United States v. ICC
396 U.S. 491 (1970)

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U.S. Supreme Court

United States v. ICC, 396 U.S. 491 (1970)

United States v. Interstate Commerce Commission

No. 28

Argued October 21, 1969

Decided February 2, 1970*

396 U.S. 491

Syllabus

In 1967, the Interstate Commerce Commission (ICC) approved a merger plan filed by the Great Northern Railway Co. (GN) and the Northern Pacific Railway Co. (NP) (collectively the Northern Lines), and three of their subsidiaries, the Pacific Coast Railroad Co., the Chicago, Burlington & Quincy Railroad Co. (Burlington), and the Spokane, Portland & Seattle Railway Co. (SP&S). The Northern Lines operate largely west from St. Paul, Minneapolis, and Duluth, across the Northern Tier of States to Spokane, Tacoma, and Portland. NP, with about 6,200 miles of track, runs generally to the south of GN, which operates about 8,200 miles of track. The Northern Lines jointly own and control the Burlington and the SP&S. The Burlington has 8,648 miles of track extending from Chicago to the Twin Cities and southwesterly to Missouri, Kansas, Colorado, and Montana, and, by its subsidiaries, reaches Houston and Galveston. The SP&S has more than 500 miles of mainline road in Oregon and Washington which provides the most direct route from Spokane to Portland and is of strategic importance to the Northern Lines. Rail competition in the Northern Lines' area is provided by GN and NP (the principal competitors), and the Chicago, Milwaukee, St. Paul & Pacific Railroad Co. (Milwaukee), which has not been an effective long-haul competitor, never having had adequate access to the Pacific Northwest gateways. Truck competition, present in the area for some time, is growing. GN's and NP's merger efforts span three-quarters of a century. The present merger plan was disapproved by the ICC in 1966 by a vote of 6 to 5, the ICC finding that: although the estimated annual savings would approximate $25 million by the tenth year after merger, a significant source of

Page 396 U. S. 492

the savings would be the elimination of jobs; the merger would eliminate substantial competition between GN and NP; even with protective conditions for the benefit of the Milwaukee, it would remain a weak competitor, and the plan did not afford benefits of such scope and importance as to outweigh the lessening of rail competition in the Northern Tier. The ICC reopened the proceedings in 1967 and considered new evidence on savings to be realized from the merger, and the additional evidence resulting in the changed position of some of the major objectors to the plan. The ICC found that: the savings would be more than $40 million a year by the tenth year; agreements with the employees had removed union objections to the merger and provided that no jobs would be eliminated except by attrition, and the applicants had accepted all protective conditions sought by Milwaukee, and acknowledged that it had failed to give appropriate weight to § 5 of the Interstate Commerce Act to facilitate rail mergers "consistent with the public interest." The ICC then reexamined the anticompetitive effects of the merger, weighing them against the savings and benefits to the public, shippers, and the roads, and, emphasizing the strengthened position of the Milwaukee, approved the plan because its benefits outweighed its anticompetitive effects. The three-judge District Court sustained the ICC, holding that the ICC was guided by the applicable legal principles and that its findings were supported by substantial evidence. Four appeals were taken: (1) the United States, through the Antitrust Division of the Department of Justice, argues that the ICC did not properly apply the standard of § 5 in determining that the merger was consistent with the public interest. It contends that, when a merger will substantially diminish competition between two financially healthy, competing roads, the anticompetitive effects should preclude approval absent a clear showing that a serious transportation need will be met or important public benefits will be provided beyond the normal savings and efficiencies deriving from a merger; (2) the Northern Pacific Stockholders' Protective Committee challenges the exchange ratios agreed upon by the companies for their stock on the basis that NP's land holdings were insufficiently valued; (3) the City of Auburn, Washington (the western terminus for NP's transcontinental trains whose yard would be closed if the merger were approved), supports the Department of Justice's brief, and contends that the ICC failed to assess adequately the impact of the merger on affected communities, and (4) the Livingston Anti-Merger Committee urges that the ICC had no authority to

Page 396 U. S. 493

approve the merger because the NP, the successor by purchase in 1896 to the Northern Pacific Railroad Co. (Railroad) does not own the franchise and right of way involved in the merger, as Congress did not authorize the sale, as required by Railroad's charter, and Railroad is not a party to the merger, and that, if it is held that NP does own the franchise, no merger can take place without approval of Congress.

Held:

1. The ICC's conclusion that the merger, as conditioned, comported with the public interest under the standards of § 5 of the Interstate Commerce Act, as amended by the Transportation Act of 1940, is supported by the findings which the ICC made on the basis of substantial evidence after measuring the competitive consequences of the merger against its resulting benefits. Pp. 396 U. S. 506-516.

(a) Congress intended by the 1940 amendments "to facilitate merger and consolidation in the national transportation system," and that the industry "proceed toward an integrated transportation system" (County of Marin v. United States,356 U. S. 412, 356 U. S. 416, 418), and the congressional objective is not to be read as confining mergers to situations where weak carriers are preserved by combining with those that are strong. Pp. 396 U. S. 508-511.

(b) Congress vested in the ICC the task of

"apprais[ing] the effects of the curtailment of competition which will result from [a] proposed consolidation and consider them along with the advantages of improved service, safer operation, lower costs, etc., to determine whether the consolidation will assist in effectuating the over-all transportation policy."

McLean Trucking Co. v. United States,321 U. S. 67, 321 U. S. 87. Pp. 396 U. S. 511-513.

(c) The ICC's determination that the conditions agreed to by the applicants, the attrition agreements with the employees, the enhanced savings, and manifold service improvements to shippers and the public, outweighed the loss of competition between the Northern Lines, is supported by substantial evidence. Pp. 396 U. S. 513-516.

2. The ICC's determination that the stock exchange ratio applicable to Northern Pacific stockholders and Great Northern stockholders, which was established, after protracted arm's-length negotiations, with the approval of the companies and the large majority of their stockholders, is just and reasonable, is supported by substantial evidence, and the ICC's refusal to reopen the record for evidence to update it was not an abuse of discretion. Pp. 396 U. S. 516-522.

Page 396 U. S. 494

3. The ICC found on the basis of substantial evidence that the merger's long-run effect would benefit the Northern Tier communities, including Auburn, even if that city's yard closed if the merger was approved. Since it now appears that the Auburn yard will remain open, the anticipated principal harm to the city because of the merger has disappeared, and, a fortiori, the ICC's refusal to take further evidence on the merger's impact on the city was not an abuse of its discretion. Pp. 396 U. S. 522-524.

4. The ICC did not err in refusing to disapprove the merger because of the Livingston Anti-Merger Committee's contention that acquisition by NP of its railroad property resulted from invalid foreclosure proceedings, as the ICC could, for purposes of the merger proceeding, properly rely on "existing judicial records supplemented by opinions of two Attorneys General" on the title question which were adverse to the Committee's challenge; nor do the charter provisions of NP's predecessor in interest foreclose the ICC's approval of the merger. Pp. 396 U. S. 524-530.

296 F.Supp. 853, affirmed.

Page 396 U. S. 495

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