1. In prescribing intrastate freight rates for railroads under §
13(4) of the Interstate Commerce Act, the Interstate Commerce
Commission may give weight to deficits in passenger revenue. Pp.
344 U. S.
260-267.
(a) Under § 15a(2) of the Interstate Commerce Act and the
National Transportation Policy of 1940, the Commission may give
weight to passenger revenue deficits in prescribing interstate
freight rates to meet over-all revenue needs. Pp.
344 U. S.
263-264.
(b) The same National Transportation Policy applies to § 13(4)
as to § 15a(2). Whichever section is used, the same economic
considerations underlie the relation between freight rates and
passenger deficits, whether interstate or intrastate. P.
344 U. S.
266.
2. The findings of the Commission which are involved in this
proceeding are sufficient to sustain the Commission's order
prescribing intrastate freight rates for Florida railroads which
will reflect the same increases as have been authorized by the
Commission for comparable interstate traffic. Pp.
344 U. S.
267-276.
(a)
North Carolina v. United States, 325 U.
S. 507, distinguished. Pp.
344 U. S.
270-274.
(b) To permit material and reports which were before the
Commission in prescribing a nationwide increase in interstate
freight rates and in further increasing interstate freight rates
for the southern territory (including Florida) to be applied under
§ 15a, but not under § 13(4), would be contrary to the
complementary nature of those sections. Pp.
344 U. S.
272-273.
(c) The Commission's jurisdiction over intrastate rates is not
limited to cases where those rates are confiscatory. It is
sufficient that the existing intrastate rates cause "unjust
discrimination against interstate or foreign commerce." P.
344 U. S.
274.
(d) Where the Commission seeks to deal generally with rates and
revenues in a large area on evidence typical of the area as a
Page 344 U. S. 255
whole, it may proceed by way of a general order supported by
sufficient evidence applicable to the whole territory, but it is
well to leave the way open for modifications of that general order
in specific situations where the general order is not justly
applicable. Pp.
344 U. S.
275-276.
101 F. Supp. 941, affirmed.
A three-Judge District Court sustained an order of the
Interstate Commerce Commission prescribing intrastate freight rates
for Florida railroads. 101 F. Supp. 941. On appeal to this Court
under 28 U.S.C. (Supp. V) §§ 1253, 2101(b),
affirmed, p.
344 U. S.
276.
MR. JUSTICE BURTON delivered the opinion of the Court.
The questions here are: (1) whether the Interstate Commerce
Commission, in prescribing intrastate freight rates for railroads
under § 13(4) of the Interstate Commerce
Page 344 U. S. 256
Act, [
Footnote 1] may give
weight to deficits in passenger revenue, and (2) whether the
findings of the Commission which are involved in this proceeding
are sufficient to sustain the rates it has prescribed. Our answer
to each question is in the affirmative.
This is an action against the United States brought in the
United States District Court for the Northern District of Florida,
under 28 U.S.C. (Supp. V) § 1336 by appellants "as and Constituting
the Florida Railroad and Public Utilities Commission." They ask the
court to enjoin, set aside, and annul an order of the Interstate
Commerce Commission requiring Florida railroads to establish
intrastate freight rates which will reflect the same increases as
have been authorized by it for comparable interstate traffic.
The underlying proceedings originated in 1940. The Interstate
Commerce Commission then undertook a nationwide investigation of
interstate railroad freight rates, under §§ 13(2) and 15a(2) of the
Interstate Commerce Act, in conformity with the National
Transportation
Page 344 U. S. 257
Policy stated in § 1 of the Transportation Act of 1940.
[
Footnote 2] The investigation
dealt with past and future freight and passenger operations,
intrastate as well as interstate. A Committee of Cooperating State
Commissioners sat with the Commission and took part in its
deliberations. Mounting railroad operating costs and declining
passenger revenue led the Commission, in 1946, to authorize a
nationwide increase of 20% in basic interstate freight rates.
Ex Parte No. 162, Increased Railway Rates, Fares, and Charges,
1946, 264 I.C.C. 695, 266 I.C.C. 537. [
Footnote 3]
In 1947, the Commission found such further increases in
operating costs and decreases in passenger revenue that it
authorized an additional nationwide interim increase of 10% in
interstate freight rates. Soon it raised this to 20%. In a third
report, it varied the percentage in different areas, with the
result that, in the southern territory, including Florida, the
increase was 25%. The 1948 final report confirmed this 25%
increase.
Ex Parte No. 166, Increased Freight Rates, 1947,
269 I.C.C. 33, 270 I.C.C. 81, 93, and 403. The Commission's
estimates of revenue contemplated the application of the increased
rates to intrastate, as well as to interstate, transportation.
[
Footnote 4]
Page 344 U. S. 258
The report concludes with the statement that the "Committee of
Cooperating State Commissioners . . . authorize us to state that
they concur in the foregoing report." 270 I.C.C. 403, 463.
Upon publication of these reports, the railroads asked their
respective state authorities to authorize comparable increases in
intrastate rates. The Florida Commission approved most of the
increases, but declined to approve the final increase from 20% to
25%. [
Footnote 5]
On petition of the Florida railroads, the Interstate Commerce
Commission undertook its own investigation of Florida intrastate
railroad rates under § 13(3) and
Page 344 U. S. 259
(4) of the Interstate Commerce Act, 41 Stat. 484, 49 U.S.C. §
13(3) and (4). A full hearing was had before a Commissioner and an
examiner, followed by a hearing upon exceptions to the examiner's
report. [
Footnote 6] The
Commission recommended that intrastate freight rates be
established
"between points in Florida which will reflect the same increases
as are, and for the future may be, maintained by respondents
[railroads] on like interstate traffic to and from Florida, and
within Florida under our authorizations in
Ex Parte No.
162 and
Ex Parte No. 166. . . ."
Finding No. 8, 278 I.C.C. 41, 73.
The Interstate Commerce Commission then gave the Florida
Commission a final opportunity to permit the increased rates to be
applied to intrastate transportation. Upon the latter's failure to
act, the Interstate Commerce Commission ordered the railroads
"thereafter to maintain and apply for the intrastate
transportation of freight from and to points in the Florida freight
rates and charges which shall be no lower than the approved rates
and charges, or on the approved rate bases, as provided in said
report. [
Footnote 7] "
Page 344 U. S. 260
Before that order took effect, this action was filed. A
three-judge District Court was convened. 28 U.S.C. (Supp. V) §
2325. Two short line railroads and numerous shippers intervened as
plaintiffs. The Interstate Commerce Commission and all Class I
railroads operating in Florida intervened as defendants. The entire
record of the proceeding before the Commission, under § 13(4), was
introduced. The court sustained the Commission and dismissed the
complaint. 1 F. Supp. 941. That judgment is here on appeal. 28
U.S.C. (Supp. V) §§ 1253, 21(b).
I.
The Interstate Commerce Commission, in prescribing
intrastate freight rates for railroads under § 13(4) of the
Interstate Commerce Act, may give weight to deficits in passenger
revenue.
In
Ex Parte No. 168, Increased Freight Rates, 1948, 272
I.C.C. 695, 276 I.C.C. 9, the Commission reviewed the changing
attitudes it has adopted concerning the role of passenger deficits
and freight rates. In such cases as the
Five Per Cent
Case, 31 I.C.C. 351, the Commission in 1914 concluded that
each class of service should completely and independently provide
its own proportionate share of expenses and profits. [
Footnote 8] In 1949, the Commission says:
"However, because of changed theories adopted by Congress in the
Transportation Act, 1920, and
Page 344 U. S. 261
because, as a practical matter, the increasing degree of
unprofitableness of the passenger traffic menaced the continuity of
an adequate national system of transportation, we were forced to a
more comprehensive view of this question. We observe also that, at
the time of those decisions, the railroads enjoyed a practical
monopoly in supplying transportation, but that situation no longer
exists."
276 I.C.C. at 34.
Citing with approval its similar views in
Ex Parte No. 3,
Fifteen Per Cent Case, 1931, 178 I.C.C. 539, and
Ex Parte
No. 123, Fifteen Per Cent Case, 1937-1938, 226 I.C.C. 41, the
Commission summarizes its present position as follows:
"These cases are typical of our more recent holdings upon this
question. While we regard it as 'trite to say that each particular
service, coach, sleeper, parlor car, and head end, should as nearly
as may be pay its own way and return a profit' (
Eastern
Passenger Fares in Coaches, 227 I.C.C. 17, 25), and we have
accepted the contention that there may be traffic that should not
be burdened with a shortage of passenger service return
(
Livestock, Western District Rates, 190 I.C.C. 611, 629),
yet, if passenger service inevitably and inescapably cannot bear
its direct costs and its share of joint or indirect costs, we have
felt compelled in a general rate case to take the passenger deficit
into account in adjustment of freight rates and charges. Both the
freight and passenger services are essential, and revenue losses or
deficits on the one necessarily must be compensated by earnings on
the other if the carriers are to continue operations. Both may be
subjected to reasonable rates and charges to produce the fair
aggregate return, even though thereby a higher rate of return may
be exacted from the one than from the
Page 344 U. S. 262
other. (
Property Owners' Committee v. Chesapeake & O.
Ry. Co., 237 I.C.C. 549, 565.)"
Id. at 35.
See also Ex Parte 87, Revenues in
Western District, 113 I.C.C. 3, 23.
This change of policy was the inevitable consequence of steadily
increasing passenger operating costs, together with the growth of
vigorous competition from automobiles and other forms of
transportation which made it futile to compensate for the passenger
deficits by increasing passenger rates. The railroads were forced
to abandon passenger mileage, reduce service, and improve their
facilities, while fixing passenger rates at a level as adequate as
competition permitted. [
Footnote
9]
In recent years, a nationwide passenger deficit has been obvious
except during the peak of wartime passenger traffic. The ratio
between passenger operating expense and revenue has varied in
different areas, but has been uniformly unfavorable to the
railroads. [
Footnote 10]
Page 344 U. S. 263
Section 15a(2) of the Interstate Commerce Act and the National
Transportation Policy of 1940 [
Footnote 11] reflect this broad concept of the unity of
the Nation's transportation system. They direct the Commission to
consider,
Page 344 U. S. 264
among other things, the need, in the public interest, of
adequate and efficient railway transportation service and the need
of revenues sufficient to sustain such service. It permeates such
general revenue proceedings as
Ex Parte Nos. 162 and
166, supra. It leaves no ground for a claim that the
Commission may not give weight to passenger revenue deficits in
prescribing
interstate freight rates to meet over-all
revenue needs.
See United States v. Louisiana,
290 U. S. 70.
The question remains whether that Commission may give weight to
deficits in passenger revenue (either interstate or intrastate)
when prescribing intrastate freight rates under § 13(4). It is
conceivable that some considerations properly given weight by the
Commission in prescribing interstate freight rates in a general
revenue proceeding might not be applicable equally to
transportation within a particular state.
In the instant case, however, there is no showing that the
character of operating conditions in Florida intrastate passenger
traffic differs substantially from that of interstate
Page 344 U. S. 265
passenger operations in the southern territory generally. On the
contrary, the Commission observes that --
"Increased passenger deficits, by reason of the continuing rise
in operating expenses and the growing use of other forms of
transportation, is a condition bearing alike upon intrastate and
interstate rates. There is here no claim or showing that the
passenger deficits of the respondents do not result from
intrastate, as well as interstate, operations, and the passenger
deficit of the East Coast, which operates entirely within Florida,
would appear to indicate to the contrary."
"The record affords no justification for a difference in
treatment in this respect [passenger deficits] between Florida
intrastate traffic, on the one hand, and interstate traffic to and
from Florida, on the other hand. The question of passenger deficits
is a serious one for both carriers and shippers, and would become
even more serious for interstate shippers if this burden were
imposed entirely upon them [rather than being shared on a like
basis with intrastate shippers on the same lines]."
278 I.C.C. at 67-68.
See opinion below, 1 F. Supp. at
944.
It appears from the report in
Ex Parte No. 168, 276
I.C.C. at 40, that, in 1948, the passenger service operating ratio
for the southern territory was 127.3%, while the operating ratios
of the three principal Florida railroads in that year were 120%,
127% and 128%. In Florida, moreover, the discontinuance of railroad
passenger service would not permit the discontinuance of high speed
tracks and equipment because of the need for fast freight schedules
to transport perishable fruits and vegetables from Florida. The
Commission dealt with the freight and passenger revenues and
properties of the Florida roads as a
Page 344 U. S. 266
whole when determining the need for increases in interstate
freight rates. Nothing has been demonstrated which would demand
different treatment of these properties in relation to the
intrastate activities.
The Commission also finds that
"the Florida intrastate rates [without the 5% increase] . . .
are abnormally low, and are not contributing their fair share to
the revenues required by respondents [Florida railroads] to enable
them to render adequate and efficient service and to operate
profitably, and thereby accomplish the purpose of the Interstate
Commerce Act. . . ."
Finding No. 5, 278 I.C.C. at 72.
In the instant case, there is no evidence which would require
the Commission to treat Florida intrastate rates differently from
interstate rates in southern territory. Instead, there are findings
that it would cause unjust discrimination against interstate
commerce in Florida if the intrastate freight rates are not
increased so as to reflect the same increase as is applied by the
Commission to like interstate traffic in the southern territory.
See note 13
infra.
The same National Transportation Policy applies to § 13(4) as to
§ 15a(2). Whichever section is used, the same economic
considerations underlie the relation between freight rates and
passenger deficits, whether interstate or intrastate. This was well
considered throughout the opinion of the Court in
United States
v. Louisiana, supra. It was there said:
"This court has consistently held that this section [§ 13(4)] is
to be construed in the light of section 15a(2) and as supplementing
it, so that the forbidden discrimination against interstate
commerce by intrastate rates includes those cases in which
disparity of the latter rates operates to thwart the broad purpose
of section 15a to maintain an efficient transportation system by
enabling the carriers to earn a fair return. So
Page 344 U. S. 267
construed, section 13(4) confers on the Commission the power to
raise intrastate rates so that the intrastate traffic may produce
its fair share of the earnings required to meet maintenance and
operating costs and to yield a fair return on the value of property
devoted to the transportation service, both interstate and
intrastate."
290 U.S. at
290 U. S.
74-75.
This was confirmed in
Florida v. United States,
292 U. S. 1,
292 U. S. 5-6.
We conclude that there is no reason why the Commission may not
give weight to passenger deficits in prescribing the intrastate
freight rates in Florida, as it does in prescribing interstate
freight rates for the southern territory. [
Footnote 12]
II
.
The Commission's findings involved in this proceeding are
sufficient to sustain the rates prescribed.
Several of the Commission's findings which lend support to its
order are printed in the margin. [
Footnote 13] Its authority
Page 344 U. S. 268
to prescribe the rates now before us rests on the provision, in
§ 13(4), that, when it finds that an intrastate rate causes "any
undue, unreasonable, or unjust discrimination against interstate or
foreign commerce . . . ," it shall prescribe such rate as, in its
judgment,
Page 344 U. S. 269
will remove the discrimination.
Note 1 supra. The Commission's finding No. 7
meets this requirement. The Commission there finds that the
maintenance of the existing intrastate rates within Florida
"on bases lower than those herein approved causes and in the
future will cause, (1) in all instances, unjust discrimination
against interstate commerce. . . ."
278 I.C.C. at 73. If supported by adequate subsidiary findings,
the ultimate finding thus sustains the authority of the Commission
and the validity of its order. [
Footnote 14]
North Carolina v. United States,
325 U. S. 507,
325 U. S. 514;
Florida v. United States, 292 U. S.
1;
Page 344 U. S. 270
282 U. S. 282 U.S.
194;
United States v. Louisiana, 290 U. S.
70. The court below adds that it is
"clear from the evidence in the case that it [the existing
intrastate rate] did result in undue, unreasonable and unjust
discrimination against interstate commerce. . . ."
1 F. Supp. 941, 945.
The nature and adequacy of the findings necessary to support an
ultimate finding of "unjust discrimination against interstate
commerce" were considered in
North Carolina v. United States,
supra. In that case, this Court held that the Commission's
findings were not adequate to support the Commission's order to
raise statewide intrastate passenger rates from 1.65 cents per mile
to 2.2 cents per mile, although the latter rate was prescribed by
the Commission as a minimum rate for comparable interstate
passenger service on the same lines and trains. The finding which
was primarily needed, and was there found lacking, was one that the
intrastate service at 1.65 cents per mile did not contribute its
fair share of the earnings required to meet maintenance and
operating costs and to yield a fair return on the value of the
property directed to the transportation service, both interstate
and intrastate.
This Court held that the mere disparity between the rates for
comparable intrastate and interstate service was not enough
per
se to establish the requisite unjust discrimination.
Confronted with evidence that the interstate rate of 2.2 cents per
mile was above a reasonable rate level for comparable intrastate
passenger service, a finding supported by evidence was held to be
necessary to show the contrary. Such a finding, lacking in the
North Carolina case, is supplied here by finding No. 3,
which states that the "intrastate rates . . . herein approved will
not exceed a just and reasonable level." 278 I.C.C. at 72.
In the
North Carolina case, there was no finding that
the existing intrastate rate was inadequate. In fact, its
Page 344 U. S. 271
ample adequacy was indicated by evidence of an extraordinarily
large volume of available traffic and profits. In contrast, the
Commission, in the instant case, has found that the existing
"Florida intrastate rates . . . , which are below the [proposed]
level herein authorized, are abnormally low and are not
contributing their fair share to the revenues . . . , and that the
burden thus cast upon interstate commerce is undue to the extent
that these intrastate rates . . . are less than they would be on
the basis herein approved."
Finding No. 5,
id. at 72-73,
and see 45-59.
The report adds that
"the revenue loss as estimated by the respondents [railroads]
because of the failure to authorize the increases herein sought is
$915,325 a year."
Id. at 65.
Whereas, in the
North Carolina case there, was evidence
to indicate that the conditions in that State were more favorable
to profitable intrastate transportation of passengers than in the
Nation at large, here, the Commission's finding No. 2 expressly
states that
"the transportation conditions incident to the intrastate
transportation of freight in Florida are not more favorable, and
such conditions in the Florida peninsula are somewhat less
favorable, than those (1) within southern territory and (2) between
Florida and interstate points."
Id. at 72,
and see 63-67.
Supporting the conclusion that the proposed increase in the
Florida intrastate freight rates will not drive away business, but
will prove profitable and reasonable, the Commission, in its
finding No. 6, says that
"the establishment of intrastate rates . . . increased
sufficiently to equal the level herein approved will substantially
increase respondents' [railroads'] revenues therefrom, and will
constitute not more than a fair proportion of respondents' total
income. . . ."
Id. at 73.
The foregoing findings cover the needs emphasized in the
North Carolina case. They go far beyond the bare disparity
between the existing intrastate rate and the
Page 344 U. S. 272
proposed minimum rate which is in substantial uniformity with
the interstate rate. These findings demonstrate that the proposed
rate in Florida will be within the zone of reasonableness, and, in
the opinion of the Commission, will cause the intrastate freight
traffic to contribute a fair share of the earnings.
The Commission has applied to the Florida operations the same
conclusion it reached as to the need for increased revenue on a
national basis, and has distributed the burden within Florida along
the same lines it followed when estimating the revenues available
in the southern territory from intrastate, as well as interstate,
operations. In the absence of any showing that it is not applicable
to Florida, the evidence which forms the basis of the Commission's
nationwide order becomes the natural basis for its Florida
order.
The Commission in the instant case has provided that these
"findings are without prejudice to the right of the authorities
of the Florida, or any other interested party, to apply for a
modification thereof as to any specific intrastate rates . . . on
the ground that they are not related to the interstate rates . . .
on like traffic in such a way as to contravene the provisions of
the Interstate Commerce Act."
Id. at 74. Certain of the rates in the original order
already have been modified or removed from that order.
1 F. Supp. at
946.
No question has been raised here as to the adequacy of the
evidence upon which any of the findings are based. Although no such
point is urged, supporting evidence appears in the record of the
"full hearing" under § 13(4), all of which was introduced in
evidence in the court below. Much of the factual material that was
before the Commission in
Ex Parte No. 162 and
Ex Parte
No. 166, and the reports in those cases, were before the
Commission and the court below in the present proceedings. To
permit such material and reports to be applied under § 15a
Page 344 U. S. 273
but not under § 13(4) would be contrary to the complementary
nature of those sections.
"The decision in the first proceeding, that the increase in
interstate rates was reasonable, was made in the hope that the
state commissions would bring intrastate rates into harmony. When
they failed to do so, the Commission reaffirmed its finding that
the new interstate rates were reasonable, and found that the
intrastate rates must be raised in order that the intrastate
traffic may bear its fair share of the revenue burden. It is plain
from the nature of the inquiry that the rate level to which both
classes of traffic were raised was found reasonable on the basis of
the traffic as a whole. Where the conditions under which interstate
and intrastate traffic move are found to be substantially the same
with respect to all factors bearing on the reasonableness of the
rate, and the two classes are shown to be intimately bound
together, there is no occasion to deal with the reasonableness of
the intrastate rates more specifically, or to separate intrastate
and interstate costs and revenues.
Compare American Express Co.
v. Caldwell, 244 U. S. 617;
United States v.
Louisiana, supra, [
290 U.S.
70];
Florida v. United States, supra, at
292 U. S.
1."
Illinois Commerce Commission v. United States,
292 U. S. 474,
292 U. S.
483-484.
See also Montana v. United States, 6
F. Supp. 778, 783.
The appellants point out that, in the
North Carolina
case, this Court mentioned the absence of other findings. Those,
however, are not needed to sustain an order already supported by
such findings as have been made in this case. [
Footnote 15]
Page 344 U. S. 274
For example, the North Carolina case mentions the absence in
that case of a finding that the existing 1.65 cent per mile
intrastate passenger rate was confiscatory. Such a finding,
supported by competent evidence, would have provided a
constitutional ground for enjoining the state rate.
See Norfolk
& Western R. Co. v. Conley, 236 U.
S. 605;
Northern Pacific R. Co. v. North
Dakota, 236 U. S. 585. The
Interstate Commerce Commission's jurisdiction over intrastate
rates, however, is not limited to cases where those rates are
confiscatory. It is sufficient that the existing intrastate rates
cause "unjust discrimination against interstate or foreign
commerce. . . ." In that event, § 13(4) directs the Commission to
prescribe intrastate rates that will remove the discrimination
without raising the rate beyond the zone of reasonableness.
See
United States v. Louisiana, supra, at
290 U. S. 74-75;
Florida v. United States, 282 U.
S. 194,
282 U. S. 211;
Wisconsin R. Commission v. Chicago, B. & Q. R. Co.,
257 U. S. 563,
257 U. S.
585-586.
Similarly, the
North Carolina case mentions, but does
not make indispensable, the specific findings in dollars which were
absent there. Reference was made in the
North Carolina
case to the absence of "findings as to what contribution from
intrastate traffic would constitute a fair proportion of the
railroad's total income," and also to the absence of any "finding
as to what amount of revenue was required to enable these railroads
to operate efficiently." 325 U.S. at
325 U. S. 516.
The Court emphasized the Commission's reliance on "the mere
existence of a disparity between what it said was a reasonable
interstate rate and the intrastate rate fixed by North
Carolina."
Page 344 U. S. 275
Ibid. In the instant case, the Commission does not rely
upon the mere disparity between the intrastate and interstate
rates. On the contrary, the Commission states that the Florida
intrastate rates
"are abnormally low, and are not contributing their fair share
to the revenues required . . . to render adequate and efficient
service and to operate profitably, and thereby accomplish the
purpose of the Interstate Commerce Act. . . ."
Finding No. 5, 278 I.C.C. at 72. Also, in finding No. 6, it says
that the establishment of the proposed increases in intrastate
rates
"will substantially increase respondents' revenues therefrom,
and will constitute not more than a fair proportion of respondents'
total income. . . ."
Id. at 73. More is not needed. It is not necessary, for
general revenue purposes, to establish for each item in each
freight rate a fully developed rate case.
"[T]he administrative arm of the Commission [would be] paralyzed
if, instead of adjudicating upon the rates in a large territory on
evidence deemed typical of the whole rate structure, it were
obliged to consider the reasonableness of each individual rate
before carrying into effect the necessary increased schedule."
United States v. Louisiana, 290 U. S.
70,
290 U. S. 75-76,
and see 290 U. S. 78-79.
See also Illinois Commerce Commission v. United States,
292 U. S. 474,
292 U. S. 483;
Florida v. United States, 292 U. S.
1,
292 U. S. 9;
Georgia P.S. Commission v. United States, 283 U.
S. 765,
283 U. S. 774;
Wisconsin R. Commission v. Chicago, B. & Q. R. Co.,
257 U. S. 563,
257 U. S. 588.
Where the Commission seeks to deal generally with rates and
revenues in a large area on evidence typical of the area as a
whole, it may proceed by way of a general order supported by
sufficient evidence applicable to the whole territory. [
Footnote 16] At the same time,
it
Page 344 U. S. 276
is well for it to leave the way open, as it did here, for
modifications of that general order in specific situations where
the general order is not justly applicable.
North Carolina v.
United States, supra, at
325 U. S. 518,
325 U. S. 535.
For these reasons, we conclude that the findings before us
sustain the order of the Commission, and that the Commission was
authorized to give the weight it did to passenger deficits when
prescribing intrastate freight rates. The judgment accordingly is
affirmed.
Affirmed.
MR. JUSTICE BLACK is of opinion that the facts found by the
Commission were not adequate to support the order, and would set
aside the order on authority of
North Carolina v. United
States, 325 U. S. 507.
[
Footnote 1]
"(4) Whenever in any such investigation [where rates made by
authority of a state are in issue] the commission, after full
hearing, finds that any such rate, fare, charge, classification,
regulation, or practice causes any undue or unreasonable advantage,
preference, or prejudice as between persons or localities in
intrastate commerce, on the one hand, and interstate or foreign
commerce, on the other hand, or any
undue, unreasonable, or
unjust discrimination against interstate or foreign commerce,
which is hereby forbidden and declared to be unlawful, it shall
prescribe the rate, fare, or charge, or the maximum or minimum, or
maximum and minimum, thereafter to be charged, and the
classification, regulation, or practice thereafter to be observed,
in such manner as, in its judgment, will remove such advantage,
preference, prejudice, or discrimination. Such rates, fares,
charges, classifications, regulations, and practices shall be
observed while in effect by the carriers parties to such proceeding
affected thereby, the law of any State or the decision or order of
any State authority to the contrary notwithstanding."
(Italics supplied.) 41 Stat. 484, 49 U.S.C. § 13(4).
[
Footnote 2]
§ 13(2), 36 Stat. 550, as amended, 41 Stat 484, 49 U.S.C. §
13(2); § 15a(2), 54 Stat. 912, 49 U.S.C. § 15a(2); § 1 of the
Transportation Act of 1940, inserting a preamble to the Interstate
Commerce Act, 54 Stat. 899, 49 U.S.C. note preceding § 1.
[
Footnote 3]
For earlier reports
see Ex Parte No. 148, Increased Railway
Rates, Fares and Charges, 1942, 248 I.C.C. 545. The several
proceedings under §§ 15a or 13(4) referred to in this opinion deal
at length with many commodity and other rates or charges besides
those which are controlled by the general percentage increases
referred to in the opinion. While such variations are important and
significant in adjusting each order to specific situations, their
consideration is not necessary to the determination of the issues
before us. The percentages used in this opinion are those which
were adopted by the court below for illustrative purposes. 1 F.
Supp. 941, 943-944.
[
Footnote 4]
In
Ex Parte No. 166, 270 I.C.C. 403, 421, the
tabulations of overall percentage increases in freight rates
include intrastate traffic. The report says:
"The table which relates to class I railroads covers all
traffic, intrastate as well as interstate, and assumes increases to
have been approved on intrastate traffic similarly to those upon
interstate traffic in the same territory, for the whole time."
In referring to revenue from operations for a "constructive,"
normal year, the report says: "This estimate is upon the assumption
that timely similar adjustments will be made upon intrastate
traffic."
Id. at 428. As to rates of return on property
values, it adds:
"They presuppose that generally similar increases will be
permitted by State authorities on intrastate traffic, or may become
effective otherwise."
Id. at 437.
See also 269 I.C.C. at 39, 94-95,
and 270 I.C.C. at 440.
[
Footnote 5]
In response to requests based upon
Ex Parte No. 162,
supra, the Florida Commission granted the original 20% general
increase in intrastate freight rates, but declined to allow
increases in intrastate rates on logs moving to the mills, wet
phosphate moving from the washer to the drying plant, waste wood
moving to retort or recovery plant, and sugar cane moving to the
mills. It also limited rate increases on pulpwood to 9%. In
response to requests to conform to
Ex Parte No. 166,
supra, the Florida Commission granted the additional 20%
general increase in intrastate freight rates, but declined to
approve the further 5% increase. It also made specific exceptions
in favor of certain commodities. As the issues with which we are
concerned are sufficiently raised by the Florida Commission's
action denying the final 5% increase, we confine our discussion to
that item.
[
Footnote 6]
While the Commission states that its conclusions differ from
those in the proposed report of the examiner, they do not so differ
on the issues before us.
[
Footnote 7]
For other decisions of the Commission as to intrastate rates
under § 13(3) and (4), growing out of
Ex Parte Nos. 162 or 166,
supra, see Increases in Alabama Freight Rates and Charges, 274
I.C.C. 439;
Texas Intrastate Rates, 273 I.C.C. 749;
Increases in Tennessee Freight Rates and Charges, 272
I.C.C. 625.
See also Increases in Arizona Freight Rates and
Charges, 270 I.C.C. 5. A recent decision, growing out of
Ex Parte No. 168, Increased Freight Rates, 1948, 276
I.C.C. 9, is
Montana Intrastate Freight Rates and Charges,
284 I.C.C. 167. The intrastate rates there ordered into effect by
the Commission were set aside in
Montana v. United States,
6 F. Supp. 778, and 786,
judgment vacated and cause remanded by
this Court for further consideration in the light of the instant
case, 343 U.S. 905.
[
Footnote 8]
The Commission there said:
"We know of no provision of law under which we should be
justified in increasing freight rates to provide a return upon
property used exclusively in the passenger service, much less to
take care of losses incurred in such service. In our opinion, each
branch of the service should contribute its proper share of the
cost of operation and of return upon the property devoted to the
use of the public."
31 I.C.C. at 392.
[
Footnote 9]
Passenger service involves not only transportation of people,
but of mail, express, baggage, milk, and other "head-end" services
requiring the speed and service of passenger trains. These
operations have shown a national operating deficit in each year
from 1936 through 1948. 276 I.C.C. at 38.
[
Footnote 10]
". . . Between the end of 1923 and the beginning of the present
year (1948), the miles of line operated in passenger service of the
class I roads decreased from 224,762 to 159,373 . . . or 29.1
percent in 26 years. . . . In addition to total abandonments, much
curtailment of service has occurred which is impossible to portray
statistically."
"
* * * *"
". . . From 1923 through 1933, both the number of passengers
carried and the revenues from passenger fares declined
uninterruptedly. Passengers carried declined from slightly less
than 1 billion in the earlier year to less than half that figure,
or 433 millions, in round numbers, in the later year. Revenues from
passenger fares fell from $1,148 millions to $329 millions, a
decline between these 2 years of more than 70 percent. This
development was accompanied, except for 1 year, by an uninterrupted
increase in the passenger service operating ratio from 81.29
percent in 1923 to 1.22 percent in 1930, the latter being the first
year of the 11 years 1920-30 in which there was an operating
deficit in this service. Since that year, there has been an annual
operating deficit in passenger service, except during the war years
1942-45."
"
* * * *"
Passenger service operating ratios and net railway
operating
deficits in 1948, by specified districts and
regions
-------------------------------------------------
District or region Operating Net railway
ratio operating deficit
-------------------------------------------------
Eastern district 120.8 $216,450,000
Pocahontas region 177.8 35,725,000
Southern region 127.3 72,982,000
Western District 132.2 234,625,000
----------------------------
Total 127.4 559,782,000
-------------------------------------------------
276 I.C.C. at 36, 40;
see also pp. 14-31 for data as to
value, revenue, expenses, operating income rate of return, traffic,
efficiency, etc., and pp. 32-40 as to passenger deficits.
See Moulton, The American Transportation Problem, c. V
(1933); 63d 64th and 65th Annual Reports of the Interstate Commerce
Commission at pp. 3, 5 and 41, respectively.
[
Footnote 11]
"In the exercise of its power to prescribe just and reasonable
rates, the Commission shall give due consideration, among other
factors, to the effect of rates on the movement of traffic by the
carrier or carriers for which the rates are prescribed; 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."
54 Stat. 912, 49 U.S.C. § 15a(2).
"It is hereby declared to be the national transportation policy
of the Congress to provide for fair and impartial regulation of all
modes of transportation subject to the provisions of this Act, so
administered as to recognize and preserve the inherent advantages
of each; to promote safe, adequate, economical, and efficient
service and foster sound economic conditions in transportation and
among the several carriers; to encourage the establishment and
maintenance of reasonable charges for transportation services,
without unjust discriminations, undue preferences or advantages, or
unfair or destructive competitive practices; to cooperate with the
several States and the duly authorized officials thereof, and to
encourage fair wages and equitable working conditions -- all to the
end of developing, coordinating, and preserving a national
transportation system by water, highway, and rail, as well as other
means, adequate to meet the needs of the commerce of the United
States, of the Postal Service, and of the national defense. All of
the provisions of this Act shall be administered and enforced with
a view to carrying out the above declaration of policy."
54 Stat. 899, 49 U.S.C. note preceding § 1.
[
Footnote 12]
Northern Pacific R. Co. v. North Dakota, 236 U.
S. 585, and
Norfolk & W. R. Co. v. Conley,
236 U. S. 605,
favor, rather than oppose, this position. In those cases, this
Court enjoined state authorities from attempting to restrict an
intrastate railroad to confiscatorily low freight or passenger
rates. Such action, however, carried no implication that the United
States' authority to provide relief is limited to cases of
threatened confiscation. In the instant case, the Interstate
Commerce Commission is authorized by Congress, under §§ 15a(2) and
13(4), to override state-prescribed rates which unjustly
discriminate against interstate commerce, whether or not the state
rates are also confiscatory.
[
Footnote 13]
"2. That the transportation
conditions incident to the
intrastate transportation of freight in Florida are not more
favorable and such conditions in the Florida peninsula are
somewhat less favorable than those (1) within southern territory
and (2) between Florida and interstate points."
"3. That the
present interstate freight rates and
charges within Florida and between points in Florida and points in
other States
are just and reasonable . . . and that
intrastate rates, charges, and minimum weights
herein
approved will not exceed a just and reasonable level."
"
* * * *"
"5. That the
Florida intrastate rates, charges, and
minimum weights,
which are below the level herein authorized,
are abnormally low and are not contributing their fair share to the
revenues required by respondents to enable them to render
adequate and efficient service and to operate profitably, and
thereby accomplish the purpose of the Interstate Commerce Act, and
as set forth in the national transportation policy declared by the
Congress, to develop and preserve a national transportation system
adequate to meet the needs of the commerce of the United States, of
the postal service, and of the national defense, and that the
burden thus cast upon interstate commerce is undue to the
extent that these intrastate rates and charges are less than they
would be on the basis herein approved."
"6. That the establishment of
intrastate rates and charges
increased sufficiently to equal the level herein approved will
substantially increase respondents' revenues therefrom, and will
constitute not more than a fair proportion of respondents' total
income. . . ."
"7. That the maintenance of
intrastate rates and
charges
within Florida on bases lower than those herein
approved causes, and in the future will cause, (1) in all
instances, unjust discrimination against interstate commerce,
(2) in nearly all instances, undue preference of and advantage to
localities in intrastate commerce, and undue prejudice to
localities in interstate commerce. . . ."
"8. That this unjust discrimination and undue prejudice should
be removed by establishing intrastate rates and charges between
points in Florida which will reflect the same increases as are, and
for the future may be, maintained by respondents on like interstate
traffic to and from Florida, and within Florida under our
authorizations in
Ex Parte No. 162 and
Ex Parte No.
166, modified as herein indicated and as proposed before the
Florida commission in proceedings referred to herein: . . . (5)
that no intrastate rate or charge shall be increased so that it
will exceed the lowest level of the corresponding rates or charges
contemporaneously maintained generally in interstate traffic to and
from Florida points in the period from August 21, 1948, to, but not
including, January 11, 1949. . . ."
"These findings are
without prejudice to the right of
the authorities of the Florida, or any other interested party,
to apply for a modification thereof as to any specific
intrastate rates or charges on the ground that they are not
related to the interstate rates or charges on like traffic in such
a way as to contravene the provisions of the Interstate Commerce
Act."
(Italics supplied.) 278 I.C.C. at 72-74.
[
Footnote 14]
An alternative provision of § 13(4) is that, whenever in such an
investigation the Commission finds that an intrastate rate
causes
"any undue or unreasonable advantage, preference, or prejudice
as between persons or localities in intrastate commerce, on the one
hand, and interstate or foreign commerce, on the other hand, . . .
it shall prescribe the rate . . . thereafter to be charged . . . in
such manner as, in its judgment, will remove such advantage,
preference, prejudice, or discrimination."
Note 1 supra. On
this point, the Commission's finding No. 7 states that the
maintenance of intrastate rates in Florida
"on bases lower than those herein approved causes, and in the
future will cause . . . (2) in nearly all instances, undue
preference of and advantage to localities in intrastate commerce,
and undue prejudice to localities in interstate commerce. . .
."
278 I.C.C. at 73. As to this alternative provision,
see also
Wisconsin R. Commission v. Chicago, B. & Q. R. Co.,
257 U. S. 563;
Houston, E. & W.T. R. Co. v. United States,
234 U. S. 342. In
view of the above restricted finding and of the doubt expressed by
the court below as to the ability of the Commission to sustain its
action on that ground, we place no reliance upon this alternative
here.
[
Footnote 15]
See Illinois Commerce Commission v. United States, supra;
Florida v. United States, 292 U. S. 1;
United States v. Louisiana, supra; Louisiana P.S. Commission v.
Texas & N.O. R. Co., 284 U. S. 125;
Alabama v. United States, 283 U.
S. 776;
Georgia P.S. Commission v. United
States, 283 U. S. 765;
New York v. United States, 257 U.
S. 591;
Wisconsin R. Commission v. Chicago, B. &
Q. R. Co., 257 U. S. 563.
[
Footnote 16]
In its report, the Commission says
"where, as is the case here, the intrastate and the interstate
traffic as a whole moves under substantially similar conditions,
and the expense of handling the two classes of traffic are
inextricably woven together, an attempt to do the impossible --
namely an attempt to show costs of intrastate service segregated
from interstate costs, together with similarly segregated valuation
of carrier property -- would serve no useful purpose."
287 I.C.C. at 66.
MR. JUSTICE DOUGLAS, with whom Mr. Chief Justice VINSON concurs,
dissenting.
The Court has taken an unprecedented, and, in my view, an
unwarranted, step in enlarging the authority of the Interstate
Commerce Commission. It upholds the power of the Commission to
raise intrastate freight rates not because they favor intrastate
over interstate commerce, not because they fail to yield their fair
share of the carriers' revenue, but because the carriers'
interstate passenger operations are losing money.
The power of Congress to regulate intrastate rates stems from
its authority to promote and protect interstate commerce.
See Shreveport Rate
Case, 234 U.S.
Page 344 U. S. 277
342. [
Footnote 2/1] By § 13(4)
of the Act, the Commission is empowered to regulate
intrastate rates which are found to be discriminatory. The
key to this regulatory authority is
discrimination against
interstate commerce, which presupposes that, somehow or other,
the particular intrastate rates interfere with or prejudice
interstate commerce. This principle is explicit in § 13(4)
[
Footnote 2/2] and in the decisions
of the Court both before and after the enactment of § 13(4).
[
Footnote 2/3]
Page 344 U. S. 278
In this case, there is no rational relation between
intrastate fright rates and
interstate passenger
operations. The present level of freight rates in Florida neither
hampers nor obstructs the free flow of interstate passenger
transportation. They do not affect its quantity or flow. There is
therefore no basis for a finding of discrimination against
interstate commerce.
The Commission, of course, is authorized to regulate intrastate
rates so that intrastate operations will provide a fair share of
the carriers' revenue. [
Footnote
2/4]
See Wisconsin R. Commission v. Chicago, B. & Q. R.
Co., 257 U. S. 563. But
that authority rests on the Commission's power to remove
discrimination. If, for example, intrastate freight operations fail
to produce an adequate return as determined by reference to the
cost of the intrastate operations and the investment in the
intrastate business, interstate commerce is discriminated against.
But there is no such failure in this case. Intrastate freight
operations in Florida are amply profitable, and carry their fair
share of the load. The Commission nevertheless has saddled the
intrastate freight business with the deficits from the interstate
passenger business. If there is any discrimination here, it is
against the local Florida shipper.
Page 344 U. S. 279
The Commission surmises, but does not find, that the intrastate
passenger rates contribute to the passenger deficits of the
carriers. But there is no showing that either the intrastate
passenger rates or the intrastate freight rates do, in fact,
contribute to these deficits. Moreover, even if we assume that
intrastate passenger rates do contribute to the passenger deficits,
we do not know the amount. The absence of these material findings,
see North Carolina v. United States, 325 U.
S. 507, indicates to me the short cut which the
Commission is taking to enlarge its jurisdiction to unprecedented
limits.
[
Footnote 2/1]
As Mr. Justice Hughes, speaking for the Court in the
Shreveport case, said, 234 U.S. at
234 U. S.
351:
"Congress is empowered to regulate -- that is, to provide the
law for the government of interstate commerce; to enact 'all
appropriate legislation' for its 'protection and advancement'
(
The
Daniel Ball, 10 Wall. 557,
77 U. S.
564); to adopt measures 'to promote its growth and
insure its safety' (
County of Mobile v. Kimball, supra);
'to foster, protect, control, and restrain' (
Second Employers'
Liability Cases supra). Its authority, extending to these
interstate carriers as instruments of interstate commerce,
necessarily embraces the right to control their operations in all
matters having such a close and substantial relation to interstate
traffic that the control is essential or appropriate to the
security of that traffic, to the efficiency of the interstate
service, and to the maintenance of conditions under which
interstate commerce may be conducted upon fair terms and without
molestation or hindrance."
[
Footnote 2/2]
The relevant portions of § 13(4) read:
"Whenever, in any such investigation, the commission, after full
hearing, finds that any such rate, fare, charge, classification,
regulation, or practice causes any undue or unreasonable advantage,
preference, or prejudice as between persons or localities in
intrastate commerce, on the one hand, and interstate or foreign
commerce, on the other hand, or any undue, unreasonable, or unjust
discrimination against interstate or foreign commerce, which is
hereby forbidden and declared to be unlawful, it shall prescribe
the rate, fare, or charge, or the maximum or minimum, or maximum
and minimum, thereafter to be charged, and the classification,
regulation, or practice thereafter to be observed, in such manner
as, in its judgment, will remove such advantage, preference,
prejudice, or discrimination. . . ."
[
Footnote 2/3]
See Shreveport Rate Case, supra; American Express Co. v.
South Dakota, 244 U. S. 617;
Wisconsin R. Commission v. Chicago, B. & Q. R. Co.,
257 U. S. 563;
Florida v. United States, 282 U.
S. 194;
Georgia P.S. Commission v. United
States, 283 U. S. 765;
Louisiana P.S. Commission v. Texas & N.O. R. Co.,
284 U. S. 125;
United States v. Louisiana, 290 U. S.
70;
North Carolina v. United States,
325 U. S. 507.
[
Footnote 2/4]
Section 15a(2) of the Act reads in pertinent part:
"In the exercise of its power to prescribe just and reasonable
rates, the commission shall initiate, modify, establish, or adjust
such rates so that carriers as a whole . . . will, under honest,
efficient, and economical management and reasonable expenditures
for maintenance of way, structures, and equipment, earn an
aggregate annual net railway operating income equal, as nearly as
may be, to a fair return upon the aggregate value of the railway
property of such carriers held for and used in the service of
transportation. . . ."