AMERICAN IMPORTERS ASSOCIATION, Pеtitioner, v. CIVIL AERONAUTICS BOARD, Respondent.
No. 24849.
United States Court of Appeals, District of Columbia Circuit.
Argued Dec. 16, 1971. Decided Nov. 29, 1972.
168
Mr. Robert A. Peavy, Washington, D. C., with whom Mr. Edward Schmeltzer, Washington, D. C., was on the brief, for petitioner.
Mr. Alan R. Demby, Atty., Civil Aeronautics Bd., with whom Messrs. R. Tenney Johnson, Gen. Counsel, O. D. Ozment, Deputy Gen. Counsel, Warren L. Sharfman, Associate Gen. Counsel, Liti-
Before FAHY, Senior Cirсuit Judge, and LEVENTHAL and MacKINNON, Circuit Judges.
PER CURIAM:
The case is before us on a petition to review two orders of the Civil Aeronautics Board (the Board) filed by the American Importers Association (AIA), a trade association whose members include importers and customs brokers. The principal order of May 19, 1970,1 embodies conditional Board approval through September 30, 1971 under Section 412 of the Federal Aviation Act of 19582 (the Act), of an agreement submitted by the International Air Transport Association (IATA), a trade association comprising domestic and international airlines engaged in air transportation to and from the United States. A sеcond order under review, of October 9, 1970, denied reconsideration of the order of May 19.3 The Board has filed with the court, without objection on the part of AIA, a subsequent order of October 13, 1971, extending approval of the agreement for an additional two years, presumably until September 30, 1973.4
Approval of the agreement by the Board has the effect, under the provisions of section 414 of the Act,5 of relieving any affected person from the operation of the anti-trust laws. Our jurisdiction to review the orders of the Board is spelled out in section 1006(a) of the Act.6
I. THE NATURE OF THE AGREEMENT
The obligation of the air carriers to importers inсludes the unloading and temporary storage of the goods imported. Upon expiration of the temporary
At the Conference of IATA held in Athens, Greece, in 1969, the member carriers agreed, inter alia, to reduce the period of free storage time at international air terminals in the United States from three to two days and to eliminate the provision in the then-existing agreement that allowed carriers to enter into local agreements enlarging the three-day period to meet local conditions.
II. OUTLINE OF THE PROCEEDINGS BEFORE THE BOARD
IATA filed with the Board the proposed free time agreement, along with many others reached at the Athens Conference. In an order of July 16, 1969,7 the Board made a tentative finding that the agreement was not adverse to the public interest but deferred final action “with a view toward eventual approval,” and allowed interested parties to file comments within fifteen days. AIA timely opposed the reduction of free time and the elimination of the local agreement provision, maintaining that restriction of the carriers’ competition raised antitrust problems and that a wooden free storage time rule mаde on a nationwide basis cannot take into account the quite different local conditions that affect the reasonableness of the free time period. AIA suggested that the Board first study the impact of such a change on the users of airline services. It was further suggested by AIA that the agreement was too vague because it failed to specify when the free storage period would begin and that it made no provision for notice of arrival. AIA argued that this could result in the assessment against importers of demurrage on shipments that arrived without their knowledge.
Apparently acting as spokesmen for the IATA carriers, Pan American Airways (PanAm) and TransWorld Airlines (TWA) together filed a brief response to AIA‘s petition, stating that the elimination of the local agreement provision provides an incentive to carriers: shippers tend to avoid those carriers whose services makes necessary the payment of demurrage. Moreover, the carriers maintained that such a provision will help to relieve the congestion at the busier air terminals. In support of their position, the carriers submitted data indicating that in practice the free storage rules never result in less than 56 hours of free time, and for about 58% of import traffic (based on а survey of PanAm import traffic into Kennedy International Airport in New York for an unspecified period of time) the rules allow up to 104 hours of free time.
On September 15, 1969, the Board approved the agreement for six months, stipulating that the free time period must not begin to run until 8:00 A.M. of the day (not including weekends and legal holidays) following the date of notification of arrival.8 On March 19, 1970, PanAm and TWA petitioned the Board to extend its approval of the free time agreement. They represented to the Board that adequate notification procedures had been adopted and that the free time agreement opеrated equitably between the carriers and importers. The two carriers reiterated the benefits of the agreement, that of relieving congestion at crowded terminals and spurring competition among carriers to provide the most expeditious service. AIA responded by submitting the results of a survey conducted of its members. The data demonstrated that at two of the busiest United States airports, free time was nearly always exceeded. The survey suggested that part of the difficulty was attributable to the inadequate notification and handling procedures of the carriers. Once again AIA raised the antitrust question.
By its order of Mаy 19, 1970, the Board conditionally approved the agree-
III. THE PRINCIPAL LEGAL CRITERIA GOVERNING REVIEW OF THE ORDERS
AIA maintains that the Board‘s opinion is not supported by adequate evidence and does not contain a sufficiently reasoned explanation of the Board‘s action. AIA further contends that the procedures employed by the Board deprived AIA of a fair hearing.
Where, as here, agreements between air carriers are submitted for approval by the Board, section 412(b),
The Board . . . shall by order approve any such contract or agreement . . . that it does not find to be adverse to the public interest, or in violation of this Act. . . . The Board shall disapprove аny agreement . . . that it finds to be adverse to the public interest, or in violation of this Act.
Section 1005(f) of the Act further provides that “every order of the Administrator or the Board shall set forth the findings of fact upon which it is based. . . .”
A. The Antitrust Claim
The agreement binds the carriers to a specified free time and precludes divergence therefrom due to local conditions. Such a restraint upon competition gives rise to a colorable antitrust claim:
[C]olorable antitrust claims should be considered substantively important. In IATA Credit Agreements, 30 C.A.B. 1553, 1554-1555 (1960), the Board ruled that when IATA resolutions appear on their face to be repugnant to antitrust principles, they cannot be approved under section 412 “unless their proponents have made a clear showing of the need for approval to fill [a] serious transportation need or secure important public benefits.” This principle has been an established aspect of the Board‘s regulatory policy since the Local Cartage Agreement Case, 15 C.A.B. 850, 853 (1952). National Air Carriers Ass‘n v. CAB, 141 U.S.App.D.C. 31, 38, 436 F.2d 185, 192 (1970). Cf. Trailways of New England, Inc. v. CAB, 412 F.2d 926, 936 (1st Cir. 1969).
This view of the public interest criteria is supported by the judicial construction of analogous provisions of thе
By its very nature an illegal restraint of trade is in some ways “contrary to the public interest,” and the Commission‘s antitrust standard, involving an assessment of the necessity for this restraint in terms of legitimate commercial objectives, simply gives understandable content to the broad statutory concept of “the public interest.”
* * * * * *
Congress has, it is true, decided to confer antitrust immunity unless the agreement is found to violate certain statutory standards, but as already indicated, antitrust concepts are intimately involved in the standards Congress chose. . . . [A] restraint that would violate the antitrust laws will still be approved whenever a sufficient justification for it exists. Nor does the Commission‘s test, by requiring the conference to come forward with a justification for the restraint, improperly shift the burden of proof. The Commission must of course adduce substantial evidence to support a finding under one of the four standards of § 15 [of the Shipping Act], but once an antitrust violation is established, this alone will normally constitute substantial evidence that the agreement is “contrary tо the public interest,” unless other evidence in the record fairly detracts from the weight of this factor. (Footnote omitted.)
See also the discussion of “public interest” in WAIT Radio v. FCC, 135 U.S.App.D.C. 317, 418 F.2d 1153 (1969); Latin America/Pacific Coast Steamship Conference et al. v. FMC, 150 U.S.App.D.C. 362, 465 F.2d 542 (1972), cert. denied, 409 U.S. 967, 93 S.Ct. 269, 34 L.Ed.2d 234 (1972).9
In view of these principles, it is essential in the face of an antitrust claim that the Board‘s approval rest upon a sufficient justification for tolerating the restraint.
B. The Claim that AIA was Deprived of a Fair Hearing
AIA concedes in its brief that it is not entitled to a full-scale evidentiary hearing, and it had not asked for one in the proceedings before the Board. It does contend that the Board failed to take steps that could have enabled the Board to reach an informed decision regarding the free time agreement. In view of our disposition of the case we need not detail the procedures the Board should take in various circumstances which may arise, noting only at this time that the Board has latitude in that regard. National Air Carriers Ass‘n v. CAB, supra.
IV. DISPOSITION OF THE ISSUE OF REDUCTION OF THE FREE STORAGE TIME FROM THREE TO TWO DAYS
As to this issue, the position of the Board is that the agreement was designed to serve the primary objective of relieving terminal congestion which results from extended storage of shipments, particularly at high density airports such as John F. Kennedy International, the reason stated by the carriers in one of their submissions to the Board, as “an incentive to move consignments through the cаrrier facility promptly and thus to open up space for handling of other freight.”
In light of the history of the controversy since it originated before the Board we have concluded the record furnishes an inadequate basis for decision of the issue now considered. The form in which the Athens resolution of IATA
We thus have a situation in which the experience under the modified agreement, as approved and extended, coupled with the admonitions of the Board to the carriers on May 19, 1970,10 responsive in part to AIA‘s objections, is not adequately reflected in the record. We think in this situation an appropriate course for the court to follow is to suspend our decision, with respect to the approval by the Board of the agreement reducing free time from three to two days, pending further proceedings before the Board on the remand which we shall order. We have authority to require such further proceedings, where appropriate. Section 1006(d) of the Act,
V. DISPOSITION OF THE ISSUE OF FLEXIBILITY AND LOCAL OPTION
The prior IATA rule permitted carriers, by local agreement, to extend free storage time. This flexibility provision was invoked (a) in the past by the carriers setting free storagе time at all United States airports at 120 hours;
In addition to its complaint regarding the reduction to two days, already discussed, AIA also complains of the elimination of any mechanism for establishing a longer period to meet local conditions at particular air terminals.
Although this issue is also posed by AIA in a broad allegation of anticompetitive restraints, we take note that in no event is it proposed that each carrier be free to compete on its own terms. The issue becomes one of whether the restraints should be determined by agreement of the carriers at an airport, or the carriers taken nationally, or even internationally. And the underlying question may prove in fact to be one of restraints on airports, rather than on carriers, with little to be said, at least in the abstract, for the freеdom of an airport to compete for the business of importers by prompting an extension of free storage time through failure to correct conditions of congestion.
There is room for an expectation that a regulation that is generally fair and reasonable may be applied uniformly throughout the nation, on the assumption that while conditions inevitably will differ somewhat from one airport to another, the differences are likely to be a matter of economic strains rather than injustice. The burden would be on the party seeking to establish an exception.11 But that would not necessarily be the cаse in a field where the inherent conditions at airports are very substantially different from each other. When there are such differences in fact, the Board is not entitled to follow Procrustes in bringing all to one size. And when, as here, the background information establishes that John F. Kennedy Airport, a high density airport of particular interest to importers, and presenting to the importer the need for calling on the various carriers at their separate buildings, has in the past been given differential treatment by the carriers because of local conditions, any Board approach would realistically require support in evidence covering that airport. Indeed, since any real complaint of importers is likely to relate to a high-density terminal, it would seem probable that a free storage time regulation could hardly be generally reasonable unless it were reasonable for such a terminal.
If the basic free storage period is sufficient to allow a reasonable period for the clearance of cargo at United States airports, generally, without “injustice” at any airport, we fail to discern why as a matter of law it must now be decided to permit local flexibility in case that condition should become insufficiеnt in the future as to some particular airport. That problem can be faced when the condition arises, on a petition to modify the approval, or to permit it to expire at the end of its term, in the light of the circumstances. Compare American Airlines v. CAB, 123 U.S.App.D.C. 310, 359 F.2d 624 (en banc), cert. denied, 385 U.S. 843, 87 S.Ct. 73, 17 L.Ed.2d 75 (1966).
The possibilities of abuse would seem to be enough basis for the Board to insist, should it find it to be in the public interest to do so, that any such determination as to need for extent and nature of local flexibility should be subject to its prior review, rather than be determined by the air carriers on their own.
Another problem would be presented if it should develop, on remand, that conditions at a particular airport or airports are such that the two-day period, following notification of the importer that the goods are ready to be picked up, is simply not sufficient for even reason-
It seems to us sufficiently likely that the Board‘s May 19, 1970, order avoids serious injustice that we decline to reach any final conclusion as to the flexibility issue on the present record, and defer it to await the proceedings on remand of the record, with the same opportunities afforded as we have noted with respect to the remand of the issue of reduction of free storage time from three to two days.
The record is remanded to the Board for further proceedings not inconsistent with this opinion.
MacKINNON, Circuit Judge, dissenting:
The necessity and desirability of cargo carriers having uniform demurrage (detention) rules is so well established and recognized in our jurisprudence as being in the public interest that it is my view no substantial antitrust issue is present. The one-day detention rule for domestic shipments and the rate to be charged are not challenged. Thus, the only question here is whether one extra day to allow for customs clearance of imported goods is sufficient and reasonable. To suggest that the allowable variants of the decision on this question trespass into the antitrust area sufficient to constitute a restraint upon competition are hardly worth noting. The issue is paper-thin and completely within the Board‘s competence and expertise.
It is necessary to have detention rules that are fair, reasonable and uniform if airline traffic is to be carried on smoothly, equitably, efficiently and without discrimination and preference between localities and interests. We have upheld the right of the Federal Maritime Commission to enforce uniform detention rules on the marine terminals under its jurisdiction.1 In the case of the railroads, such demurrage rules were forced on the carriers by the United States Commissions and the Interstate Commerce Commission because they recognized the public interest required them.2
The National Association of Railway Commissioners, an association comprising the commissioners of the several States, adopted in November, 1909, a uniform demurrage code. Its action was based upon extensive investigations and thorough discussion, participated in by the railroad commissioners, commercial organizations, representatives of railroads and individual shippers from all parts of thе country. On December 18, 1909, the Interstate Commerce Commission endorsed the rules so adopted and recommended that they be made effective on interstate transportation throughout the country. (In re Demurrage Investigation, 19 I.C.C. 496). — Swift & Co. v. Hocking Valley Ry. Co., 243 U.S. 281, 37 S.Ct. 287, 61 L.Ed. 722, affirming 93 Ohio St. 143, 112 N.E. 212.
For the text of the original uniform code, and discussion thereof, see 21 Ann.Rep.Natl.Assn. of Ry.Commrs. (1909), pp. 203-240.
Existence of merely unique or exceptional transportation conditions in certain localities furnishes no ground for exceptions being made to the uniform code in favor of such localities unless clearly unlawful discrimination would result against such localities if exceptions were not made. — Michigan Mfrs. Assn. v. Pere Marquette R. Co., 31 I.C.C. 329; Merchants & Planters Compress & Warehouse Co. v. Galveston, H. & H. R. Co., 129 I.C.C. 477.
Provision for exceptional cases would rob rules of their efficiency. — Michigan Mfrs. Assn. v. Pere Marquette R. Co., 31 I.C.C. 329.
1 Interstate Commerce Acts Annotated 721 (1930).
This Uniform Code has been approvingly construed by the Supreme Court on a number of occasions. For example, in Pennsylvania R. Co. v. Kittanning I. & S. Mfg. Co., 253 U.S. 319, 323-324, 40 S.Ct. 532, 533, 64 L.Ed. 928 (1920):
The purpose of demurrage charges is to promote car efficiency by penalizing undue detention of cars. The duty of loading and of unloading carload shipmеnts rests upon the shipper or consignee. To this end he is entitled to detain the car a reasonable time without any payment in addition to the published freight rate. The aim of the Code was to prescribe rules, to be applied uniformly throughout the country, by which it might be determined what detention is to be deemed reasonable. In fixing the free time the framers of the Code adopted an external standard; that is, they refused to allow the circumstances of the particular shipper to be considered.
When they prescribed 48 hours as the free time, they fixed the period which, in their opinion, was reasonably required by the avеrage shipper to avail himself of the carrier‘s service under ordinary circumstances. The framers of the Code made no attempt to equalize conditions among shippers. It was obvious that the period fixed was more than would be required by many shippers most of the time; at least, for certain classes of traffic; and that it was less than would be required by some shippers, most of the time, for any kind of traffic. Among the reasons urged for rejecting consideration of the needs or merits of the individual shipper, was the fear that, under the guise of exempting shippers from demurrage charges because of conditions pеculiar to them, unjust discrimination and rebates to favored shippers might result.
See also Swift & Co. v. Hocking Valley R. Co., 243 U.S. 281, 37 S.Ct. 287, 61 L.Ed. 722 (1917). The need for uniformity in demurrage rules has been frequently recognized by the I.C.C. Chrysler Corp. v. N. Y. Central R. Co., 234 I.C.C. 755, 759 (1939); N. Pac. Millers’ Assn. v. Chicago, M., St. P. & P. R. Co., 181 I.C.C. 750, 754 (1932); Mich. Manufacturers‘s Assoc. v. Pere Marquette R. Co., 31 I.C.C. 329, 330 (1914). In this latter case the Commission stated:
The code here under attack was adopted by the carriers in November, 1909. In several proceedings that have been brought before us seeking modifications of certain of its provisions the Commission has emphasized the fact that the code was not prepared by the carriers but by a committee of the National Association of Railway Commissioners, composed of a representative of each state that had a railway commission and a member of the Interstate Commerce Commission, and that the action of this body in recommending the adoption of the code was taken only after an extensive investigation and a thorough discussion, participated in by railroad com-
missioners, commercial organizations, representatives of railroads, and individual shippers from all parts of the country. It was the opinion of the committee that prepared the code that uniformity in its provisions was most necessary for its successful operation, and that if it was sought by the rules to provide for exceptional cases the rules would be robbed of their efficiency. Sеe report of the committee on car service and demurrage on page 231 of the proceedings of the twenty-first annual convention of the National Association of Railway Commissioners.
It also seems that the petitioner here is relying upon the congestion at Kennedy International Airport under the prior rule3 to justify a flexible rule for local airports under the new rule.4 However, when the rule was changed by the Board‘s order of 1969 so that free time does not begin to run until the consignee has been notified of the arrival of the goods and they are available for pickup all talk of congestion being a factor is beside the point. If congestion, or any other factor, prohibits, delays or interferes with pickup of the goods, free time does not even begin to run under the new rule. Thus, under the new rule it is not necessary to allow for any flexibility because of congestion.
It is my view that with the issue being the limited one that it is, there being no challenge to the one-day rule for domestic shipments, and the detention charge not being questioned, that the Board was well within its authority in approving the agreement. I would accordingly affirm the Board without requiring the remand.
Notes
Section 412 provides:
(a) Every air carrier shall file with the Board a true copy, or, if oral, a true and cоmplete memorandum, of every contract or agreement (whether enforceable by provisions for liquidated damages, penalties, bonds, or otherwise) affecting air transportation and in force on the effective date of this section or hereafter entered into, or any modification or cancellation thereof, between such air carrier and any other air carrier, foreign air carrier, or other carrier for pooling or apportioning earnings, losses, traffic, service, or equipment, or relating to the establishment of transportation rates, fares, charges, or classifiсations, or for preserving and improving safety, economy, and efficiency of operation, or for controlling, regulating, preventing, or otherwise eliminating destructive, oppression, or wasteful competition, or for regulating stops, schedules, and character of service, or for other cooperative working arrangements.
(b) The Board shall by order disapprove any such contract or agreement, whether or not previously approved by it, that it finds to be adverse to the public interest, or in violation of this Act, and shall by order approve any such contract or agreement, or any modifiсation or cancellation thereof, that it does not find to be adverse to the public interest, or in violation of this Act; except that the Board may not approve any contract or agreement between an air carrier not directly engaged in the operation of aircraft in air transportation and a common carrier subject to the Interstate Commerce Act, as amended, governing the compensation to be received by such common carrier for transportation services performed by it.
Section 414 provides:
Any person affecting by any order made under sections 408, 409, or 412 [49 U.S.C. §§ 1378, 1379, 1382] of this Act shall be, and is hereby, relieved from the operations of the “antitrust laws“, as designated in section 1 of the Act [