Appellant carriers made applications to the Interstate Commerce
Commission, under § 4 of the Act to Regulate Commerce, as amended
by the Act of June 18, 1910, c. 309, 36 Stat. 539, 547, for
authority to continue existing tariffs (and, more generally, to
continue an existing method) whereby rates were made lower for
certain ports and inland cities than for certain places less
distant from points of origin.
Held that, in passing on such applications, the
Commission was empowered, while granting the relief as asked in
respect of the ports, to grant it in a less degree only in respect
of the inland cities, thus making a distinction between them and
the ports not made by the tariffs or sought for in the
applications.
The power of the Commission, under § 4 of the Act to Regulate
Commerce, as amended June 18, 1910, is not limited to granting or
denying
in toto the precise relief applied for by a
carrier, but whenever, following such an application, the
Commission has considered the special circumstances affecting the
particular carrier in its relations to that section, it may
exercise a broad administrative discretion in determining from time
to time the relief which such carrier should receive.
Quaere whether application by the carrier is a
prerequisite to the granting of relief under § 4 as amended.
In a proceeding under § 4, as amended, the Commission represents
the public, and the carrier is the only necessary party; interested
communities and shippers, though customarily heard, need not be
notified, and, at least in the absence of participation, are not
bound.
Such shippers or communities as deem themselves injured by
discrimination or unreasonable rates in tariffs filed pursuant to
orders made by the Commission under amended § 4 have their remedy
not in applying for a rehearing of the proceedings in which such
orders were made, but by direct applications to the Commission for
relief under §§ 13 and 15.
That part of amended § 4 which provides that, when rates have
been reduced in competition with water routes, they shall not be
increased unless, upon hearing, the Commission finds a reason in
changes of conditions other than the elimination of water
competition, has no application to a case in which the complaint is
based not on increase, but on difference of rates, in which the
elimination of water competition is denied by the parties
complaining, and in which the change complained of was part of a
general readjustment of transcontinental rates made necessary by
increase of water competition and authorized by the Commission
after prolonged hearings.
231 F. 292, reversed.
The case is stated in the opinion.
Page 242 U. S. 182
MR. JUSTICE BRANDEIS delivered the opinion of the Court.
By the Act of June 18, 1910, c. 309, 36 Stat. 539, 547, amending
§ 4 of the Act to Regulate Commerce, carriers were prohibited from
charging more "for a shorter than for a longer distance over the
same line or route in the same direction" without obtaining
authority from the Interstate Commerce Commission so to do. A
period of six months from the passage of the amendment was provided
within which carriers might file application for authority to
continue charges of that nature then lawfully existing.
For many years prior to 1910, it had been a common practice to
make freight rates from the East to Pacific coast points lower than
to intermountain territory, because of competition by the
Atlantic-Pacific ocean carriers. About 185 interior cities near the
coast had been granted the same transcontinental rates as the ports
of San Francisco and Oakland because the competing water carriers
customarily "absorbed" the local rates or charges from the ports to
those cities. Among the interior cities thus treated as "Pacific
Coast Terminals" were Sacramento, Stockton, San Jose, and Santa
Clara. The extent to which the higher rates to intermountain
territory were justified and the proper basis for "back haul" rates
had been the subject of many hearings before the Interstate
Commerce Commission.
Proceeding under § 4, as amended, six railroads applied to the
Commission under date of December 7, 1910, for relief in respect to
west-bound transcontinental commodity rates. The applications,
after enumerating the then-existing tariffs, sought authority
specifically "to continue all rates shown in the above-named
tariffs from eastern shipping points designated to Pacific coast
terminal points," and generally
"to continue the present method of
Page 242 U. S. 183
making rates lower at the more distant points than at the
intermediate points, such lower rates being necessary by reason of
competition of various water carriers"
from Atlantic to Pacific ports. After prolonged hearings, the
Commission entered its so-called Fourth Section order No. 124, by
which, while declining to grant the applications as made, it
authorized charging, in some respects, lower rates for the longer
hauls. The limitation of such charges was set by a zone system and
rate percentage basis prescribed by the Commission, which involved
an extensive readjustment of rates, but the existing practice of
treating these interior cities as terminals was not disturbed. The
validity of the order was attacked by the carriers in the courts,
and, after three years of litigation, finally sustained in
Intermountain Rate Cases, 234 U.
S. 476.
Meanwhile, the "effective date" of the order had been extended
by the Commission. After the decision of this Court, further
extensions of the "effective date" were sought by the carriers and
granted. Some modifications of the order were proposed by the
carriers. Additional hearings were had in which many shippers
participated. Changes in conditions occurring since the entry of
the original order on July 31, 1911, were considered -- among
others, that Congress had passed the Act of August 24, 1912, giving
the Commission jurisdiction over transportation "by rail and water
through the Panama Canal;" that the canal itself had been opened on
August 15, 1914; that competing ocean rates had been lowered and
service improved, and that the ocean carriers had discontinued the
practice of "absorbing" rates from the ports to interior cities. An
elaborate supplemental report was made by the Commission on January
29, 1915, and another on April 30, 1915. The propriety of
modifications in addition to those proposed by the carriers was
shown and a new plan for constructing "back haul" rates,
developed
Page 242 U. S. 184
by the Commission, was eventually embodied in the amended Fourth
Section order No. 124 of April 30th, 1915, and adopted by the
carriers in the tariffs filed thereunder. Following the limitation
imposed by the amended order, the tariffs filed confined the low
"terminal" rates to ports of call like San Francisco and Oakland,
and the interior coast cities, including Sacramento, Stockton, San
Jose, and Santa Clara, were subjected to rates materially higher
than San Francisco and Oakland, though much lower than those to
intermountain territory.
Representatives of these four cities, conceiving them aggrieved
by the refusal to grant them the same rates as the ports, and
alleging that they had participated in whole or in part at hearings
which preceded the entry of the last amendment order, applied to
the Commission for a rehearing, and when their application was
denied, brought this suit in the district court to restrain the
enforcement as to them of the amended order, and of the tariffs
filed thereunder. The City of Santa Clara and associations
representing the traffic interests of Sacramento, Stockton, and San
Jose joined as plaintiffs. The United States, the Interstate
Commerce Commission, and the six railroads were made defendants.
The bill alleged, among other things, that these cities had for a
number of years enjoyed the same rates as San Francisco and
Oakland; that large industries and other businesses had been
established there because they enjoyed terminal rates; that their
commercial importance and prosperity would be ruined if the rates
were withdrawn; that no changed conditions existed justifying a
withdrawal of terminal rates; that they had not been parties to the
proceedings in which the orders were made, and that the "orders
authorizing withdrawal of terminal rates" from them were, among
other things,
"discriminatory and unjust, were made without said cities having
their day in court, or without giving them an opportunity to show
the unreasonableness thereof, that
Page 242 U. S. 185
no justification for such increase was shown, and the order of
April 30, 1915, was without evidence, that petitioners have been
denied the equal protection of the law and deprived of property
without due process of law, to their irreparable damage."
The case was heard before three judges, and a final decree was
entered which declared that the
"orders of the Interstate Commerce Commission of January 29,
1915, and April 30, 1915, in Fourth Section applications Nos. 205,
342, 343, 344, 350, and 352,"
insofar as they authorize the carriers to charge for the
transportation of west-bound transcontinental freight destined to
Sacramento, Stockton, San Jose, and Santa Clara, California
"any greater amount than is concurrently charged for the like
carriage of like freight to San Francisco and Oakland, California,
were beyond the statutory powers of the Interstate Commerce
Commission, and the enforcement thereof should be enjoined, and
said orders in the particulars above mentioned are hereby cancelled
and set aside."
The decree also enjoined and cancelled to like extent the
tariffs filed in pursuance of such orders. The district court
rested its decision that the Commission had no statutory power to
enter the amended order upon the ground that an order authorizing
higher rates to these interior cities could not legally be entered
unless there was an "application" to it by the carriers for that
specific purpose and "a hearing upon the particular application as
in a special case;" that there had been no such application and
hearing, and that consequently the orders were void and the tariffs
filed in pursuance thereof illegal.
Merchants' &
Manufacturers Traffic Ass'n et al. v. United States, 231 F.
292.
The appeal, in which all the defendants joined, raises important
questions involved in the administration of the Fourth Section as
amended June 18, 1910, namely:
First: is it essential to the validity of an order
authorizing
Page 242 U. S. 186
a lower rate for a longer haul, that it be based upon an
application asking only the precise relief granted?
Second: what is the remedy of a community or shipper which deems
itself aggrieved by the order made?
The orders here in controversy were confessedly based upon
applications made by the carriers. Both the amended orders and the
decree recite by numbers the applications dated December 7, 1910.
The objection made by the appellees is that the limited authority
granted by the Commission had not been applied for, since the
carriers asked specifically for leave to continue lower rates,
which were the same for ports and for interior California cities,
but the Commission permitted these rates to ports while it denied
like rates to the interior cities. Respondents deny that the
district court holds in effect that applications for relief must be
granted
in toto or denied
in toto; but such is
the necessary effect of its decision. Amended § 4 empowers the
Commission, "upon application," to authorize a carrier "to charge
less for longer than for shorter distances." These carriers asked
leave, among other things, to charge on west-bound transcontinental
freight to about 193 coast and interior cities much less than to
intermountain territory. The Commission permitted them to charge,
to eight of these cities which were ports, as much less as the
application requested, but as to the other 185, which were interior
cities, including the four complaining here, permitted the carriers
to charge only somewhat less. In other words, the Commission
granted a part of the relief asked. The district court says it had
no power so to do. But there is nothing in the act to justify
limiting the power of the Commission to either a grant or a denial
in toto of the precise relief applied for. Such a
construction would make § 4 unworkable, and defeat the purpose of
the amendment. It is at variance with the broad discretion vested
in the Commission
Page 242 U. S. 187
and the prevailing practice of administrative bodies. It fails
to give effect to the provision that "the Commission may from time
to time prescribe the extent to which such designated common
carriers may be relieved from the operation of this section." It is
inconsistent with
Intermountain Rate Cases, 234 U.
S. 476, where the order sustained granted relief very
different from that applied for, and it finds no support in
United States v. Louisville & Nashville Railroad,
235 U. S. 314,
235 U. S. 322,
cited by the district court, in which case relief from the
operation of the Fourth Section had not been granted. The clause in
amended Fourth Section, which declares
"that, upon application to the Interstate Commerce Commission,
such common carrier may in special cases, after investigation, be
authorized to charge less for longer than for shorter
distances,"
was designed to guard against the issue, by the Commission, of
general orders suspending the long- and short-haul clause, and to
insure action by it separately in respect to particular carriers,
and only after consideration of the special circumstances existing.
Whenever such consideration has been given,
"the Commission may from time to time prescribe the extent to
which such designated common carrier may be relieved from the
operation of the section."
It may be doubted whether application by the carrier is a
prerequisite to the granting of relief. As was said in
Intermountain Rate Cases, 234 U.
S. 476,
234 U. S. 485,
§ 4 vests in the Commission the "primary, instead of a reviewing,
function" to determine the propriety of a lesser rate for a longer
distance, and § 13 declares that the Commission
"shall have the same powers and authority to proceed with any
inquiry instituted on its own motion as though it had been appealed
to by complaint or petition under any of the provisions of this
act, including the power to make and enforce any order or orders in
the case, or relating to the matter or thing concerning which
inquiry is had,
Page 242 U. S. 188
excepting orders for the payment of money."
Unless formal application be an indispensable prerequisite to
the exercise by the Commission of the power granted by the Fourth
Section, its absence or a defect in it could be waived, and it
would be waived by the filing of tariffs under the order entered.
For the order is permissive merely. The carrier is the only
necessary party to the proceeding under § 4. The Commission
represents the public. While it is proper and customary for
communities or shippers interested to participate in hearings held,
there is no provision for notice to them. They are not bound by the
order entered, at least in the absence of such participation. And
if the rates made by tariffs filed under the authority granted seem
to them unreasonable or unjustly discriminatory, §§ 13 and 15
afford ample remedy. Respondents contend that, after the amended
order was entered and the tariffs filed, they did apply to the
Commission for relief, "but were denied the right of a hearing,"
and that "their protest and demand were ignored and denied." What
they did was to petition for a "rehearing" in the proceedings under
the Fourth Section, to which they now say they were not parties,
instead of applying for redress under § 13, as they had a legal
right to do. They mistook their remedy. To permit communities or
shippers to seek redress for such grievances in the courts would
invade and often nullify the administrative authority vested in the
Commission; and, as this case illustrates, the attempt of the court
to remove some alleged unjust discriminations might result in
creating infinitely more. The decree of the district court cancels
the amended order and the tariff only so far as it concerns the
four complaining cities, and thereby discriminates perhaps most
unjustly in their favor as against the other 181 interior
cities.
It was also contended on behalf of the four cities that the
amended orders violated the clause added to § 4 by
Page 242 U. S. 189
the Act of June 18, 1910, which provides that,
"whenever a carrier by railroad shall in competition with a
water route or routes reduce the rates on the carriage of any
species of freight to or from competitive points, it shall not be
permitted to increase such rates unless, after hearing by the
Interstate Commerce Commission, it shall be found that such
proposed increase rests upon changed conditions other than the
elimination of water competition."
The answers to this contention are many. What these four cities
complain of is not increase of rates, but the fact that San
Francisco and Oakland may be given rates lower than theirs, and
they strongly deny that water competition has been eliminated.
Indeed, it was the increased effectiveness of water competition due
to the opening of the Panama canal -- a notable change in
conditions -- which compelled the rate readjustment of which they
complain, and the higher rates to the interior cities, made under
authority of the Commission, were granted after prolonged hearings,
as part of the general readjustment of transcontinental rates. The
provision relied upon has no application to such a case.
The decree of the district court must be reversed, with
directions to dismiss the bill.
Reversed.