transportation service,{2} and its refusal has been judicially approved. Railway Express Agency v. United States, 153 F.Supp. 738, 741 (S.D.N.Y.1957), aff’d per curiam, 355 U.S. 270; see American Trucking Ass’ns v. United States, 326 U.S. 77, 86-87.

More fundamentally, it misconceives the object of congressional motor carrier regulation to maintain that the Commission must, in application proceedings, respect inherent cost advantages of contract, as against common, carriers. They are not different "modes" of transportation within the meaning of the National Transportation Policy, and Congress has not been concerned with maintaining competition between them as it has been, for example, between railroad and motor carriers. Compare Schaffer Transp. Co. v. United States, 355 U.S. 83. The Commission is specifically admonished, in § 218(b) of the Act, not to prescribe minimum rates that give contract carriers an undue competitive advantage over common carriers.

In rate proceedings, however, the Commission has construed this section as not authorizing it to invalidate cost-justified rates of existing, previously authorized contract carriers even though they may draw away a large volume of traffic from common carriers. New England Motor Rate Bureau v. Lewers, 30 M.C.C. 651 (1941). Once granted a permit, therefore, a contract carrier may exploit its inherent cost advantages to the great detriment of existing common carriers. In determining to ignore those cost advantages in an application proceeding, the Commission acts well within its authority to effectuate the congressional policy of limiting entrance to contract carriage as a means of preserving the capacity of available common carriers to meet the Nation’s transportation needs.

That policy is unaffected by the 1957 amendments to §§ 203(a)(15) and 209(b). There is not one reference to rates in the legislative history of those amendments. If anything, the action of the 1957 Congress looks the other way; § 218(a) was amended, by 71 Stat. 343, 49 U.S.C. § 318(a), to require the filing of actual, rather than minimum, contract carrier rates so as to eliminate a competitive disadvantage of common carriers.

The right of the Commission to disregard rate advantages as such in application proceedings does not, however, dispose of this case. For the testimony and arguments presented to the Commission fairly raised the claim that the available common carrier rates, whether or not just and reasonable in relation to transportation costs, were prohibitive for the shippers. If this claim were sustained by the Commission, it is difficult to see how it could avoid the conclusion that a denial of the permit would hobble the shipper without benefiting protestants by potentially augmenting their traffic.

The Commission has, in fact, recognized what it styles an "embargo" exception to its usual practice of disregarding the level of rates charged by existing carriers. See H.L. & F. McBride Extension -- Ohio, 62 M.C.C. 779, 790 (1954). In Herman R. Ewell Extension -- Philadelphia, 72 M.C.C. 645, 648 (1957), the Commission treated a shipper’s claim similar to the present one in a manner relevant to our problem.

[T]he present record does not show any effort by the carriers to handle with the shipper its claim that their rates are prohibitive. Sugar is a relatively inexpensive commodity which sells at prices which, compared to prewar prices, do not appear to have increased percentagewise to the same extent as most other commodities. It appears not improbable that the margin of profit thereon is so narrow that the traffic will not move except at rates lower than other commodities customarily moved in tank-truck equipment. It may be that protestant’s rates, though not intrinsically unreasonable from a standpoint of cost or compared to other bulk liquid rates, are still too high to move this particular traffic. And it may be that protestants are within their rights in the exercise of their managerial discretion in refusing any reduction even at the cost of losing the traffic, but, if so, they should at least have negotiated with the shippers to the point of making their positions clear. Their failure to do so indicates either decision to forego the traffic except at their present rates or a lack of interest in it at rates at which it can move.

Without departing from the general proposition that the reasonableness of rates is not an issue in public convenience and necessity proceedings, and that, if rates are too high, an adequate remedy is available under section 216 of the Interstate Commerce Act, we conclude that authority should be granted here. . . . [Protestants’] rates have not and will not move the traffic; and, to this extent, the available motor service is inadequate to meet the shipper’s requirements. Protestants, never having handled the traffic, will not be adversely affected by this action.

In the Ewell proceeding, there was evidence that the existing rates were two to three times as high as those proposed by the applicant, that the shipper would have to "absorb" about $200 on each 30,000-pound shipment, and that it had asked existing carriers to adjust their rates without result. Similar evidence was presented in the present proceeding. The representative of the Steele Canning Company testified that, in numerous discussions with protestant carriers, it had learned that their less than truckload rates were two and three times as high as the truckload rates proposed by the applicant, and that these rates would drive its canned goods out of the competitive market. Whether this testimony was specific and persuasive enough to establish that the traffic would not move at existing rates we do not know, for the Commission made no finding on this issue. Compare Schirmer Transp. Co., Inc., Extension -- Molasses, 77 M.C.C. 240, 242 (1958). Until it does, we are unable to exercise our reviewing function of ensuring that the Commission stays within its statutory authority and does not act arbitrarily. Cf. Florida v. United States, 282 U.S. 194, 214-215.

I would vacate the judgment of the District Court and remand the case to the Commission for a considered determination whether the rates of protestant motor carriers are prohibitive. The scope of inquiry should be strictly limited. The Commission need not engage in a full-dress rate proceeding to determine whether present motor carrier rates are unjust or unreasonable. It need only find, from the evidence of record or additional evidence that it deems necessary, whether those rates impose an embargo on the shippers’ goods.

* [This opinion applies only to No. 49, Atchison, Topeka & Santa Fe R. Co. v. Reddish, No. 53, Interstate Commerce Commission v. Reddish, and No. 54, Arkansas-Best Freight System, Inc. v. Reddish.]

1. The Commission has consistently ruled that a joint-line transportation service is not inadequate to meet a shipper’s needs. See cases collected in Hale & Hale, Competition or Control III: Motor Carriers, 108 U.Pa.L.Rev. 775, 783 n. 24 (1960).

2. Thus, in the present case, the applicant submitted a balance sheet, but no income statement (R. 31).


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Chicago: Frankfurter, "Frankfurter, J., Concurring," Icc v. J-T Transport Co., Inc., 368 U.S. 81 (1961) in 368 U.S. 81 368 U.S. 131–368 U.S. 138. Original Sources, accessed March 29, 2023, http://www.originalsources.com/Document.aspx?DocID=L4PTSAUX4UZSMFX.

MLA: Frankfurter. "Frankfurter, J., Concurring." Icc v. J-T Transport Co., Inc., 368 U.S. 81 (1961), in 368 U.S. 81, pp. 368 U.S. 131–368 U.S. 138. Original Sources. 29 Mar. 2023. http://www.originalsources.com/Document.aspx?DocID=L4PTSAUX4UZSMFX.

Harvard: Frankfurter, 'Frankfurter, J., Concurring' in Icc v. J-T Transport Co., Inc., 368 U.S. 81 (1961). cited in 1961, 368 U.S. 81, pp.368 U.S. 131–368 U.S. 138. Original Sources, retrieved 29 March 2023, from http://www.originalsources.com/Document.aspx?DocID=L4PTSAUX4UZSMFX.