In a proceeding under §13(3) and (4) of the Interstate Commerce
Act, the Interstate Commerce Commission considered the petition of
railroads operating in Utah for an increase in freight rates on
intrastate traffic in Utah, which had been denied by the Public
Service Commission of Utah. After making findings patterned after
those approved in
Kiff v. United States, 344 U.
S. 254, the Interstate Commerce Commission concluded
that the intrastate rates caused "undue, unreasonable, and unjust
discrimination against interstate commerce," and it issued an order
generally applying to intrastate traffic in Utah the 15% increase
previously granted generally for interstate traffic. Appellants
sued to set aside the order, but the District Court denied
relief.
Held: certain findings of the Commission lack
sufficient support in the evidence; the judgment is reversed, and
the cause is remanded to the District Court with instructions to
set aside the Commission's order and remand the cause to the
Commission for further proceedings in conformity with this opinion.
Pp.
356 U. S.
422-429.
(a) The Commission's finding that prevailing intrastate rates
were abnormally low and failed to contribute a fair share to
over-all revenue was not adequately supported by the evidence,
since there was no positive evidence to indicate that the relative
cost of intrastate traffic was as great as that of interstate
shipments. Pp.
356 U. S.
426-427.
(b) To support its finding that intrastate conditions were not
more favorable than those incident to interstate transportation,
the railroad evidence was far from substantial. Pp.
356 U. S.
427-428.
(c) The findings contain no indication that the Commission
concerned itself with the revenues derived from, or the conditions
incident to, intrastate passenger operations, which must be taken
into consideration in arriving at a general intrastate freight
level.
Chicago, M., St. P. & P. R. Co. v. Illinois,
355 U. S. 300. Pp.
356 U. S.
428-429.
146 F. Supp. 803 reversed, and cause remanded.
Page 356 U. S. 422
MR. JUSTICE CLARK delivered the opinion of the Court.
This appeal presents another clash between state and federal
authority in the regulation of intrastate commerce. The Public
Service Commission of Utah and the Utah Citizens Rate Association,
appellants, seek to set aside an order of the Interstate Commerce
Commission entered in a proceeding under § 13(3) and (4) of the
Interstate Commerce Act [
Footnote
1] in which an increase in intrastate
Page 356 U. S. 423
freight rates to the general level of interstate rates was
granted to railroads operating in Utah. 297 I.C.C. 87. The
principal contention here is that the evidence before the
Commission was insufficient to support its ultimate finding that
existing intrastate rates caused "undue, unreasonable, and unjust
discrimination against interstate commerce." 297 I.C.C. at 105. A
three-judge District Court found against appellants on this and all
subsidiary issues. 146 F. Supp. 803. Upon direct appeal, 28 U.S.C.
§ 1253, we noted probable jurisdiction. 352 U.S. 888 (1956). Having
concluded that certain findings of the Commission lack sufficient
support in the evidence, we reverse the judgment of the District
Court.
The action of the Commission was limited to freight rates on
intrastate traffic in Utah. In
Ex Parte No. 175,
Page 356 U. S. 424
the Commission had increased interstate freight rates on a
national basis by an aggregate of 15%. [
Footnote 2] The appellee railroads applied to the Public
Service Commission of Utah for a like increase in intrastate rates.
After a full hearing, the Utah Commission dismissed the application
on the ground that the railroads had not produced evidence
concerning their intrastate operations, as required by Utah law. No
appeal was taken. Instead, pursuant to 49 U.S.C. § 13(3) and (4),
the railroads filed a petition with the Interstate Commerce
Commission which led to the order under attack here. The Commission
found the evidence insufficient to establish any undue or
unreasonable advantage, preference, or prejudice as between persons
or localities in intrastate commerce, on the one hand, and
interstate commerce, on the other. But, in findings patterned after
those approved in
King v. United States, 344 U.
S. 254 (1952), it concluded that the intrastate rates
caused "undue, unreasonable, and unjust discrimination against
interstate commerce." 297 I.C.C. at 105. It sought to remove this
burden by generally applying to intrastate traffic the 15%
interstate increase previously granted in
Ex Parte No.
175. [
Footnote 3]
Appellants attack two findings of the Commission as not being
supported by substantial evidence. The first is that existing
intrastate rates were abnormally low, and failed to contribute
their fair share of the revenue needs of the railroads. Evidence
was introduced to show that some of Utah's intrastate rates were
lower than corresponding interstate rates for like distances. No
showing was made, however, of the comparative costs of
performing
Page 356 U. S. 425
such services. The second finding under attack is that the
conditions incident to intrastate transportation were not more
favorable than those incident to interstate movements. The evidence
underlying this finding indicated only that goods moving intrastate
were handled precisely as were those in interstate transportation,
being intermingled on the same trains.
Intrastate transportation is primarily the concern of the State.
Federal power exists in this area only when intrastate tariffs are
so low that an undue or unreasonable advantage, preference, or
prejudice is created as between persons or localities in intrastate
commerce, on the one hand, and interstate commerce, on the other,
or when those rates cast an undue burden on interstate commerce.
[
Footnote 4] Proof of such must
meet "a high standard of certainty,"
Illinois Central R. Co. v.
Public Utilities Comm'n, 245 U. S. 493,
245 U. S. 510
(1918); before a state rate can be nullified, the justification for
the exercise of federal power must "clearly appear."
Florida v.
United States, 282 U. S. 194,
282 U. S.
211-212 (1931). The Court pointed out in
North
Carolina v. United States, 325 U. S. 507,
325 U. S. 511
(1945), that the findings supporting such an order of the
Interstate Commerce Commission must encompass each of the elements
essential to federal power. Thereafter, in
King v. United
States, supra, we stressed the necessity of substantial
evidence to support the findings, although we held it unnecessary
"to establish for each item in each freight rate a fully developed
rate case." 344 U.S. at
344 U. S. 275.
In
King, however, the insufficiency of the findings rather
than of the evidence was urged upon the Court. Those findings,
which we held adequate to support an order increasing intrastate
rates, were,
inter alia, (1) that existing intrastate
rates were abnormally low, and did not contribute a fair share of
the railroads' revenue needs; (2) that conditions
Page 356 U. S. 426
as to the movement of intrastate traffic were not more favorable
than those existing in interstate commerce; (3) that the rates cast
an undue burden on interstate commerce; (4) that the increase
ordered by the Commission would yield substantial revenues; and (5)
that such increase would not result in intrastate rates' being
unreasonable, and would remove the existing discrimination against
interstate commerce. 344 U.S. at
344 U. S.
267-268, footnote 13. We also held in
King that
the Commission might give weight to deficits in passenger revenue
when prescribing intrastate freight rates so as to meet overall
revenue needs. In our most recent review of federal power in this
intrastate area,
Chicago, M., St. P. & P. R. Co. v.
Illinois, 355 U. S. 300
(1958), we relied on the principles of the above cases in striking
down an increase in intrastate passenger fares for a suburban
commuter service because the Commission had failed to take into
account "the carrier's other intrastate revenues from Illinois
traffic, freight and passenger." 355 U.S. at
355 U. S.
308.
We do not believe that the evidence here met the exacting
standards required by our prior cases. As to the finding that
prevailing intrastate rates were abnormally low and failed to
contribute a fair share of overall revenue, we discover no positive
evidence to indicate that the relative cost of intrastate traffic
was as great as that of interstate shipments. The absence of such
evidence is important, for it is not enough to say that interstate
rates were higher on similar shipments for like distances,
Florida v. United States, supra, at
282 U. S. 212,
especially where, as here, there was some indication that
intrastate traffic moved at lower cost than interstate. The annual
reports of the four interstate railroads operating in Utah showed
that their Utah operating ratios (freight service cost divided by
freight service revenue) and the Utah density statistics (ton mils
of traffic per mile of main track) were more favorable than
comparable systemwide figures.
Page 356 U. S. 427
The Commission discredited the density statistics because of the
absence of branch line inclusion in the totals. This was true,
however, in the case of both Utah and system-wide computations,
leaving no apparent foundation for the conclusion of
unreliability.
Other evidence seemed to indicate that those railroads with the
larger percentages of total operations within Utah enjoyed higher
rates of overall return for 1953, the year just prior to the
hearings in this case. The Denver & Rio Grande, with almost
half of its entire operations within Utah, showed a rate of return
of 6.06%. The Southern Pacific and Union Pacific, with
substantially smaller proportions of Utah operations Showed returns
of 3.48% and 3.56%, respectively.
Statistics introduced by the railroads as to comparative
economic conditions showed recent economic improvement to be
greater percentage-wise in the West, and particularly in Utah, than
in other sections. The emphasis recently has switched from
agriculture to industrial and mining activity, with its resulting
increase in traffic -- a factor tending to suggest more favorable
railroad operating conditions.
As to the finding that intrastate conditions were not more
favorable than those incident to interstate transportation,
[
Footnote 5] the railroad
evidence on this point was far from substantial. In essence, it
merely showed that intrastate and interstate traffic was handled by
the same crews and intermingled in the same movement. This
Page 356 U. S. 428
failed to establish that all material factors bearing on the
reasonableness of rates were substantially the same. As we have
previously noted, appellants offered convincing evidence not only
of greater density on intrastate operations, permitting a wider
spread of fixed costs, but also of lower operating ratios and
higher returns as the percentage of intrastate traffic increased.
In the face of this proof, the evidence as to general similarity of
conditions falls short of the "high standard of certainty"
required.
It is suggested that the Commission, in granting general
interstate increases, frequently proceeds on the assumption that
intrastate rates will be raised to the same level. But this
assumption is no through ticket permitting it to approach the
question of intrastate rates with partiality for a uniform
increase. Rate uniformity is not necessarily the goal of federal
regulation, nor can the Commission's wishful thinking be
substituted for substantial evidence. Section 13 is not cast in
terms of "assumption" or "partiality." As applied to this case, it
contemplates an inquiry into intrastate rates and conditions within
Utah, and any conclusion that interstate operating conditions
equally exist there must be ticketed on more than assumption.
Finally, we note an absence in the findings of any indication
that the Commission concerned itself with the revenues derived
from, or the conditions incident to, intrastate passenger
operations. While a sweeping inquiry into those operations is not
required, we believe that, in light of our opinion in
Chicago,
M., St. P. & P. R. Co. v. Illinois, supra, the findings
must reflect consideration of these factors in arriving at a
general intrastate freight level.
"A fair picture of the intrastate operation, and whether the
intrastate traffic unduly discriminates against interstate traffic,
is not shown . . . by limiting consideration to the particular . .
. service in disregard of the revenue contributed by the other
intrastate service. "
Page 356 U. S. 429
355 U.S. at
355 U. S. 308.
This issue was not argued by the parties, our opinion in that case
having been announced after submission of the instant case. We
mention it at this point, however, since further proceedings before
the Commission no doubt will ensue.
The judgment of the District Court is reversed, and the cause is
remanded to that court with instructions to set aside the order of
the Commission and remand the cause to the Commission for further
proceedings in conformity with this opinion.
It is so ordered.
[
Footnote 1]
Sec. 13.
"(3) Whenever in any investigation under the provisions of this
part, or in any investigation instituted upon petition of the
carrier concerned, which petition is hereby authorized to be filed,
there shall be brought in issue any rate, fare, charge,
classification, regulation, or practice, made or imposed by
authority of any State, or initiated by the President during the
period of Federal control, the Commission, before proceeding to
hear and dispose of such issue, shall cause the State or States
interested to be notified of the proceeding. The Commission may
confer with the authorities of any State having regulatory
jurisdiction over the class of persons and corporations subject to
this part or part III with respect to the relationship between rate
structures and practices of carriers subject to the jurisdiction of
such State bodies and of the Commission, and to that end is
authorized and empowered, under rules to be prescribed by it, and
which may be modified from time to time, to hold joint hearings
with any such State regulating bodies on any matters wherein the
Commission is empowered to act and where the ratemaking authority
of a State is or may be affected by the action taken by the
Commission. The Commission is also authorized to avail itself of
the cooperation, services, records, and facilities of such State
authorities in the enforcement of any provision of this part or
part III."
"(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 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."
41 Stat. 484, as amended, 49 Stat. 543, 54 Stat. 911, 49 U.S.C.
§ 13(3, 4).
[
Footnote 2]
The increase was accomplished in three separate orders. 280
I.C.C. 179; 281 I.C.C. 557; 284 I.C.C. 589.
[
Footnote 3]
Appellants challenge the validity of the interstate increases
permitted in
Ex Parte No. 175. That record, however, was
not introduced in this proceeding; moreover, our disposition
requires no decision on this phase of the case.
[
Footnote 4]
See note 1
supra.
[
Footnote 5]
"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."
Illinois Commerce Comm'n v. United States, 292 U.
S. 474,
292 U. S.
483-484 (1934);
King v. United States, supra,
at
344 U. S.
273.
MR. JUSTICE FRANKFURTER, whom MR. JUSTICE BURTON, MR. JUSTICE
HARLAN, and MR. JUSTICE WHITTAKER join, dissenting.
This case involves an order of the Interstate Commerce
Commission raising rates on Utah intrastate freight traffic on the
ground that such rates unduly discriminate against interstate
commerce. The Court has found the evidence insufficient to support
the Commission's findings bearing on discrimination, and, although
petitioners do not call them in question, has also concluded that
the findings themselves are inadequate. Our holding in the recent
case of
Chicago, M., St. P. & P. R. Co. v. Illinois,
355 U. S. 300, has
been extended to require, even in such a case as this,
comprehensive findings concerning all intrastate operations.
There comes a time in the development of law, especially when it
concerns as complex and important a subject as that in the present
case, when a comprehensive survey must be made and the cumulative
effect of episodic instances appraised to determine whether or not
they reveal a harmonious whole. Case by case adjudication, without
scrutiny of underlying generalizations or presuppositions, must
culminate in an effort to determine whither we are going, and
whether the direction cut by
Page 356 U. S. 430
the specific instances should be further pursued, or whether it
represents a deviation from the path demanded by the purpose of the
regulatory legislation. These considerations, and the fact that the
sufficiency of the evidence can only be judged intelligently in the
light of the findings, make it necessary to consider at some length
the cases in which this Court has been concerned with intrastate
rate discrimination against interstate commerce and the findings
that have been required of the Commission to justify an order
removing such discrimination.
Federal regulation of intrastate rates originated in cases
involving discrimination as between particular persons or
localities engaged in interstate commerce and particular persons or
localities engaged in intrastate commerce. The discrimination in
the
Shreveport case,
Houston, E. & W.T. R. Co. v.
United States, 234 U. S. 342,
arose from the fact that interstate shippers were required to pay
more than intrastate shippers although the rate disparity was not
justified by any difference in costs, transportation conditions, or
other factors usually considered in setting rates. This
discrimination was removed in order to protect the interstate
commerce of the particular shippers or localities shown to have
been prejudiced, the same reason for prohibiting under § 3(1) of
the Interstate Commerce Act, 24 Stat. 379, 380, as amended, 49
U.S.C. § 3(1), any "undue or unreasonable preference or advantage
to any particular person . . . locality . . . or any particular
description of traffic . . . " where two forms of interstate
commerce are involved. It has often been said that this form of
discrimination arises simply from the relation of rates to each
other, but this is true only if it is understood that the
circumstances that enter into the setting of rates and justify
differences between them are also taken into consideration. Even in
a persons-localities case, discrimination is not made out merely
from a disparity in rates, but, as the Court made clear in the
Page 356 U. S. 431
Shreveport case, the disparity must exist under
"substantially similar conditions and circumstances. . . ." 234
U.S. at
234 U. S.
347.
The power to remove discrimination thus announced in the
Shreveport case, as between persons and localities in
interstate and intrastate commerce, was given express statutory
basis by § 416 of the Transportation Act of 1920, 41 Stat. 456,
484, 49 U.S.C. § 13(4), amending § 13 of the Interstate Commerce
Act. The amendment added, however, as part of a much more
comprehensive regulation of the Nation's transportation system, a
broad prohibition against "any undue, unreasonable, or unjust
discrimination against interstate or foreign commerce. . . ." This
provision, taken in conjunction with § 15a(2), 41 Stat. 456, 488,
as amended, 49 U.S.C. § 15a(2), was construed in
Railroad
Comm'n of Wisconsin v. Chicago, B. & Q. R. Co.,
257 U. S. 563, to
authorize the Commission to remove "revenue discrimination"
resulting from unjustifiably low intrastate rates. The
constitutionality of this power was upheld against claims of
unwarranted intrusion into the area reserved to the States in their
control over intrastate commerce. "Revenue discrimination" consists
not in prejudice to particular shippers or localities, but in the
burden cast on interstate commerce because of the failure of
intrastate commerce to contribute its fair share to meet the
revenue needs of the carrier. Of course interstate shippers and
localities will ultimately be prejudiced by having to make up
revenues properly due from intrastate commerce or by the collapse
of an adequate transportation system, but the immediate purpose of
the exercise of the Commission's power under this head is to assure
to the carrier needed revenues. The test of what revenues are
needed is found in §15a(2), 41 Stat. 456, 488, as amended 49 U.S.C.
§ 15a(2), which instructs the Commission, in prescribing rates, to
give due consideration
Page 356 U. S. 432
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 National Transportation Policy of 1940, 54 Stat. 899, 49
U.S.C. at pp. 7107-7108, in turn expanded and supplemented the test
of § 15a(2). The "dovetail relation," as Mr. Chief Justice Taft
termed it in the
Wisconsin case, 257 U.S. at
257 U. S. 586,
between the second part of § 13(4) and § 15a(2), thus gave a much
broadened purpose to federal regulation.
"Theretofore, the effort of Congress had been directed mainly to
the prevention of abuses; particularly those arising from excessive
or discriminatory rates. The 1920 Act sought to ensure also
adequate transportation service."
New England Divisions Case, 261 U.
S. 184,
261 U. S.
189.
The order sustained in the Wisconsin case affected intrastate
fares on a statewide basis. The Court expressly rejected
discrimination against persons or localities as justification for
the order on the ground that there was insufficient evidence to
support a finding of statewide discrimination of this kind. This
conclusion may have been justified in the
Wisconsin case
itself. However, the limitation imposed by that case and later
cases upon the effective scope of the persons-localities basis of
discrimination, because of stringent evidentiary requirements,
seems to have derived more from the origin of the prohibition in
the particular kind of situation presented by the
Shreveport case than from restrictions inherent in the
regulatory scheme contemplated by the statute. Whether
discrimination is directly against shippers or against the revenues
of the carriers, practical considerations require that evidence
typical of discriminatory conditions be sufficient to justify an
order that goes
Page 356 U. S. 433
beyond the particular instances shown. In revenue cases,
evidence of some intrastate rates may be deemed typical, and relied
on to show that intrastate rates in general do not contribute their
fair share to revenues. Likewise, it might not have been
unreasonable to rely on evidence of prejudice to certain interstate
shippers as indicative of prejudice throughout the State to
interstate shippers, and thus justify a statewide order to remove
discrimination against "interstate commerce" without resort to the
question of revenues.
For a time, it appeared that § 13(4) would be construed to
authorize the removal of discrimination against interstate commerce
on such a basis. In
Georgia Public Service Comm'n v. United
States, 283 U. S. 765, for
example, the Court sustained a statewide order not confined in its
effect to traffic directly shown to have been prejudiced, yet
attention does not seem to have been directed to the revenue needs
of the carriers. In its opinion, the Court spoke particularly of
"undue prejudice and discrimination to interstate shippers and
localities . . . ," 283 U.S. at
283 U. S. 773,
and the brief for the Interstate Commerce Commission indicates that
the case was not primarily conceived of as a revenue case. Pp.
38-40. (
See also the significance of the Court's reliance,
283 U.S. at
283 U. S. 774,
on
Nashville, C. & St. L. R. v. Tennessee,
262 U. S. 318.) In
Louisiana Public Serv. Comm'n v. Texas & N.O. R. Co.,
284 U. S. 125, an
order affecting rates throughout most of the State was sustained in
spite of the fact, as appellants pointed out, 284 U.S. at 126-128,
that there were no findings in regard to revenue. Finally, in
Ohio v. United States, 292 U. S. 498, the
Court sanctioned an unusually wide application of the
persons-localities basis of discrimination in sustaining an order
raising coal rates throughout the entire northeastern part of
Ohio.
Nevertheless, the approach suggested by these cases was not, in
fact, carried forward. The first Florida case
Page 356 U. S. 434
Florida v. United States, 282 U.
S. 194,
282 U. S. 208,
strongly reaffirmed the
Wisconsin case in its rejection of
the persons-localities basis for a statewide order, and in the
requirement that an order predicated on such a theory be restricted
to "competitive territory."
See American Express Co. v. South
Dakota ex rel. Caldwell, 244 U. S. 617,
244 U. S. 626.
This was perhaps inevitable in view of the fact that the
Shreveport doctrine had been evolved to remedy a specific
situation -- prejudice against particular shippers or localities
shown be relatively direct evidence -- so that the evil that gave
rise to the legal theory in turn limited its growth. Furthermore,
the broad power that the Court found in the relation between §
13(4) and § 15a(2), to protect the carriers' revenues, made it
appear unnecessary to expand the persons-localities theory in order
effectively to protect interstate commerce. The result has been
that, over the years, the cases that have come before this Court
that have resulted in significant developments under § 13(4) have
been almost exclusively revenue cases.
Findings in revenue cases under section 13(4). -- In
these cases, we have been concerned to set forth, with such
precision as the subject matter permits, the findings required to
justify an ultimate conclusion that there is a revenue
discrimination against interstate commerce. Such findings need not
be, in any particular form of words, the automatic recitation of a
talismanic formula, but must give ample assurance that the
Commission has applied the standards and engaged in the process of
judgment contemplated by the statute. Only through the findings can
a court know what it is that the Commission has decided and is to
be reviewed.
Since the purpose of the proceeding is to increase the
contribution to revenues from intrastate traffic, there must be a
finding that higher rates will in fact result in increased
revenues. If business is unable to bear the
Page 356 U. S. 435
higher rates, and either production will be curtailed or traffic
diverted to cheaper modes of transport, increased rates may
actually decrease revenues. The Commission's finding on this matter
must express an informed, expert judgment about probabilities. It
may not rest simply on the mechanical application of proposed rates
to the volume of past traffic, but, on the other hand, the fact
that there is uncertainty about the actual revenue outcome will not
make the finding insufficient.
United States v. Louisiana,
290 U. S. 70,
290 U. S.
80.
The finding principally required in a revenue case is that
intrastate commerce is not contributing its "fair share" to the
revenues needed to achieve the ends set forth in § 15a(2) and the
National Transportation Policy. What share is a fair share?
Intrastate traffic is not contributing a fair share if it pays
lower rates than interstate traffic when, on balance, the
circumstances that usually go to the setting of rates are not
substantially more favorable for intrastate traffic than for
interstate traffic. As already indicated, this same test is
applicable in cases involving discrimination against persons or
localities. A disparity in rates does not alone establish a
forbidden discrimination, as the Court has frequently said, nor, it
is equally clear, since conditions surrounding interstate
transportation may be more favorable, does identity of rates alone
give assurance that there is not such discrimination.
The most obvious of the circumstances thus made relevant are the
costs that enter into the rendering of the transportation service.
The circumstances that go to the setting of a rate, however, are
not necessarily confined to such costs, but may include a wide
range of other considerations such as the ability of traffic to
bear the increase and the economic condition of an industry. Costs,
furthermore, may be considered indirectly through the factors that
generate costs, such as the quality of the service
Page 356 U. S. 436
rendered, the physical characteristics of the area through which
the traffic moves, average loading, average length of haul, density
of traffic, and so forth. In regard to the average length of haul,
for example, if terminal costs are fixed, the longer the haul the
more the carrier will realize per mile unless the rate is itself
graduated to take this fact into account. Interstate hauls are
probably, on the whole, longer than intrastate hauls. Where
passenger service is concerned, wholly different factors may become
important in deciding whether fare differentials are justified. For
instance, coaches used in intrastate suburban or commuter service
may require more cleaning and average fewer passenger miles per day
than through coaches.
See, e.g., In re Intrastate Rates Within
Illinois, 102 I.C.C. 479, 483. It is apparent that the factors
that may reasonably be found to enter into costs are inexhaustible
in number and too changing in significance to permit a definitive
catalogue to be drawn up. Least of all should such a task be
undertaken by courts that cannot be assumed to have familiarity
with, let alone specialized knowledge of, the practicalities of the
transportation industry, and whose contact with these matters is
necessarily episodic. Understanding in such a complex area as rate
regulation, and the feel for the subject essential to successful
administration, come only from saturation in the elements of the
problem by those constantly concerned. Even to the Commission, what
one year has appeared an inconsiderable factor in appraising
relative transportation conditions affecting costs has, the next,
in the light of new experience, been deemed highly relevant.
It is essential to bear in mind precisely what it is that the
Commission compares when it compares the circumstances surrounding
the movement of interstate and intrastate traffic that go to the
setting of rates. In the case of interstate traffic, one rate set
for an entire interstate movement
Page 356 U. S. 437
may take into account not only conditions within the State whose
intrastate rates are in question, but also conditions in
surrounding States. In comparing cost factors, therefore, it may be
necessary to consider not only whether interstate and intrastate
traffic, as they move through the State, move under the same
conditions, but also the conditions under which interstate traffic
moves beyond the borders of the State. The interstate area relevant
to this inquiry may embrace several States, such as the Western
District in the present case, or half the country; it is the area
chosen in setting the interstate rates.
What findings the Commission is required to make concerning the
circumstances surrounding interstate and intrastate transportation
to justify an ultimate finding that intrastate traffic is not
contributing its fair share to revenues have necessarily been
dictated more by the practicalities of administration than the
demands of abstract logic. The Commission has not been required to
make findings as to revenues and costs attributable to intrastate
traffic, or even to make findings specifically negativing the
existence of any factors that might affect costs. Although such
findings would give increased assurance that intrastate commerce
was not being made to bear more than its fair share, an
unwillingness to render nugatory the provisions of § 13(4) by
imposing upon the Commission obligations impossible of fulfillment
has precluded the Court from such a requirement.
In
Illinois Commerce Comm'n v. United States,
292 U. S. 474, a
case involving rates in the Chicago Switching District, the Court
clearly laid down what had been implicit in earlier cases
sustaining Commission orders. In reply to a contention that there
had been no finding separating interstate and intrastate property,
revenues, and expenses, the Court stated:
"Where the conditions under which interstate and intrastate
traffic move are found to be substantially the same with respect to
all
Page 356 U. S. 438
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."
292 U.S. at
292 U. S.
483-484. This statement was quoted with approval and
applied in
King v. United States, 344 U.
S. 254,
344 U. S. 273.
The order in the
King case was sustained although the only
finding respecting the similarity of conditions surrounding
interstate and intrastate transportation was the general finding
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."
278 I.C.C. 41, 72.
See also the second
Florida
case,
Florida v. United States, 292 U. S.
1,
292 U. S. 11.
More elaborate findings have not been required because of the
practical impossibility, at least where the traffic is mingled and
carried on as one operation, of accurately segregating costs
between interstate and intrastate commerce. Moreover, a general
finding of similarity of conditions was held sufficient because it
would have been the height of imprudence for this Court to require
the Commission specifically to negative the existence of all
factors that might touch on costs when, because of the changing
nature of the transportation industry and the endless variety of
situations giving rise to discrimination, such factors are not
precise, fixed, or equal in importance. The holding in the
King case was a practical solution hammered out to meet
the almost intractable difficulty of regulating as two systems what
is, in fact, one integrated transportation system of interstate and
intrastate commerce, where regulation, if there is to be regulation
at all, must be by approximation and compromise.
Page 356 U. S. 439
Evidence in section 13(4) cases. -- In the present
case, the Commission found that
"The conditions incident to the intrastate transportation of
freight in Utah are not more favorable than those incident to the
interstate transportation between Utah and adjoining States."
Petitioners attack this finding as not supported by substantial
evidence. The findings necessary to support an order under § 13(4)
have been considered at length because only in the light of them,
and the reasons that led the Court to require these, and not more
elaborate, findings, can the sufficiency of the evidence be
appraised. Thus, it would be paradoxical, after deciding that the
Commission need not make findings segregating costs because of the
practical impossibility of accurate allocation, to require that
evidence to the same effect be in the record. Likewise, if
individual findings on particular factors that may bear on costs
need not be made because an authoritative catalogue of such factors
cannot be compiled, it would be inconsistent, and would disregard
the criteria governing the findings, to require that the record
contain evidence as to all such factors or as to any particular
factor.
Since, as cannot too often be pointed out, the Commission's
administration of § 13(4) must, from the nature of the case,
proceed by approximation and estimate, and, for this reason, the
possible must have a large share in determining the permissible, it
is highly relevant to examine at least some of the § 13(4) cases
that have come before this Court to determine what evidence has
actually been in the record in support of findings of similarity of
conditions. In determining whether the record in the present case
satisfied the requirement of substantial evidence, we do not deal
with a new problem.
In the
Wisconsin case itself,
Railroad Comm'n of
Wisconsin v. Chicago, B. & Q. R. Co., 257 U.
S. 563, a stipulation that operating and transportation
conditions were
Page 356 U. S. 440
substantially the same made it unnecessary to examine the
evidence underlying the Commission's finding on this point, and the
record on which the Commission founded its order was not, in fact,
before this Court. In
New York v. United States,
257 U. S. 591,
however, a case also involving intrastate passenger fares, this
Court affirmed the District Court's dismissal of a bill brought to
annul the Commission's order when the substantiality of the
evidence was squarely in issue. The record contained testimony that
physical characteristics of interstate and intrastate service, type
of equipment, running time, and accommodations were similar, and,
in addition, there was testimony of the most general sort that
transportation conditions within the State did not justify lower
rates. There was some indication that traffic density in New
England was greater than in New York.
Alabama v. United States, 283 U.
S. 776, involved intrastate rates on fertilizer and
fertilizer materials. The issue of the substantiality of the
evidence to support the Commission's findings was squarely
presented. The record contained no evidence of the cost of the
intrastate service. Instead, there was general testimony that the
conditions surrounding intrastate and interstate transportation in
Alabama were substantially similar, and that the witnesses knew of
no conditions in Alabama that would justify different intrastate
rates. There was some evidence that the tonnage of fertilizer
moving intrastate was much greater than that moving interstate, and
that ton-miles per loaded car of fertilizer were greater in Alabama
than in the Southern District as a whole. Evidence was introduced
of competition from wagons on short, intrastate hauls. Yet, in
spite of this specific evidence tending to show, as against the
more general testimony, that conditions affecting intrastate
traffic were not the same as those affecting interstate traffic,
this Court sustained the Commission's order, finding that the
question
Page 356 U. S. 441
of similarity of transportation conditions had been "thoroughly
canvassed," and that the findings were supported by evidence. 283
U.S. at
283 U. S. 779
and note 4.
In
Louisiana Public Service Comm'n v. Texas & N.O. R.
Co., 284 U. S. 125,
involving both interstate and intrastate rates on sand, gravel, and
similar materials in western Louisiana, this Court found that the
facts stated in the opinion were adequately supported by the
evidence, and were sufficient to warrant the order prescribing
higher rates. The record contained evidence as to general freight
costs per mile in different States in the territory embracing
Louisiana, but no comparison was made of the costs of interstate
and intrastate transportation within the State, and there was no
evidence of the cost of transportation in the particular part of
Louisiana concerned, or of the particular commodities on which
higher rates were sought. Evidence was introduced to show general
freight density in the States in the territory considered,
interstate and intrastate combined, and, according to the
Commission, 155 I.C.C. 247, 253, about ninety per cent of the
movements of the particular commodities involved was intrastate.
There was also considerable evidence that bore indirectly on
traffic density in these commodities: tonnage moved in each of the
States; producers throughout the territory, in Louisiana, and in
western Louisiana; total production in western Louisiana; shipments
to particular consumers; estimates, based on the Louisiana highway
program and population statistics, of probable future consumption.
In addition, there was the usual general testimony on similarity of
conditions, and references to Commission findings in earlier
proceedings on the same question. Although the record is, as to the
issue we are here concerned with, one of the most extensive in any
§ 13(4) case that has been before the Court, there is little or no
evidence specifically directed to transportation conditions in the
southern part
Page 356 U. S. 442
of western Louisiana, the area to which the Louisiana Commission
had specifically refused to apply the interstate level of
rates.
Another case in which this Court found that there was
substantial evidence was
Florida v. United States,
292 U. S. 1,
involving intrastate rates on logs. The record contained evidence
bearing on the cost of transporting logs in Florida, and indicating
that existing intrastate rates did not cover the cost of the
service. As to freight in general, there was evidence that costs
per gross ton-mile were higher on the carrier's lines in Florida
than for the rest of its system, and that density on its lines in
Florida, intrastate and interstate combined, was less than for its
system as a whole or its system excluding Florida. These
comparisons involved the question whether evidence of general
freight conditions could be used to justify raising rates on a
particular commodity. The case furnished the best evidence on the
probability that increased rates would increase revenues because
the proposed intrastate rates had actually been in effect for a
period before the Court set aside an earlier order of the
Commission.
In
Illinois Commerce Comm'n v. United States,
292 U. S. 474,
already referred to in connection with the rule that there need not
be findings segregating interstate and intrastate expenses, the
Court also found that there was substantial evidence. The
Commission relied primarily on an extensive cost study of the
movement of all commodities in the Chicago Switching District, a
study that did not, however, make any separation between interstate
and intrastate costs. There was evidence of the physical
characteristics of the service: that interstate and intrastate
traffic were handled in the same manner and carried on the same
trains. On the other hand, it was shown that average intrastate
hauls were shorter than average interstate hauls, yet the
Commission had set a single rate no
Page 356 U. S. 443
matter what the length of haul. In spite of this evidence
indicating that at least one factor underlying costs favored
intrastate traffic, the Court upheld the Commission's order.
Mississippi ex rel. Rice v. United States, 307 U.S.
610, concerned intrastate rates on sand, gravel, fertilizer, and
fertilizer materials. This Court affirmed the District Court per
curiam, citing cases to the effect that the Commission's orders
would be sustained when supported by substantial evidence. The
record contained no evidence segregating costs between intrastate
and interstate traffic, although one witness testified generally
that costs were less in Mississippi than in neighboring States.
There was no evidence on traffic density as such, but considerable
from which conclusions as to density might be inferred. Thus, there
was evidence of the tonnage of the commodities involved that had
been moved by the carriers, intrastate, interstate, and total,
during selected annual periods, and evidence of points of
production in Mississippi. The carriers relied on testimony that
the same service was rendered interstate and intrastate traffic,
and the usual general evidence of similarity of conditions. Against
this was testimony that the bulk of intrastate movements were
single-line, and that, because of extra switching and inspection of
cars at switching points, and because of the necessity of keeping
interchange records, joint-line movements were more expensive than
single-line. Dispute centered principally on whether increased
rates would increase revenues. Evidence was introduced to show
intensive truck competition, facilitated by the fact that short
hauls from wayside gravel pits to all points in the State were
possible. Other evidence minimized the seriousness of such
competition. The record contained little evidence of conditions
surrounding the production and transportation of the commodities in
other parts of
Page 356 U. S. 444
the South, but the Commission relied to some extent on its
investigation into general conditions in earlier proceedings
concerned with interstate rates.
New York v. United States, 342 U.
S. 882,
aff'g 98 F. Supp. 855, another per
curiam affirmance, raised intrastate commuter fares to the level of
interstate commuter fares. A study had been made of the cost of the
intrastate commuter service, costs being apportioned between that
service and other service on the trains studied principally on the
basis of passenger-mile ratios. The results of the study were used
by the Commission, however, to show that intrastate fares did not
cover the cost of service, rather than to contrast intrastate with
comparable interstate costs. Intrastate commuter service was of
much heavier volume than interstate, both in number of passengers
and passenger miles, but the Commission pointed out that increased
costs from such density went far to offset its advantages. Wear and
tear on equipment was increased, and, since traffic was
concentrated at rush hours, additional crews and equipment needed
to handle it were idle during the rest of the day. There was
evidence that intrastate trains made more stops than interstate
trains, and used coaches that were older, more crowded, and not
air-conditioned. Yet these differences were found not to justify a
lower fare.
In
King v. United States, 344 U.
S. 254, the parties raised no question as to the
sufficiency of the evidence. The Court observed, however, that
evidence supporting the findings appeared in the record and that
much of the material that had been before the Commission in its
investigations into the interstate rates had also been before it in
the § 13 proceedings. 344 U.S. at
344 U. S. 272.
The record did contain evidence of operating expenses allocated to
Florida traffic, interstate and intrastate, but it was admitted
that the allocation was simply on the basis of the percentage of
revenue derived from such traffic,
Page 356 U. S. 445
and that it was impossible accurately to ascertain actual
expenses. However, for one carrier, because of special bookkeeping,
it was possible to show that actual freight expenses were higher in
Florida than for the rest of its system. Statistics were introduced
to show that the percentage increase in net railway operating
income for Florida and the carriers operating in Florida had been
greater than for the Southern District as a whole.
As to density, there was evidence that the density of freight
traffic in Florida at least for some carriers, was lower than that
for their whole systems or their systems excluding Florida. Against
this, the State Commission introduced evidence showing that there
had been a greater relative increase in tonnage originated in
Florida than on the entire systems of the three principal carriers
serving Florida. There was evidence that intrastate movements were
mostly by local trains on branch lines, and the percentage of
branch lines in Florida was greater than for the rest of the
carriers' systems. Because of overtime wages, shorter hauls, more
switching, the necessity of frequently making and breaking up
trains, such local trains were shown to be more expensive to
operate than through trains. The Court left it to the Commission to
weigh the competing claims of all this evidence on the question of
similarity of conditions.
In recent years, the Court has, by per curiam affirmance,
disposed of a number of cases involving challenges to § 13(4)
orders. In
Tennessee v. United States, 346 U.S. 891,
aff'g 113 F. Supp. 634, a case involving intrastate rates
on coal and wood, the District Court had found that there was
substantial evidence. The Commission's report,
Tennessee
Intrastate Rates and Charges, 286 I.C.C. 41, stated the
principal evidence relevant to the finding that intrastate
conditions were not more favorable than interstate conditions. The
results of a traffic study, separately listing interstate and
intrastate
Page 356 U. S. 446
terminations of the commodities involved, bore indirectly on
density. A greater proportion of intrastate than interstate traffic
was handled in costly local trains. A cost study based on waybills
showing average load, haul, and rates charged was introduced to
show that intrastate rates provided a greater return above cost
than rates on interstate movements; the Commission rejected this
evidence on the ground that the information in the waybills was
unreliable.
In
Louisiana Public Service Comm'n v. United States,
348 U.S. 885,
aff'g 125 F.
Supp. 180, the District Court had also found that there was
substantial evidence. The Commission in its report,
Louisiana
Intrastate Freight Rates and Charges, 291 I.C.C. 279, relied
on evidence that generally intrastate traffic was carried in the
same trains with the same crews as interstate traffic and under no
more favorable operating conditions, and that, in fact,
considerable intrastate traffic moved in expensive local trains.
There was also evidence separately stating, as between intrastate
and interstate commerce, the tonnage of the various commodities
terminated during a test period.
In
Illinois Central R. Co. v. Mississippi Public Service
Comm'n, 349 U.S. 908,
aff'g Mississippi Public Service
Comm'n v. United States, 124 F.
Supp. 809, the principal question before the District Court had
been the sufficiency of the evidence. Among the considerations that
that court relied on in setting aside the Commission's order was
the fact that the passenger deficit in Mississippi was lower than
for the entire systems of the Mississippi carriers, for the rest of
the South, or for the country as a whole. It found the evidence too
unsubstantial, furthermore, to support the Commission's judgment
that, in spite of competition from other forms of transportation,
increased rates would increase revenue.
Page 356 U. S. 447
From this review of the cases in this Court, and from a
consideration of others in the District Courts and before the
Commission, certain conclusions emerge that should be decisive in
disposing of the case now before us. In the first place, there has
been in many cases only the slightest direct evidence of the cost
of moving intrastate traffic, and, in other cases, the record is
wholly devoid of such evidence. As is clear from
Illinois
Commerce Comm'n v. United States, 292 U.
S. 474, and
King v. United States, 344 U.
S. 254, such evidence is not required when intrastate
and interstate traffic are intimately bound together. The records
in many cases contained evidence of factors affecting costs, but,
according to the traffic involved and the character of the
investigation, what has been deemed an important factor in one case
has been passed over in silence in another. Reliance on general
testimony concerning similarity of conditions has been almost
universal and, in some of the cases considered, such evidence
appears to have provided the principal, if not exclusive, support
for the Commission's finding.
The evidence introduced before the Commission to support a
finding of similarity of conditions varies with the purpose and
scope of the proceeding. Thus, an investigation under § 13(4) may
involve intrastate rates on a single commodity or on all freight
traffic; it may involve the rate of a single carrier or all the
carriers in the State; it may be confined to rates in a certain
part of the State or extend to rates and fares throughout the
State. Obviously a single, comprehensive, easily applied formula
for testing the evidence required in all these cases cannot be
devised without closing one's eyes to the rich and shifting variety
of situations presented by the Nation's transportation system, and
without unduly confining the Commission in its responsibility to
deal with the intermingled interstate and intrastate transportation
of a single system.
Page 356 U. S. 448
Finally, it is of importance to distinguish § 13 proceedings,
such as those in the present case, that accompany or follow
regulation of interstate rates on comparable traffic. In these
cases, in determining the level at which interstate rates should be
set in order to assure a given revenue, the Commission often
proceeds on the assumption that intrastate rates will be raised to
the same level or proportionately increased. Of course, uniformity
of rates is not the goal of federal regulation, and the
Commission's conclusions in the interstate proceedings do not
justify foregoing the inquiry into intrastate rates and conditions
required by § 13. But the manner in which the Commission
customarily proceeds is strong evidence of what is practically
possible in performing the difficult regulatory task imposed by the
statute. It should be respected by this Court in prescribing
standards for the Commission's guidance. When a § 13 proceeding
follows regulation of rates on comparable interstate traffic,
furthermore, evidence introduced in the interstate proceedings,
whether they are general revenue proceedings or directed to
specific rates, will, to a greater or less extent, also bear on
conditions surrounding the movement of intrastate traffic, and it
may not be unreasonable for the Commission to assume, in the
absence of persuasive evidence to the contrary, that the
conclusions it has drawn from such evidence about general
conditions are equally applicable to a particular State. As was
stated in
King v. United States, 344 U.
S. 254,
344 U. S.
272,
"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 evidence in the present case. -- The present case
concerns, with exceptions not now relevant, all Utah intrastate
freight rates. It follows a general revenue proceeding raising
interstate rates, and seeks to apply the same increase there
granted to intrastate traffic.
Page 356 U. S. 449
The validity of the Commission's statewide order was not
impaired because, as to particular traffic or carriers in the
State, a rate increase might not be justified. It may be that an
increase in rates on certain traffic will decrease revenues, or the
operations of one carrier may already be exceptionally profitable.
Factors affecting costs may vary throughout the State. In
New
York v. United States, 257 U. S. 591, the
fact that evidence indicated that one carrier had a more favorable
route with greater density than others did not preclude an order
raising passenger fares on a statewide basis. If general orders are
to be possible at all, and § 13(4) necessarily implies them, the
Commission must be able to proceed on evidence typical of general
conditions,
see Georgia Public Service Comm'n v. United
States, 283 U. S. 765,
283 U. S. 774,
making provision as it did in the present case for the
re-examination of specific rates claimed not to fall within the
findings.
See Railroad Comm'n of Wisconsin v. Chicago, B. &
Q. R. Co., 257 U. S. 563,
257 U. S. 591;
New England Divisions Case, 261 U.
S. 184,
261 U. S.
196-199.
The evidence in the present case said to bear on the conditions
surrounding the movement of interstate and intrastate traffic
included evidence of the following: economic conditions in Utah,
the rate of return on the carriers' net property investment, net
railway operating income, revenue per ton-mile, freight service
ratio, density, operating efficiency, the character of the service
rendered interstate and intrastate traffic, and general similarity
of operating conditions.
There was general testimony from a number of qualified witnesses
that interstate and intrastate traffic in Utah moved under
substantially similar conditions, were carried on the same trains,
handled by the same crews, and accounted for in the same manner,
and that generally no better service was given interstate than
intrastate traffic. There was evidence that so-called
"piggyback"
Page 356 U. S. 450
service was used exclusively for interstate traffic, and that
traffic in Utah was more heavily weighted in favor of mine products
moving in cheap gondola cars than in neighboring States, but there
was no indication that these considerations, insofar as they
affected costs, were not in fact taken into account in setting
rates on the particular commodities involved.
The average rate of return on net property investment for the
five Class I carriers serving Utah, and their net railway operating
income, were shown to have declined steadily since 1950. Since
these figures were not broken down between interstate and
intrastate operations within Utah, however, nor between operations
in Utah and other States, but instead embraced the carriers' entire
systems, the showing of a decline is of no probative value on
similarity of conditions surrounding the movement of interstate and
intrastate traffic. The decline may be attributable as much to one
traffic as to the other. It goes, instead, to establish the
carriers' need for additional revenue from one source or another.
The same may be said of the evidence of particular costs entering
into the rendering of freight service. There was evidence that
wages on the entire systems of the five Utah Class I carriers had
risen 45.89% from 1948 to 1953, that they were generally higher in
the Western District than in the States further east, and that
average unit prices for materials and supplies in that District had
risen 24.7% from 1949 to 1954. In none of these statistics were
costs attributable to interstate and intrastate traffic segregated
and compared.
As in most § 13(4) cases, the record here contained numerous
statistics showing revenue per ton-mile. Revenue per ton-mile on
all freight traffic in Utah, interstate and intrastate, had
increased less between 1939 and 1952 than revenue per ton-mile for
the Western District and for the country as a whole. On the other
hand, the results
Page 356 U. S. 451
of a waybill study introduced by the Utah Commission showed
that, in 1952, the revenue per ton-mile from Utah intrastate
shipments was greater than that from interstate shipments that had
originated in Utah. But, as the Interstate Commerce Commission
pointed out in its report, revenue per ton-mile tends to be less on
interstate traffic because average hauls are longer. In any event,
since differences in revenue per ton-mile are often simply a
reflection of the fact that there are differences between
interstate and intrastate rates, they are not probative of the
relative cost factors affecting interstate and intrastate
traffic.
I turn now to the evidence that the Court finds, contrary to the
Commission, establishes that, on the whole, conditions surrounding
intrastate traffic are substantially more favorable than those
surrounding interstate traffic, and require overruling the District
Court and setting aside the Commissioner's order. This evidence,
according to the Court, so preponderates over the general testimony
on similarity of conditions, referred to above, that the Commission
was bound to accept it as decisive.
There was evidence such as increase in population, automobile
registrations, and income payments to individuals that justified a
conclusion that economic conditions in Utah had improved relatively
more than in the Western District and the United States as a whole.
Although this evidence may be relevant to the density of traffic in
Utah as compared with other States, or the density of intrastate
and interstate traffic within Utah, it is so remote that it cannot
reasonably be argued that it compels a conclusion one way or
another.
The Court suggests that Utah intrastate transportation
conditions must be more favorable because the rate of return on the
Denver and Rio Grande Western, with almost half of its operations
in Utah, is greater than the rate of return for the Southern
Pacific and Union Pacific.
Page 356 U. S. 452
For this Court to draw such an inference presupposes a natural
law of railroading within the Court's knowledge or to which it can
gain ready access. There is nothing in the record to indicate that
the higher rate of return for the D & RGW is due to the fact
that a substantial part of its traffic is Utah intrastate traffic.
It may be due to any one of a number of factors: the railroad as a
whole may be more efficiently operated than the UP or the SP; its
routes may be more favorably situated or the operations on other
parts of its system particularly profitable; the lower rate for the
UP and the SP may be due to circumstances present anywhere in their
far-flung empires.
The Court finds that there was no justification for the
Commission's conclusion that density figures introduced by
petitioners were unreliable. Such a judgment by the Court on the
basis of these statistics is indeed puzzling.
Exhibit 64 compares, for four Class I carriers in Utah, freight
density (ton-miles per mile of mainline track) for "intrastate"
operations with this density for each carrier's system as a whole.
In each case, the "intrastate" density is greater than the system
density. It is important to understand just what is being compared
in this exhibit. As was admitted by petitioners, the "intrastate"
density in the exhibit is not limited to traffic that, under §
1(2)(a) of the Act, 24 Stat. 379, as amended 49 U.S.C. § 1(2)(a),
moves "wholly within one State." Yet it is the cost of moving only
such intrastate traffic, traffic wholly within the State, that must
be ascertained and compared with the cost of moving interstate
traffic, because only this kind of intrastate traffic is subject in
the first instance to regulation by the State. Instead,
"intrastate" density in the exhibit includes also that portion of
interstate movements that lies within Utah, whether such movements
originate or terminate there or bridge the State.
Page 356 U. S. 453
The comparison in this exhibit, therefore, is by no means
probatively the best when the purpose is to show that the cost of
moving one ton one mile on an intrastate journey is less than it
would be on an interstate journey. The most persuasive comparison
would be between the average density of interstate traffic in the
region taken for the purposes of setting the interstate rates and
the average density of intrastate traffic that moves wholly within
the State. The interstate density properly taken into
consideration, because it is the density that affects the
interstate rates, is the average density for the entire interstate
journey including that part that lies in other States, but not
including the intrastate density in those States. There is some,
although less, probative value in a comparison between the density
of interstate traffic confined to interstate traffic within the
State and the density of intrastate traffic. For this comparison to
be reliable, density of interstate traffic for the entire region
for which the interstate rates have been set must be assumed to be
substantially the same as the density of interstate traffic within
the State.
The comparison in Exhibit 64, between interstate and intrastate
density on the carriers' entire systems and interstate and
intrastate density in Utah, is of considerably less probative value
than these two comparisons. It does not show whether Utah
intrastate density is in fact greater or less than interstate
density either in Utah or on the carriers' entire systems. It has
some evidentiary value, of course, since, if over-all system
density is less than over-all density within the State, there are
probably factors in the State generating traffic that do not exist
in neighboring States. That these factors generate more intrastate
than interstate traffic, however, is a matter of speculation, and
average regional interstate density may still be higher than
intrastate density within
Page 356 U. S. 454
Utah. A comparison somewhat similar to that in Exhibit 64, and
in fact relied on in the second
Florida case,
Georgia
Pub. Serv. Comm'n v. Atlantic C.L. R. Co., 186 I.C.C. 157,
164, is a comparison between combined interstate and intrastate
density within one State and combined interstate and intrastate
density on the balance of the carrier's system in surrounding
States. It is impossible to tell from such a comparison whether or
not region-wide interstate density is less than intrastate density
in the particular State involved, although that it is may be a
permissible judgment for the Commission to make but hardly for this
Court to impose upon it.
These distinctions are necessary because the bearing of density
on the cost of interstate and intrastate traffic is unlike that of
many other factors. Thus road conditions, wages, and cost of fuel
in a State are likely to fall with equal effect on intrastate
traffic and interstate traffic as it passes through the State. As
to these conditions, a comparison between those prevailing in one
State and surrounding States is highly relevant. Since interstate
rates take into account average conditions throughout the region,
if conditions are more favorable in one State, intrastate traffic
moving only under those more favorable conditions should not have
to pay the same rate as interstate traffic.
The Commission itself discounts the importance of the density
figures because comparison is made of density on mainline track
only and that on branch lines is excluded. However, the Court finds
that, since branch-line density is excluded both from Utah and
system figures, the omission does not render the evidence
unreliable. This is right if, and only if, the proportion of branch
line to main line in Utah is the same as for the carriers' systems
as a whole. If there is proportionately more low-density
branch-line track in Utah, Utah density will be relatively lower.
The possibility that such is in fact the case was
Page 356 U. S. 455
mentioned at the hearings (R. 294), and petitioners introduced
no evidence to supply the deficiency in their exhibit.
Thus, it is clear that there were good reasons for rejecting the
evidence in Exhibit 64, [
Footnote
2/1] but even if the comparison offered were the best, the
Commission surely would not be compelled to accept the density
evidence as conclusive. Density is only one of a multitude of
factors affecting costs, and what is gained by high density may
Page 356 U. S. 456
be lost because of some other factor. High density itself, as
was shown in
New York v. United States, 342 U.
S. 882 (
see 279 I.C.C. at 161), is not always
an unmitigated blessing, and low interstate density may be the
result of rate discrimination, rather than a justification for
it.
The Court also relies on evidence that the freight service
operating ratio of four Class I carriers operating in Utah for
1950-1953 was more favorable for operations described in the
exhibit as "intrastate" than for the carriers' entire systems. The
"intrastate" traffic included in this comparison was the same as
that used in the density statistics. Moreover, the Commission
itself rejected the evidence because of an even more fundamental
criticism of the method used to segregate expenses attributable to
intrastate traffic. Since it was impossible in many instances to
ascertain actual expenses, allocation had been to a large extent
simply on the basis of the number of train miles in the State. The
carriers had long attacked this method of allocation as artificial
and not reflecting the actual cost of service, and there is no
justification for overriding the Commission's judgment on the
matter.
The upshot is that petitioners produced no evidence of
dissimilar conditions that was not open to serious criticism, and
that the Commission was not justified in rejecting or severely
restricting in effect. There remained to support the Commission's
finding the general testimony that interstate and intrastate
traffic in Utah did, in fact, move under substantially similar
conditions, and also the evidence in the earlier general revenue
proceeding to adjust interstate rates that, as we recognized in
King v. United States, 344 U. S. 254,
344 U. S. 272,
becomes the natural basis for the intrastate order in the absence
of any showing that it is not applicable. This Court has never
before overturned an order of the Commission under §13(4)
Page 356 U. S. 457
on the ground that the evidence was insufficient to sustain a
finding of revenue discrimination, although that question has been
squarely presented on a number of occasions. The evidence in the
present case was as substantial as that in many of these other
cases, and, under an interpretation of the Act that respects the
practical difficulties facing the Commission, should be enough.
The Court objects that there was "no positive evidence" to
support the Commission's finding, but it does not say what evidence
on what factors affecting costs, beyond that in the record, was
required. Should there have been evidence on length of haul,
average loading, cars per train, grade conditions, volume of
intrastate traffic handled by local trains, size of crews? This
Court cannot say in each case what factors would be significant
enough to necessitate evidence, and to require that the record
contain evidence negativing all possible factors would be as
paralyzing as to require findings to that effect. Once there is
evidence of the general nature here introduced, it is for those who
contend that intrastate conditions are dissimilar to come forward
with convincing evidence showing what specific factors affecting
costs are more favorable. Statements in earlier opinions of the
Court indicate that such is in fact present law. [
Footnote 2/2] It is the only workable solution. As
Mr. Justice Brandeis said in the
New England Divisions
Case, 261 U. S. 184,
261 U. S.
197,
"Obviously, Congress intended that a method should be
Page 356 U. S. 458
pursued by which the task, which it imposed upon the Commission,
could be performed."
Intrastate passenger operations. -- This consideration
of the findings the Court has required in § 13(4) cases, and the
evidence necessary to support them, bears on the far-reaching
consequences, not adverted to in the Court's opinion, of holding
that our decision in
Chicago, Milwaukee, St. P. & P. R. Co.
v. Illinois, 355 U. S. 300, in
some manner applies to the present case. It is not clear from the
Court's opinion whether, on the remand, the Commission will be
required to make findings on the profitableness of intrastate
passenger operations, such as were required in the
Milwaukee case for all intrastate operations, or only on
the similarity of conditions surrounding intrastate and interstate
passenger traffic.
It was settled in
King v. United States, 344 U.
S. 254, that interstate freight traffic could be made to
support interstate passenger traffic, and intrastate freight
traffic to support intrastate passenger traffic. Left open, because
there was no indication in the record that the deficits arising
from the two kinds of passenger traffic significantly differed, was
the question whether intrastate freight traffic could be made to
support an interstate passenger deficit. Such support would be the
practical effect if interstate freight rates are set to compensate
for an interstate passenger deficit, and intrastate freight rates
are raised to the same level although intrastate passenger
operations are profitable or result in a smaller loss than
interstate passenger operations. The question was presented in
Mississippi Public Service Comm'n v. United
States, 124 F.
Supp. 809, where the failure of the Commission to take into
account a lower passenger deficit in Mississippi was one ground for
the District Court's setting aside the order. Since there were
other issues in the case, however, our per curiam affirmance did
not necessarily indicate a view on the question.
Illinois
Central R. Co. v. Mississippi
Page 356 U. S. 459
Public Service Comm'n, 349 U.S. 908. The precise
problem, furthermore, was not clearly settled by the general
holding in the
Milwaukee case that there should be
findings "which reflect the commuter service deficit in the
totality of intrastate revenues . . . ,"
355 U. S. 355 U.S.
300,
355 U. S. 308,
nor, strictly speaking, must the question be answered at this point
in the present case though doubtless it will arise under the
Court's disposition on the remand.
There is no apparent reason why a lower passenger deficit, like
any other favorable circumstance surrounding intrastate
transportation, would not justify a lower rate on intrastate
freight traffic. If intrastate traffic taken as a whole contributes
its fair share to needed revenues and does not, from a revenue
standpoint, discriminate against interstate commerce, what
justification can there be for a finding of discrimination that is
possible only because a segment of intrastate traffic is considered
in isolation? Raising rates in this situation may have the effect
of compelling intrastate commerce to contribute more than its fair
share.
It does not necessarily follow that the Commission should be
required to make findings, supported by evidence in the record,
that the intrastate passenger deficit is not lower than the
interstate, or about the profitableness of, or circumstances
surrounding, any segment of intrastate operations with which it is
not immediately concerned. Indeed, the consequences that follow in
the train of such a requirement demonstrate that it exalts formal
consistency over sound policy. In the first place, if the
Commission must determine the profitableness of intrastate
passenger operations, it will, of course, be compelled to segregate
revenues and costs attributable to intrastate and interstate
traffic. Yet it is precisely this that, in
Illinois Commerce
Comm'n v. United States, 292 U. S. 474, and
the
King case, we said, urged on by the
Page 356 U. S. 460
difficulty of accurate allocation, was not required when
interstate and intrastate traffic were mingled together.
Another consequence of the Court's decision appears to be that
every case involving an intrastate rate claimed to result in a
revenue discrimination must be broadened into a general inquiry
into all intrastate rates and the profitableness of, or
circumstances surrounding, all intrastate traffic. The result would
be a radical, and in all likelihood unworkable, change in the way
the Commission has administered the provisions of § 13(4) for over
35 years. The Commission's Reports are full of cases in which
intrastate rates on one commodity or group of commodities, or on
traffic in only one part of a State, have been tested for
discrimination without reference to the entire intrastate picture.
The
Wisconsin case itself raised passenger fares without
consideration of other intrastate operations, and the
Chicago
Switching case,
Illinois Commerce Comm'n v. United
States, 292 U. S. 474,
concerned only segments of Illinois and Indiana intrastate traffic.
The possible disruptive effect of requiring the Commission to
proceed by giant, statewide strides, rather than by steps designed
to relieve discrimination from a particular segment of intrastate
commerce, is alone sufficient to cast doubt on the wisdom of the
Court's decision and to require a close scrutiny of the
Milwaukee case to determine if the rule there set forth is
not in fact confined to the special situation that gave rise to it.
[
Footnote 2/3]
Page 356 U. S. 461
The
Milwaukee case involved intrastate fares on
commuter service that was, for all practical purposes, totally
separate from the interstate operations of the carrier. There had
been no previous proceedings to set the fares on comparable
interstate traffic because in fact there was no significant
comparable interstate traffic with which the intrastate traffic was
mingled. Intrastate fares were not raised to a level of interstate
fares that had previously been determined to be reasonable;
instead, they were raised to a level that the Commission decided,
after considering the intrastate traffic alone, would contribute a
fair share to revenues. In such a context a determination of
discrimination too easily becomes simply an inquiry into
reasonableness, an inquiry the Commission is not empowered to make
in respect to intrastate fares.
Page 356 U. S. 462
By being compelled to make findings reflecting a broader view of
the profitableness of intrastate operations, the Commission is made
to give assurance that intrastate commerce has, in fact, been
compared with interstate commerce, and discrimination found. A
broad comparison between interstate and intrastate operations is
necessary because, in this special situation, a narrow comparison
is not possible. [
Footnote 2/4]
It is a very different matter when there is comparable
interstate traffic and intrastate rates are raised to the level of
rates on that traffic already determined to be reasonable. This was
the case in
New York v. United States, 342 U.
S. 882,
aff'g 98 F. Supp. 855, also involving
intrastate suburban fares, and there was no suggestion that the
Commission was bound to look to the totality of intrastate
operations. The fact that a comparison of rates on similar traffic
is possible gives a greater degree of assurance than was possible
in the
Milwaukee case that intrastate traffic is not being
compelled to contribute more than its fair share to needed
revenues, and that it is discrimination, rather than simply
unreasonableness, that the Commission seeks to remedy. In this
situation, the Commission is justified in considering whether a
particular segment of intrastate commerce is contributing its fair
share to revenues.
Of course, those who contend that intrastate traffic as a whole
is not discriminating against interstate traffic may come forward
and show, as they may in respect to any claimed dissimilarity of
conditions surrounding interstate and intrastate traffic, some
favorable aspect of intrastate operations that the Commission
should take into account. In the absence of such a showing,
however, the
Page 356 U. S. 463
Commission should be able to assume that discrimination shown to
exist as to the particular segments of intrastate and interstate
traffic with which the § 13(4) proceeding is concerned is not
offset by other conditions that this Court speculates may affect
wholly different segments of intrastate commerce. The record in the
present case is devoid of the remotest suggestion that the Utah
intrastate passenger deficit is any less than the interstate
passenger deficit, and the Commission should not be required to
seek out such evidence itself and make findings beyond those it has
already made.
This is a solution that accommodates imponderables, and does not
demand precision where the nature of the subject can yield only
approximations. It is a solution responsive to the difficult
regulatory problems posed by § 13(4). Embedded in it are some of
the advantages in simplicity of administration that would follow if
this Court had expanded, as it might well have done, the doctrine
of discrimination against persons or localities to permit statewide
orders protecting all interstate shippers against discrimination
without reference to revenues. At the same time, there remains an
opportunity for intrastate shippers or a state commission to show
to the Interstate Commerce Commission's satisfaction the existence
of specific factors favoring intrastate traffic in general that
should not wisely be ignored. It is the solution that seems best
designed to achieve the purposes of the Act without interposing
insurmountable obstacles to the effective regulation of the
national transportation system, the responsibility for which rests,
after all, predominantly with the Interstate Commerce
Commission.
[
Footnote 2/1]
The record also contains evidence that, in 1952 and 1953,
density for the Denver and Rio Grande Western was higher on its
lines in Utah than on its lines in Colorado or for its system as a
whole. Such a comparison, as already pointed out, does not show
that Utah intrastate density for the D&RGW is in fact higher
than interstate density over the carrier's entire system.
Furthermore, the system of the D&RGW is confined almost
completely to Utah and Colorado, and there was no showing that the
density figures could not be explained on the basis of special
conditions in Colorado, rather than by more favorable conditions in
Utah compared with the Western District as a whole. The same
criticism can be made of the evidence that operating efficiency on
the D&RGW -- tons per freight car loaded, tons per train, tons
per locomotive, etc. -- is more favorable in Utah than
Colorado.
There was also considerable evidence, taken from actual freight
bills, of tonnage terminated in Utah during a four-month test
period in 1953-1954, in some instances segregated between
interstate and intrastate movements. However, since all interstate
movements during the period were admittedly not included, the
evidence provides no basis for reliable conclusions about
density.
Evidence of the relative volume of interstate and intrastate
movements of particular commodities, such as coal, ores, and
concentrates, are no necessary indication of over-all freight
density, and therefore of little assistance on this question in a
proceeding to raise all freight rates. When the § 13(4) proceeding
is concerned with rates on certain commodities only, it is for the
Commission to decide what density comparisons are significant,
whether of over-all freight traffic, movements of the particular
commodities, or movements restricted to a particular region.
See, e.g., Indianapolis Chamber of Commerce v. Cleveland, C.,
C. & St. L. R. Co., 60 I.C.C. 67, 74.
[
Footnote 2/2]
King v. United States, 344 U.
S. 254,
344 U. S.
264-265:
"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 passenger
operations in the southern territory generally."
United States v. Louisiana, 290 U. S.
70,
290 U. S.
79:
"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. . . ."
[
Footnote 2/3]
A recent report on the "Problems of the Railroads" of the
Subcommittee on Surface Transportation of the Senate Committee on
Interstate and Foreign Commerce, issued after extensive hearings on
the depressed conditions in the industry, expresses deep concern
over the implications of the
Milwaukee decision, and
specifically proposes legislation to forestall what appear to be
the consequences of the present decision:
"From the testimony, it is clear that this opinion of the
Supreme Court [in the
Milwaukee case] not only places an
intolerable burden under present accounting practices, but, in
addition, presents an almost impossible obstacle because of the
problem of segregating intrastate and interstate expenses of rail
operation. Further, the subcommittee thinks that each service
should stand on its own feet, supported by rates that are
compensatory."
"Fear has been expressed that this case might be construed as
requiring that the finding of 'undue, unreasonable, or unjust
discrimination against, or undue burden on, interstate or foreign
commerce' stipulated by the act be made only in the light of the
overall, statewide totality of a carrier's operating results
deriving from the entire body of that carrier's rates applicable
within the State, thus precluding such a finding on a showing of
only the effect of the particular rate or rates in issue. To
protect against such an interpretation of the
Milwaukee
case it is proposed to provide that the Commission, in determining
whether any intrastate rate causes discrimination against, or
burden on, interstate commerce, need not consider in totality the
overall statewide results of the carrier's operations, but need
consider only the effect of the particular rate or rates in
issue."
Report of the Subcommittee on Surface Transportation of the
Senate Committee on Interstate and Foreign Commerce, S.Rep. No.
___, 85th Cong., 2d Sess. 15 (April 30, 1958).
The legislative proposals of the Subcommittee have been embodied
in a bill introduced in the Senate on May 8, 1958. S. 3778, 85th
Cong., 2d Sess.
[
Footnote 2/4]
Are we to assume that the
Milwaukee case has,
sub
silentio, overruled
Illinois v. United States, 342
U.S. 930,
aff'g 101 F. Supp.
36, where the intrastate suburban service was almost wholly
distinct from the carriers' other operations?