1. Section 13(4) of the Interstate Commerce Act, which empowers
the Commission to remove unjust discrimination by intrastate rates
against interstate commerce by prescribing minimum intrastate
rates, is to be taken as supplementing § 15a(2), and, so construed,
empowers it to raise intrastate rates so that the intrastate
traffic may produce its fair share of the revenue 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. P.
290 U. S.
75.
2. In the performance of its duty, under § 15a(2), of providing
adequate revenue for groups of carriers, the Commission is not
obliged to undertake the impossible task of finding, in advance of
the order raising rates, the reasonableness of each individual
rate; it is enough if, with proper procedure and supported by
evidence, it find that the increases to be allowed, when applied to
members of a group, will generally not exceed reasonable maxima,
reserving to all interested parties the right to secure
modification of any particular rates which, when challenged, may be
found to be unjust or unreasonable. P.
290 U. S.
75.
3. This same principle applies when intrastate rates are raised,
under § 13(4), to the level of interstate rates increased under §
15a(2). P.
290 U. S.
78.
4. Findings of the Commission, read with its reports,
held sufficient as findings that, through failure to
contribute such increased
Page 290 U. S. 71
revenue as would result from increased intrastate rate, the
intrastate traffic in question was not bearing its fair share of
the burden of maintaining a national transportation system, and
that the probability that proposed increase of those rates would
increase the revenue was sufficiently great to make the increase a
reasonable exercise of sound managerial judgment. P.
290 U. S.
80.
5. The fact that increases of interstate rates were permissive
only does no affect the validity of an order under § 13(4) for
corresponding increases of intrastate rates which is to remain in
effect only so long as the increases of interstate rates shall be
maintained by the carriers. P.
290 U. S. 82.
2 F. Supp. 545 reversed.
Appeal from a decree of the District Court of three judges
setting aside an order of the Interstate Commerce Commission for
increased intrastate rates.
See 186 I.C.C. 615; 178
id. 539; 179
id. 215.
MR. JUSTICE STONE delivered the opinion of the Court.
This is an appeal under the Urgent Deficiencies Act of October
22, 1913, 38 Stat. 208, 219, 220, Judicial Code, § 238, from a
final decree of a District Court, of three judges, for Eastern
Louisiana, which made permanent an interlocutory decree staying an
order of the Interstate Commerce Commission. The order directed the
removal of unjust discrimination against interstate commerce
resulting from intrastate rates maintained by rail carriers
Page 290 U. S. 72
in Louisiana, by prescribing an increase in intrastate rates on
specified commodities, in amounts equal to increases in interstate
rates on the same commodities, established by appellant carriers
under the authority of an earlier order of the Commission in the
Fifteen Per Cent Case, 1931, 178 I.C.C. 539; 179 I.C.C. 215.
In the Fifteen Per Cent Case the Commission, acting under §
15a(2) of the Interstate Commerce Act, after an extensive hearing,
granted permission to the carriers of the country to add a
surcharge to established rates in amounts varying with different
commodities but not exceeding in any case 10 percent of the basic
rate. Thereupon, the railroads of the country, including those
operating in Louisiana, added the permitted surcharges to their
interstate rates and most states authorized like increases in their
intrastate rates. Others failed to increase the intrastate rates,
and the State of Louisiana, by its Public Service Commission,
refused to allow the increase on some thirty-seven commodities and
on all less than carload lots. The carriers filed petitions
invoking the exercise of the power of the Commission under § 13(3)
and (4) of the Interstate Commerce Act, as added by Transportation
Act 1920, § 416, 41 Stat. 484, to remove undue discrimination by
those intrastate rates against interstate commerce. This
proceeding, after an extended investigation and hearings by the
Commission, resulted in the order challenged here. Increase in
Intrastate Rates, 186 I.C.C. 615. It requires the carriers to
charge, upon specified commodities and all less than carload lots
in intrastate commerce in Louisiana,
"rates which shall be not lower than the rates now in force and
applicable to the interstate transportation of said traffic within
the State of Louisiana, plus the surcharge authorized by the
findings in the Fifteen Per Cent Case . . . on corresponding
interstate traffic, so long as such surcharges are maintained. . .
."
In setting aside the order, the court below rested its decision
upon the inadequacy of the Commission's findings.
Page 290 U. S. 73
It thought that, as the Commission, in the Fifteen Per Cent
Case, 1931, did not find that the several interstate rates
resulting from the authorized surcharges would each be just and
reasonable, there was no basis for raising the intrastate rates
under § 13(3) and (4),
see Florida v. United States,
282 U. S. 194;
cf. Georgia Pub. Serv. Comm'n v. United States,
283 U. S. 765, and
that the order could not be supported as a revenue measure because
there were no findings that the increased rates would produce an
increase in carrier income. It is also argued here that the order
assailed is invalid because the Commission, in its earlier order,
did not require the carriers to increase their rates interstate,
but only permitted them to do so at their option.
1. The Transportation Act of 1920, by § 422, 41 Stat. 488, added
§ 15a(2) to the Interstate Commerce Act, [
Footnote 1] for the first time laid on the Commission
the affirmative duty to establish rates for interstate rail
carriers
". . . so that carriers as a whole (or as a whole in each of
such rate groups of territories as the Commission may from time to
time designate) 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,
Page 290 U. S. 74
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. . . ."
See Wisconsin Railroad Comm'n v. C., B. & Q. R.
Co., 257 U. S. 563;
Dayton-Goose Creek Ry. v. United States, 263 U.
S. 456;
New England Divisions Case,
261 U. S. 184,
261 U. S. 189.
Associated provisions calculated to preserve carrier income in the
interests of an efficient transportation service were those
empowering the Commission to permit pooling of traffic and
earnings, § 407 of the Transportation Act amending § 5 Interstate
Commerce Act, and to fix minimum, as well as maximum, rates, § 418
of Transportation Act amending § 15(1) Interstate Commerce Act, to
preclude the absorption of traffic of weaker competitors by
cutthroat competition.
See New England Divisions Case,
supra, 261 U. S.
190.
Under earlier acts, the Commission had been given power to
remove unjust discrimination in rates or service between shippers
or localities, § 2 Act of February 4, 1887, 24 Stat. 379, 880; § 3
Interstate Commerce Act, and rates in interstate commerce were
required to be reasonable "in the sense of furnishing an adequate
compensation for the particular service rendered and the abolition
of rebates."
Wisconsin Railroad Comm'n v. C., B. & Q. R.,
Co., supra, 257 U. S. 585;
§ 1 Act of 1887; § 4 Act of 1906, 34 Stat. 589; § 15 Interstate
Commerce Act. Under these acts, the Commission had the power to
order the carriers to desist from discrimination against interstate
shippers by intrastate rates,
Shreveport Case,
234 U. S. 342,
but, until the Transportation Act, it was without authority to
prescribe intrastate rates.
By § 416 of the Transportation Act, adding § 13(4) to Interstate
Commerce Act, directly involved here, the Commission was given
power to remove unjust discrimination by intrastate rates against
interstate commerce, by prescribing minimum intrastate rates.
[
Footnote 2] This Court has
consistently
Page 290 U. S. 75
held that this section is to be construed in the light of §
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 § 15a to maintain an
efficient transportation system by enabling the carriers to earn a
fair return. So construed, § 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.
Wisconsin Railroad Comm'n v. C., B. & Q. R.
Co., supra, 257 U. S.
586-590;
New York v. United States,
257 U. S. 591,
257 U. S. 601;
Florida v. United States, supra, 282 U. S. 211;
Louisiana v. United States, 284 U.
S. 125,
284 U. S. 131;
see Nashville, C. & St.L. Ry. Co. v. Tennessee,
262 U. S. 318.
As pointed out in the reports of the Commission in this case and
others (
see Increased Rates, 1920, 58 I.C.C. 220; New York
Passenger Fares, 59 I.C.C. 290), § 15a, by its terms, commands the
Commission, in providing the required revenue by increasing rates,
to deal with the carriers of the nation as a whole or in broad
classes, and as this Court recognized in the
New England
Divisions Case, supra, 261 U. S.
197-198, this requirement would be nullified and the
administrative arm of the Commission paralyzed if,
Page 290 U. S. 76
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.
It cannot be supposed that Congress, in placing this duty on the
Commission, intended, in the absence of some express provision
compelling it, that the Commission should follow a procedure which
would preclude its acting effectively, if at all. That such was not
its intention appears from the words of the statute. It does not,
in terms, command the Commission to find that each rate prescribed
under § 15a is just and reasonable, as prerequisite to a general
increase in rates. It provides only that the action of the
Commission in raising rates so that they may yield a fair return is
to be "in the exercise of its power to prescribe just and
reasonable rates," with the qualification, in the proviso to the
granted authority to increase rates, "that the Commission shall
have reasonable latitude to modify or adjust any particular rate
which it may find to be unjust or unreasonable. . . ." When read in
the light of the subject matter to which the section is to be
applied, the production of increased revenue by a nationwide or
group increase of rates, it is apparent that these provisions
cannot rightly be construed to require the Commission, as a
condition of any action by it, to find the reasonableness of each
individual rate. If the Commission were required to do that, there
would be no occasion for the granted latitude to modify those rates
found to be unjust or unreasonable.
The natural construction of the section, one consistent with its
language and making possible its practical operation, is that which
has uniformly been given to it by the Commission. Section 15a(2)
does not relieve the Commission from the responsibility of seeing
to it that the rates, as increased, are to be reasonable. But, in
performing
Page 290 U. S. 77
the duty broadly to increase carrier revenue, it is enough if
the Commission, in the first instance, makes such inquiry and
investigation as would enable it to say that the prescribed
increases, when applied to members of the group, will generally not
exceed a reasonable maximum. The extent of this inquiry and the
detail of investigation cannot be marked by this Court with
certainty. The size of the group dealt with, the nature of the
traffic, the urgency of the relief demanded, these and other
factors should condition the Commission's procedure in each case.
But, with proper procedure, the ultimate finding that the rates as
generally applied are reasonable, supported by evidence, and
accompanied by suitable reservation of the rights of all interested
parties to secure modification of any particular rate which, when
challenged, is found to be unjust or unreasonable, complies with
the statute. The requirement that increase of rates by Commission
action is to be in the exercise of its power to prescribe
reasonable rates is thus observed, but in conformity to the
administrative necessities which the proviso contemplates.
In the Fifteen Per Cent Case, 1931, the Commission, after a
careful survey, found itself faced with an acute emergency calling
for prompt action to give temporary financial relief to the
transportation system. The Commission's report amply discloses that
the reasonableness of the rates as generally applied was a
controlling consideration in fixing the varying amounts of the
surcharges and in selecting the particular items to bear them. This
is manifested in its conclusion that
"the freight articles selected by us in this connection were
those for the transportation of which we believed the rates could
be somewhat increased without causing the traffic to be transferred
to other agencies of transportation and without bringing about an
undue disturbance in business conditions or transgressing the
bounds of maximum reasonable
Page 290 U. S. 78
rates."
It was necessary under the circumstances that the increases take
effect without suspension, but this was done subject to the proviso
that
"the resulting rates will in all respects be subject to
investigation and determination as to the lawfulness of particular
rates or schedules of rates, as provided by the act."
The Commission's action complied with § 15a,
see New England
Divisions case, supra, 261 U. S.
197.
In proceeding under § 13(3) and (4) to make the order challenged
here, the Commission made no express finding that the increased
intrastate rates would be reasonable, but incorporated the findings
bearing on the reasonableness of the increased interstate rates
made in the Fifteen Per Cent Case, 1931. Although § 13(4) does not
in terms require the Commission to find that the intrastate rates
which it prescribes are reasonable, it is not questioned that the
section confers no authority on the Commission to require
intrastate rates to be raised above a reasonable level,
see
Georgia Pub. Serv. Comm'n v. United States, supra,
283 U. S. 770;
Florida v. United States, supra, and the appellees insist
that the order is defective because, in conforming the intrastate
rates to the reasonable level of interstate rates, the Commission
did not find specifically that, in each case, the rate as increased
would be just and reasonable. But we think that the relationship of
the section to § 15a(2), already described, is such that the
standard of reasonableness prescribed by the latter is that
necessarily set up for § 13(4), which supplements it. The
considerations already detailed which define that standard for §
15a necessarily define it for § 13(3) and (4), which creates a duty
in "dovetail" relationship to that imposed on the Commission by §
15a.
Wisconsin Railroad Comm'n v. C., B. & Q. R. Co,
supra, 257 U. S. 586.
The administrative difficulties which would preclude performance of
the duty imposed by § 15a if the Commission were required to find
that each individual rate prescribed is just and reasonable
Page 290 U. S. 79
would similarly prevent compliance with that under § 13(4).
Since neither can be performed effectively without performance of
the other, the standard of reasonableness to which the Commission
must conform is necessarily the same under both, and that implies
that, under § 13(4), as under § 15a(2), reasonable latitude must be
given for modification of particular rates found to be
unreasonable.
The case of the Louisiana rates was not alone before the
Commission, and it should not be treated as though it were. A
number of other states contesting, in the aggregate, a wide range
of rates were heard at the same time. Had the Commission been
required to go into the circumstances of each item with
particularity, the purpose of its original order would have been
defeated. It sufficed that the Commission found that Louisiana
showed nothing in the circumstances of its agriculture and industry
or its traffic conditions so different from the rest of the country
as to lead to the conclusion that the intrastate rates, raised to
the reasonable general interstate level, would not themselves be
reasonable, and that it saved the rights of interested parties to
test the reasonableness of any individual rate.
A question different from that before us was presented in
Florida v. United States, supra. There, the discrimination
was essentially one of undue prejudice against shippers, confined
by the evidence to rates prevailing in northern Florida. It
involved only one railroad and one commodity. It was not the
general revenue proceeding authorized by § 15a. The court was
careful to point out that the Commission had undertaken to
establish a statewide level of intrastate rates without any
findings with respect to the corresponding interstate traffic which
would tend to support the conclusion that a statewide alteration of
intrastate rates was necessary to protect the interstate commerce
involved.
Page 290 U. S. 80
2. The objection that the finding of unjust discrimination by
the intrastate rates against interstate commerce is unsupported by
any finding that the increased rates would produce increased
revenue is rested upon the statement, separated from its context in
the Commission's report, "we conclude that no positive finding in
regard to the revenue outcome of the increases can be justified."
It is manifest that any finding of undue prejudice to interstate
commerce, based upon the failure of prevailing intrastate rates to
contribute their fair share to the support of a national
transportation system, must necessarily rest upon a prediction that
an increase of the intrastate rates will result in an increase of
revenue, a prediction involving, especially since 1930, many
elements of uncertainty. There are no formal requirements for the
findings to be made by the Commission in this type of case,
see
Manufacturers Ry. Co. v. United States, 246
U. S. 467,
246 U. S. 490,
and while the particular form in which they were cast here is not
to be commended, the report, read as a whole, sufficiently
expresses the conclusion of the Commission, based upon supporting
data, including estimates of experienced railroad traffic men, to
which the report refers, that the probability of increased revenue
was sufficiently great to make the increase of rates a reasonable
exercise of sound managerial judgment. This, we think, meets the
requirements of the statute.
In the Fifteen Per Cent Case, 1931, the Commission had said:
"The plan outlined in the appendix we estimate will produce
between one hundred million and one hundred twenty-five million
dollars increased revenue on the basis of present traffic if
applied to both state and interstate."
And, in the proceeding resulting in the present order, it
said:
"We find that, in view of the surcharges which have become
effective interstate in the freight rates on the classes and
commodities here in question, under our findings in Fifteen Per
Cent Case,
Page 290 U. S. 81
1931,
supra, respondents' intrastate rates in Louisiana
on the same classes and commodities, to which no corresponding
surcharges have been added, have resulted and will result in unjust
discrimination against interstate commerce, except in the case of
intrastate rates on sugar cane."
This finding could only mean, when applied to the question in
hand, that the intrastate traffic was not bearing its fair share of
the burden of maintaining a national transportation system by
contributing such increased revenue as would result from an
increase in rates. This the Commission proceeded to point out in
detail when it said further:
"It is estimated that, based on the traffic of 1931, the
application of the surcharges on the excepted commodities would
produce additional annual revenue"
in substantial amounts named with respect to each of the
carriers participating in the traffic, and continued, saying:
"Railroad traffic men expressed the opinion that,
notwithstanding possible diversion of traffic to other
transportation agencies, the addition of the surcharge to the
intrastate rates would produce an increase in revenue."
And, as bearing upon the estimated revenue increase, the
Commission said:
"There is nothing of record which warrants the conclusion that
the situation as to fertilizer, cotton seed, cotton seed products,
fresh vegetables, or sweet potatoes is different in Louisiana from
what it is in other parts of the country or in surrounding states
where surcharges are now being assessed. Similar allegations with
respect to the possible effect of truck competition and as to the
ability of various commodities to stand any increase were made in
Ex parte 103 [The Fifteen Per Cent Case, 1931] and were considered
in reaching our conclusions. Nor is there anything to show that the
movement of sweet potatoes will be adversely affected by the
application of a surcharge thereon without a similar charge on
other potatoes."
Like findings were held sufficient to support similar orders,
which had been entered in this same proceeding,
Page 290 U. S. 82
when attacked before district courts of three judges in Montana
and Kentucky.
Montana v. United States, 2 F. Supp.
448;
Kentucky v. United States, 3 F. Supp.
778. Nor do they differ in any material way from those in
Wisconsin Passenger Fares, 59 I.C.C. 391, 393, which were deemed
adequately to support the finding of undue prejudice in
Wisconsin Railroad Comm'n v. C., B. & Q. R. Co.,
supra, 257 U. S. 580.
See also Georgia Pub. Service Commission v. United States,
supra; Alabama v. United States, 283 U.
S. 776;
Louisiana Public Service Comm'n v. Texas
& New Orleans R. Co., 284 U. S. 125.
3. The fact that the order of the Commission for the increase of
interstate rates was permissive only does not affect the validity
of its order prescribing minimum intrastate rates. The interstate
rates, after the addition of the authorized surcharges, were lawful
rates in interstate commerce, which was discriminated against by
the failure to make corresponding increases in intrastate rates.
This discrimination the Commission removed in the manner authorized
by § 13(4), by prescribing minimum intrastate rates at the same
level as the interstate rates. The order precluded any unauthorized
interference with state regulatory power by providing that it
should be effective only so long as the surcharges upon interstate
rates should be maintained by the carriers.
Reversed.
[
Footnote 1]
"§ 15a(2) 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 (or as a whole in
each of such rate groups or territories as the Commission may from
time to time designate) 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:
Provided, That the Commission shall have reasonable
latitude to modify or adjust any particular rate which it may find
to be unjust or unreasonable, and to prescribe different rates for
different portions of the country."
[
Footnote 2]
Section 13(4):
"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
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. . . ."
41 Stat. 456, 484.