1. An order of the Interstate Commerce Commission disapproving
reduced rates proposed by a carrier is void unless supported by
findings of the basic or
quasi-jurisdictional facts
conditioning the power of the Commission. P.
294 U. S.
504.
2. Such findings should be precise and clear. P.
294 U. S. 511.
3. There is a zone of reasonableness between rates that are
excessively high and rates that are less than compensatory within
which a carrier is ordinarily free to adjust its charges for
itself. P.
294 U. S.
506.
4. A rate schedule initiated by a carrier must be upheld as
lawful unless adequate reasons are presented for setting it aside.
P.
294 U. S.
510.
5. The Commission may not prevent a carrier from reducing its
rates to meet competition merely upon the ground that the
reduction
Page 294 U. S. 500
would disturb the prevailing rate structure, grouping, and
differentials, and possibly lead to a "rate war" between carriers.
Pp.
294 U. S. 507,
294 U. S.
509.
8 F. Supp. 970 affirmed.
Appeal from a decree of the District Court of three judges,
which enjoined the enforcement of an order of the Interstate
Commerce Commission annulling reductions proposed by the Milwaukee
Railroad of some of its rates on coal.
MR. JUSTICE CARDOZO delivered the opinion of the Court.
On November 22, 1932, the Chicago, Milwaukee, St. Paul &
Pacific Railroad Company (referred to in this opinion as the
Milwaukee) filed with the Interstate Commerce Commission a schedule
of rates for the transportation of bituminous coal from mines in
Indiana to destinations in Northern Illinois. Upon complaint by
competing
Page 294 U. S. 501
railroads and producers in Illinois, the Interstate Commerce
Commission suspended the proposed tariffs, and afterwards annulled
them. 197 I.C.C. 245; 200 I.C.C. 609. A District Court of three
judges has perpetually enjoined the enforcement of the order of the
Commission, thereby reinstating the tariffs established by the
carrier. 8 F. Supp. 970. The case is here upon appeal. Judicial
Code, § 210, 28 U.S.C. § 47a.
The rates in controversy affect the transportation of coal from
groups of mines in Indiana known as the Brazil-Clinton and the
Linton-Sullivan origin groups to Rockford and Freeport, Illinois,
and certain intermediate points. Up to the effective date of the
new schedule, the rate to Rockford and Freeport from the
Brazil-Clinton group had been $1.87 per ton, and from the
Linton-Sullivan group $1.92. The proposed change called for a
reduction of 17 cents, with the result that the rates between the
points mentioned became $1.70 and $1.75, respectively. Reductions
ranging from 4 to 10 cents were proposed for other destinations
nearer to the point of origin.
In its transportation of bituminous coal, the Milwaukee is in
competition with lines in Illinois, Indiana, and Western Kentucky.
We direct our attention first to the situation in Illinois,
confining ourselves to facts that have been found by the
Commission. For many years, there was a parity of rates between the
Springfield group in Illinois and the Brazil-Clinton group in
Indiana. There was also a customary differential for Illinois
groups farther south than Springfield, as well as for other groups
in Western Kentucky. For example, the rate from Springfield to
Rockford was 30 cents less than from mines in Southern Illinois. On
August 20, 1930, these relations were broken by an order of the
Illinois Commerce Commission reducing intrastate rates in Illinois
17 cents a ton. Rates from Springfield to Rockford which had been
$1.87 became $1.70; those from Southern Illinois, previously $2.17,
became
Page 294 U. S. 502
$2. Upon the publication of these reductions, Milwaukee
complained of them to the Interstate Commerce Commission, and asked
that they be cancelled, 49 U.S.C. § 13. It insisted that the lower
schedule would result in undue and unreasonable advantage to
persons and localities in intrastate commerce and in undue and
unreasonable discrimination against those in interstate commerce.
The Commission rendered its decision in March, 1932. It allowed the
contested rates to stand insofar as the points of destination were
Rockford and Freeport, though it found discrimination, and ordered
an increase of 5 cents a ton, upon shipments to Chicago. Intrastate
Rates on Bituminous Coal in Illinois, 182 I.C.C. 537. In respect of
the Rockford-Freeport traffic, it held that the intrastate rates
might reasonably be higher, but that the like was true of the rates
to the same points from the groups in Indiana. 182 I.C.C. 537 at
549, 550:
"The principal competition of the Illinois producers at these
destinations comes from Indiana, and we find no sufficient
justification for requiring any of the Illinois rates to these
points to be increased until the low rates from Indiana referred to
have been placed upon a level more nearly commensurate with the
general level of rates in this territory."
In brief, the ruling was that the Interstate Commerce Commission
would keep its hands off until the rates of interstate competitors
had been placed upon a sounder basis. It would not stabilize rates
at the then-prevailing levels when the rate structure as a whole
was in need of readjustment and revision. A refusal to interfere
with one of the terms of a proportion is very different from an
approval of the proportion as a continuing condition. Restraints
were not imposed upon the lines in Illinois, but equally they were
not imposed upon those in Indiana. The decision was not a mandate
to the carriers to preserve undisturbed an existing relation
between rates; the decision was a refusal by the Commission to
compel an increase of the rates on
Page 294 U. S. 503
one side of the relation. Those on the other side were subject
to change at the instance of the carriers affected to the same
extent as they had been before. The forces of competition were left
to do their work.
From the situation in Illinois, we turn to that in Indiana and
Kentucky. Again we confine ourselves to the report unless testimony
is mentioned. Six carriers in addition to Milwaukee are in
competition for the carriage of coal from groups in Indiana to
points in Northern Illinois. These lines are the means of
transportation for the product of the coal mines at Princeton and
Booneville. They compete also to a slight extent for the carriage
of coal from the Brazil and Linton groups, though the testimony is
that their traffic from those points is only 1% or less, as
compared with 99% belonging to Milwaukee. For all these Indiana
routes, group rates have been maintained for many years as the
outcome of agreement among the carriers concerned. Rates from
Linton-Sullivan were 5 cents higher than from Brazil-Clinton, those
from Princeton 7 cents higher than from Linton-Sullivan, and those
from Booneville 10 cents higher than from Princeton. If Milwaukee
is upheld in the reduction of its own schedule from Brazil and
Linton northward, there is likely to be an attempt by other Indiana
carriers to make proportionate reductions from points along their
lines.
The change of rates in Illinois had repercussions also upon
tariffs in Kentucky. As far back as 1927, the Commission fixed a
differential of 35 cents in favor of the roads from the Western
Kentucky mines as compared with those from the mines in Southern
Illinois. Illinois-Indiana Coal cases, 128 I.C.C. 265; West
Kentucky Coal Bureau v. Illinois Central R. Co., 172 I.C.C. 279.
Upon the lowering of intrastate rates for Illinois carriers, the
Western Kentucky carriers restored the preexisting relation between
themselves and their Illinois competitors by reducing their own
rates to the extent of the established differential.
Page 294 U. S. 504
The Commission made an order approving the reduction.
With these changes in the rates in Illinois and Kentucky, there
remained only the rates from the groups in Indiana that were out of
line with the proportion maintained for many years. To restore that
proportion, Milwaukee filed a new schedule whereby the rates from
Brazil-Clinton to Rockford and Freeport were again placed at a
parity with those from Springfield to the same places, the rates
from Linton-Sullivan being correspondingly adjusted. This is the
schedule that has been disapproved by the Commission. Two reports
were filed, one in November, 1933, the other in April, 1934. The
first, which came from a division of the Commission, was confirmed
by the entire body upon denying a petition for rehearing. Suit for
an injunction was promptly started by the carrier. Two days before
the day appointed for the hearing, the Commission, of its own
motion, reopened the proceeding, and thereafter filed a second
report amplifying the first one. Following that report, the suit
was brought to trial upon supplemental pleadings. The carrier took
the position (1) that the order of the Commission was not supported
by the finding, and (2) that, irrespective of the findings, it was
not supported by the evidence. The District Court gave a decree for
the complainant upon the second ground, without passing upon the
first. Upon appeal to this Court by the Commission and by
intervening railroads, the appellees (the Milwaukee and intervening
coal producers) renew the grounds of challenge put forward at the
trial.
This Court has held that an order of the Interstate Commerce
Commission is void unless supported by findings of the basic or
quasi-jurisdictional facts conditioning its power.
Florida v. United States, 282 U.
S. 194,
282 U. S. 215;
United States v. Baltimore & Ohio R. Co., 293 U.
S. 454.
Page 294 U. S. 505
"In the absence of such findings, we are not called upon to
examine the evidence in order to resolve opposing contentions as to
what it shows or to spell out and state such conclusions of fact as
it may permit."
Florida v. United States, supra. Orderly review
requires that this objection being basic and jurisdictional be
disposed of at the beginning.
The jurisdiction of the Commission to cancel the proposed
schedule was invoked by the protesting carriers and producers under
two sections of the statute, subdivisions 1 and 7 of § 15 and
subdivision 2 of § 15a. Section 15 (subdivisions 1 and 7) is to the
effect that the Commission shall have power to determine the just
and reasonable rate when a rate in force or proposed is found to be
unjust or unreasonable or unduly discriminatory or otherwise
unlawful. Section 15a(2) is to the effect that, in the exercise of
this power to establish just and reasonable rates, the Commission
shall give due consideration, among other factors,
"to the need, in the public interest, of adequate and efficient
railway transportation service at the lowest cost consistent with
the furnishing of such service, and to the need of revenues
sufficient to enable the carriers, under honest, economical, and
efficient management, to provide such service."
The second report of the Commission is a long and discursive
narrative. Two paragraphs at the end give the key to its meaning
[200 I.C.C. 621, 622]:
"We find that the proposed rates, if permitted to become
effective, would lead to a disruption of the rate structure on coal
in the Indiana and related areas, thus impairing the revenue of the
carriers serving those areas and their ability to provide the
adequate and efficient transportation service contemplated by § 15a
of the act; that they would cause a disruption of the individual
groups from which the rates are proposed, and that they would
Page 294 U. S. 506
cause a disruption of the longstanding rate relation existing
for competitive purposes between the several Indiana groups."
"We find that the proposed rates would be unreasonable, and in
violation of §§ 1(5) [which denounces unreasonable charges] and
15a(2) of the act [which has been summarized above]."
The statement in the second of these paragraphs that the
proposed rates would be "unreasonable" must be read in the light of
the report as a whole, and then appears as a conclusion
insufficient as a finding unless supported by facts more
particularly stated.
Cf. Florida v. United States, supra,
at p.
282 U. S. 213;
Southern Pacific Co. v. Interstate Commerce Comm'n,
219 U. S. 433,
219 U. S. 449.
There is no suggestion in the report that the rates have been so
reduced as to be less than compensatory. True, they do not reach
the maxima beyond which charges are excessive. On the other hand,
they do not pass the minima beyond which charges are too low. A
zone of reasonableness exists between maxima and minima within
which a carrier is ordinarily free to adjust its charges for
itself.
Texas & Pacific Ry. Co. v. United States,
289 U. S. 627,
289 U. S. 636;
United States v. Illinois Central R. Co., 263 U.
S. 515,
263 U. S. 522.
We lay to one side cases of discrimination or preference or rivalry
so keen as to be a menace to the steady and efficient service
called for by the statute. Interstate Commerce Act, § 15a. Those
tendencies excluded, "a carrier is entitled to initiate rates and,
in this connection, to adopt such policy of ratemaking as to it
seems wise."
United States v. Illinois Central R. Co.,
supra.
Subjected to these tests, the finding by the Commission that the
new rates are unreasonable is seen to be nothing more than a
deduction from the paragraph immediately preceding, wherein we
learn that the schedule, if put into effect, will disrupt the rate
structure in Indiana and related
Page 294 U. S. 507
areas and disturb groupings and differentials maintained for
many years. This brings us to the question whether such disruption
and disturbance may be deemed a sufficient reason for taking from a
carrier the privilege of reaching out for a larger share of the
business of transportation and initiating its own schedule to help
it in the struggle. For an answer to that question, other facts,
exhibited with greater particularity in other parts of the report,
must be brought forward and considered. Those affecting the Indiana
groups may conveniently be stated first; those affecting groups in
Illinois afterwards.
Every change of a rate schedule, either voluntary or
involuntary, is a disruption
pro tanto of the rate
structure theretofore prevailing. Plainly such a disruption,
without more, is no sufficient reason for prohibiting a change. The
Indiana carriers, by long continued cooperation, have maintained a
fixed schedule of differentials between mines in the southern group
(Princeton and Booneville) and mines farther to the north. There is
not a fact stated in the report to indicate that it will be unjust
or impracticable to apply the new Milwaukee rates to the other
lines in Indiana after increasing them by the differentials
hitherto prevailing. There is not a fact to indicate that the rates
so reduced will be less than compensatory, or that capacity for
service to the public will be impaired or put in jeopardy.
"The raising of rates does not necessarily increase revenue. It
may, in particular localities, reduce revenue instead of increasing
it, by discouraging patronage."
Florida v. United States, supra, at p.
282 U. S. 214.
As applied to the Indiana groups, the broad conclusions of the
report, when related to the supporting findings, amount to this,
and nothing more: that the new schedule for Milwaukee is likely to
be followed by new schedules maintaining the same ratio for other
lines in Indiana. Even if the outcome for those lines is a
diminution of the profits (the return being none the less
compensatory), this, without more,
Page 294 U. S. 508
does not make it wrongful for Milwaukee to restore the
longstanding parity between Brazil and Springfield. At the very
least, the findings should inform us, if only approximately, of the
extent of the expected loss; they should make it clear whether the
impairment of revenues will be trivial or substantial, for only
thus can the impairment be related to capacity for service.
Cf.
Florida v. United States, 292 U. S. 1,
292 U. S. 9.
Nothing of the kind is shown. The schedules are to be congealed as
they exist, because, if not congealed, they will be fluid, fluidity
is change, and change has the potency, if not the promise, of
disturbance. As to conditions in Indians, this and hardly more is
the teaching of the report.
We pass to the relation between the Indiana groups and those in
Illinois. As we have seen, parity of rates had been maintained for
many years between Indiana lines transporting coal from
Brazil-Clinton to Northern Illinois and Illinois lines transporting
coal from Springfield. There was no complaint by the Commission
during those years that the relation was unfair. There was no
holding to that effect when orders of the state commission
prescribing lower rates in Illinois were kept in operation against
the protest of Milwaukee. Intrastate Rates on Bituminous Coal
between Points in Illinois,
supra. The significance of
that decision has been considered already in the course of this
opinion. As we have striven to make clear, the Commission did not
rule that the effect of the new rates was to establish a fair
relation, still less the only fair one, between Illinois and
Indiana, a relation to be maintained as something fixed and
constant. The findings then made are repeated by quotation in the
report in this proceeding without comment or explanation that would
give them another meaning. If the schedule in controversy is to be
rejected as oppressive or unreasonable, the grounds for the
rejection must be looked for somewhere else than in the earlier
decision.
Page 294 U. S. 509
We are warned by the new report, however, that a change, once
permitted, has a tendency to spread. The acceptance of the new
schedule for Milwaukee will lead, it is said, to requests for
proportionate reductions by other lines in Indiana, and this, in
turn, to new reductions by lines in Illinois, and even in Kentucky,
the outcome being characterized in the argument of counsel, though
not in the report, as a rate war between the roads. The threat of
such a war may be a reason for rejecting a new schedule if the rate
relation previously existing is a fair one, or even, we may assume,
if the Commission is without power to avert the reprisals, and
thereby nullify the threat. Neither of these conditions is
satisfied in this case. The Commission does not hold that the
existing rate relation is intrinsically sound and fair. On the
contrary, it expressly concedes that the rate situation as between
the Illinois and Indiana groups may be in need of correction,
though it expresses the belief that this should not be done in any
piecemeal fashion.
* The point of the
decision is not that present rates are sound, but that they must be
maintained, even if unsound, for fear of a rate war which might
spread beyond control. The danger is illusory. The whole situation
is subject to the power of the Commission, which may keep the
changes within bounds. If Illinois lines attempt to lower their
rates again, a proceeding will be available to maintain a fair
relation. If the lines in Kentucky, operating in interstate
commerce, apply for new reductions, the supervisory power of the
Commission will subject them to the rule of reason. But other
remedies even more plainly adequate are at hand in case of need.
Under § 15 of the statute, the Commission, of its own motion, may
conduct a comprehensive inquiry into the rates of all the lines
within the area of controversy, may fix the fair relation between
one line and another,
Page 294 U. S. 510
and may build the structure of the rates accordingly.
Florida v. United States, 292 U. S.
1;
United States v. Louisiana, 290 U. S.
70.
In the light of these considerations, it is not the Milwaukee
that is subject to the reproach of dealing with the matter
piecemeal. All that the Milwaukee has done is to initiate a
schedule which must be upheld as lawful unless adequate reasons are
presented for setting it aside.
Cf. Anchor Coal Co. v. United
States, 25 F.2d
462;
Atchison, T. & S.F. Ry. Co. v. United States,
279 U. S. 768,
279 U. S. 773.
The reproach of piecemeal action is incurred by the Commission,
which has not adjudged the fairness of the relation now subsisting
between Illinois and Indiana rates, which has not questioned its
own capacity to prevent unjust reprisals, which has put off to an
indefinite future the remodeling of the rate structure for all the
carriers affected, and which has left this particular carrier
helpless in the interval. In brief, a schedule of lowered tariffs
has been cancelled though the facts that control the validity of
the reduction have yet to be determined. This was not a full
discharge by the Commission of an immediate responsibility. It was
inaction and postponement. Responsibility was shifted from the
shoulders of the present to the shoulders of the days to come.
We would not be understood as saying that there do not lurk in
this report phrases or sentences suggestive of a different meaning.
One gains at places the impression that the Commission looked upon
the proposed reduction as something more than a disruptive
tendency; that it found unfairness in the old relation of parity
between Brazil and Springfield, and that the new schedule, in its
judgment, would confirm Milwaukee in the enjoyment of an undue
proportion of the traffic. The difficulty is that it has not said
so with the simplicity and clearness through which a halting
impression ripens into reasonable certitude. In the end, we are
left to spell out, to argue, to choose between
Page 294 U. S. 511
conflicting inferences. Something more precise is requisite in
the
quasi-jurisdictional findings of an administrative
agency.
Beaumont, S.L. & W. Ry. Co. v. United States,
282 U. S. 74,
282 U. S. 86;
Florida v. United States, 282 U.
S. 194,
282 U. S. 215.
We must know what a decision means before the duty becomes ours to
say whether it is right or wrong.
The decree should be affirmed, and it is so ordered.
*
See the last two paragraphs of the first report by
Division No. 2, which the second report has readopted and
confirmed.