Baltimore & Ohio Railroad v. United States

BALTIMORE & RAILROAD CO. OHIO еt al. v. STATES UNITED et al. Argued January 9-10, 27, No. 642. March 1967.* 1967. Decided * Together 680, with No. Delaware Corp. & Hudson Railroad v. al., United States et No. Erie-Lackawanna Railroad Co. v. al., United et 813, City States No. Scranton et al. v. United States al., 814, Shapp et No. al., v. United States et 815, Chicago and No. & Eastern Illinois Co. al., v. United appeal States et also on Railroad from same court. Trienens, Cutler, J. Lloyd Howard N. Edward W. Bourne, Harry Silleck, Jr., Keyserling G. Leon H. and Gordon P. MacDougall argued for appellants the cause in all cases. With Messrs: Trienens and Cutler on the appellant brief for in Baltimore & Ohio Railroad Co. George Saunders, Jr., No. 642 were L. K. and Edward Wheeler. With Mr. Cutler on the brief for appellant Jersey Central Railroad of New in No. 642 Rich- Co. was Wachenjeld. ard B. With Mr. Bourne on brief for appellant Erie-Lackawanria Co. in were No. 691 Railroad. J. Campbell Rafferty. Kenneth and John T. Mr. Silleck also briefs for appellant filed in No. and Messrs. and MacDougall Keyserling for appellants Nos. and Frank Mullen Vesper, F. Patrick C. and James H. Durkin were on for appellant the briefs No. 815.

Solicitor General Marshall argued cause for in all With him on were States cases.’ the brief United Turner, Attorney Assistant General Louis F. Claiborne A. argued Posner. Ginnane Richard Robert W. appellee cause for Interstate Commerce Kahn, With him on the brief all cases. were Fritz R. Cox, Hugh B. Jerome Nelson. Arthur Cerra and J. Kanell, Samuel Myskowski, Auerbach, Walter J. Joseph David Attorney Connecticut, General of Special Assistant Massachusetts, Berman, Attorney General Assistant argued Island, John H. Governor Rhode Chajee, Mr. Cox remaining appellees. With for the the cause Co. was Pennsylvania for Railroad appellee on the brief filed brief for Mr. also Henry Auerbach Sailer. P. York, New Haven al., of New appellees. Smith et trustees on the Myskowski Railroad Co. With Mr. <feHartford Lejko- York were Louis J. New appellee brief State witz, Tynan, Dunton F. Assistant' Attorney General, and Chajee Messrs. General. With Governor Solicitor State, of Con- on the brief for the Kanelt Berman Mulvey, Attorney General, al. were Harold M. necticut et Hirtle, Ahern, Robert L. Michael David Beizer and F. B. for Lynch J. Attorneys General, Assistant William Connecticut; Attorney Brooke, State of Edward W. the Tauro, Attor- Special General, Joseph L. Assistant of ney General, Massachusetts; the Commonwealth for Attorney Robert M. Joseph Nugent, General, and J. Schacht, for State of Attorney General, Assistant the on brief for Island. Donald L. Wallace was Rhode of Philadelphia Greater Chamber Commerce appellees Levy al. on brief -appellee Anderson was for et City Philadelphia. Friedman, Attorney General,

Edward and Edward Harris, M. Attorneys Munce and Robert Assistant Gen- eral, filed a brief for the Commonwealth Pennsylvania, curiae, urging in 642, as amicus affirmance Nos. and 691. the opinion delivered of the Court.

Mr. Justice Clark involve, appeals validity These six of an order of permitting the Interstate Commerce Commission Pennsylvania of the Company Railroad and the New York Company (Penii-Central) Central Railroad pursuant (2) § of the Act, Interstate Commerce amended, 41 481, (2). original Stat. 49 U. S. 5§ In its C. April 6, order the Commission found that merger might divert a substantial of traffic amount from the Erie-Lackawanna Company Railroad (E-L), the Del (D aware Hudson Railroad Company H) and «fe Boston and Maine Corporation (B «feM), three smaller competing carriers designated “protected as the railroads” by the Commission. protected These railroads had filéd (2) § 5 (d) under Act applications inclusion both merger and in Ry. & W. Co. and New Norfolk York, C. & St. L. —Merger, R. 324 I. C. 1. In the Co . C. case latter inclusion of E-L and D «feH has been recom and, together mended with B M, pending «fe before applications protected Commission. The of the Penn-Central roads proceeding have been held abeyance pending decision in the proceeding. Norfolk

On the merger, merits Penn-Central the Com mission protected found that the service the railroads “render their is essential and the interest shippers dictates that .preserved.” The Com [such service] mission “that concluded immediate consummation of the proposed merger would be the public consistent with if interest, imposed conditions are impairment to obviate weakening” or serious three lines. Without such protected conditions the inclusion roads ain major system, found, further it would if the be “three carriers could doubtful withstand the competition applicants of the merged, they and, unless period protected during, the necessary to determine future, their we would not authorize consummation at this time, though approving even merger.” the 327 I. C. C. sponte, sua 475, 532. It, therefore, applied, certain condi the tions to immediate consummation of merger the which “designed to prevent any were loss revenue over as a direct result protected three railroads railroads] [the merger.” “ap Its consummation of this of immediate undelayéd was of the consummation” proval “subject... specifically made to the conditions described ibid., appendix was as an appendix G,” which attached April 6, 1966, order, to the and which we likewise attach be Appendix Commission, apparently as an here. The necessity urgency cause of for the and the conditions G compliance Appendix even merger, required a from a though report had neither the bénefit of Hearing thereon, advantage Examiner nor the of hear conditions ing before the Commission itself. These protection pro be given detailed must prerequisite railroads made them a tected merger. of the consummation Commission, therefore, pro- only found

tection of the three railroads was but fixed the necessary, required compliance prior terms thereof and to permitting nothing merger. the' There was Ap- tentative about pendix general G. The conditions were into two divided categories provided (1) that: On traffic for which protected “competitive railroads are factors” merged company pending shall not, final determination provide any changed of the inclusion or proceedings, new routing practice,, freight rates, or service which would divert or tend divert traffic from routes in which protected any or railroads, them, participate participated merger. (2) the time of the And protected merged railroads indemnified company against revenue reason merger. losses Appendix G to the order detailed manner in which

1 “Competitive any particular factor” was route, rate, defined any “protected or service on which handling railroads” were merger application the time the traffic at was filed or at the date of the order..

377 for indemnity provided and such would be calculated complaints of or processing as to. new the accelerated or Section 7 changed routes, practices, rates, services. merged if Appendix company G the did provided of merger to all the the be conditions, accede years for two or “such time as the Commission deferred may necessary protect, determine to interests D H, B M E-L.” And provided § of & & and construed, the conditions “shall be administered and H protecting with the view D & E-L, enforced B M and the shipping public depends upon & and against for transportation, them the effects of the period purposes for the set forth above.” Thereafter, hearing, apparently and without but on objection of most of parties, the Commission on September 16, 1966, April modified its order reopened' the hearing. 328 I. C. C. 304. The objectors, among things, pointed other con- to the fact ditions Appendix G any were made or without notice of. hearing and would create irreconcilable conflicts between protected carriers adversely others affected merger. reopening In the hearing limited it to imposed the conditions in Appendix G-,the prevention possible manipulation of such conditions enlargement and the of the indemnity in- provision to capital clude In reopening loss. order of Septem- ber 16, Í966, the Commission left intact order April 1966, as to the undelayed consummation of the merger, effect on continued the ban or changed new routes, practices, rates as to any traffic in which protected participated, railroads but lifted the indem- condition until nification further order, which time any found provision such necessary could be made retro- merger. to the date active None previous findings, necessity as to the the immediate imposition original the conditions included order, were alone traffic conditions withdrawn. The amended in effect. were left arose 7, 1966, on September

This was filed suit seeking of E-L and other railroads complaint the interlocutory restrain the consumma an to injunction convened, A was merger. court three-judge tion of the by a 28 it declined, § U. S. C. and thereafter 2284, vote, grant interlocutory injunction. divided to the States, 259 v. Erie-Lackawanna Railroad Co. United F. 964. from Supp. appellants sought stay The application who referred the Mr. Justice Harlan the granted Court and on 1966. At it was October expedited the same time we the oase for consideration. 385 U. question whether, S. The sole us is before light of findings the necessity for interim protection for protected railroads, the so-called Com mission in permitting erred consummation merger prior to and awaiting without determination proceedings. the inclusion Com We believe that mission erred in approving the consummation immediate merger determining without fate of ultimate protected We, therefore, judg roads. reverse the ment and remand the case District Court instructions to remand the matter to for the Commission . further proceedings in opinion. accordance with this

I.

Questions not here decided.

At the outset we make it clear do that we on pass the validity of the merger, special conditions Ap- pendix G, the modified order of the Commission, or the peripheral points posed by the parties. various We hold only that under the findings uncontradicted Com- mission it necessary was for it to conclude the inclusion proceedings, as protected railroads, prior per- mitting consummation of the merger.

II. background, and relative merger, participants its its

position. merger study has been The Penn-Central under years. discussion the Commission for some After withdrew-, study completed initial was in 1959, Central plan began negotiations from the for a with" Chesapeake Railway Company (C 0) and Ohio «fe joint control of the Baltimore and Ohio Railroad Com- pany (B 0). However, «fe when a later «fe had date.C contracted purchase for the of some stock, B 0«fe 61% gave up Central plan negotiations and renewed with Penn. signed agreement merger The two roads an in 1962. The New York, New Haven and Hartford Rail- road'Company (NH) approached Penn for and Central inclusion in plan but given was a The deaf ear. merger agreement provided that all properties, franchises, etc. .(permitted, respective law), state would be trans- ferred to the merged company and appropriate stock ' exchange, debt arrangements, etc., effected.

As the Commission found, merger would “create hour-glass an shaped system flared on the east from Montreal, Canada, through Boston, Mass., to Norfolk, Va., and on the west from Mackinaw City, Mich., through Chicago, Ill., to Louis, St. Mo.” 327 C., I. C. at operate It would some 19,600 miles road in 14 States between the Great Lakes, with a splash in Canada on the north, and the Ohio and Potomac Rivers' on the south. After the systems two are con- planned as and' nected new expanded yards and will provided, consolidate trains moving now separately between the same points. The combined systems will have a substantial parallel amount of track- age routes, with 160 common points or junctions. consolidated, Terminals will be present interchanges be- 380 only the eliminated will be systems two

tween systems respective facilities yards and most efficient projects calls for merger plan The will be utilized. key creat- points, traffic long-haul will intermesh their cities with the principal nonstop'service between ing a and branch multiple-stop routes coyering the “locals” in transit savings enormous is estimated that lines. It effected; yards chosen Certain can be time —such into elec- and modernized be remodeled Selkirk —will 5,000 from capacities of tronically yards with operated to West through The trains 10,000 per day. cars the West and those from formed at Selkirk be will consignees up broken for to terminals' dispatch Jersey. New England, York, and northern New New City calls traffic to be plan for New York some The. line routed over Central’s Hudson River East Shore By consolidating through lessen cost. lines, traffic on fast filling trains, re-routing out over routes, the most efficient eliminating interchanges some other effecting im- provements, the merged company by 6,000,000 will reduce the number of train A operated. single-line miles service will operated more points, circuity between with less switching. plan'álso daily less The trains calls Pennsylvania to be withdrawn from the with seven new added, leaving daily. ones trains total Pennsylvania largest and Central the third largest Region. Together in the Northeastern railroad - operating revenue of two roads was over in Their $1,500,000,000 1965. net in 1964 income totaled in $57,000,000 almost and ran in 1965 excess of In $75,000,000. 1963 total net barely.$16,000,000. was operation systems cost of of the two The runs $90,000,000 working capital a month and their was $72,000,000 some 31, 1965. As of 1963, December their in. combined in- $1,242,000,000. were Pennsylvania vestments and made systems up are each underlying Cehtral of corpo-

381 rations, Report of the Examiners’ As of date in merged company ownership interest 182 have Thirty-six railroads lease! of corporations and 10 under in corporations are rail six of which the carriers! voting a All merged company would have control. six I are It would likewise six Class control Class railroads.. switching II and a railroads, railroads, five terminal hold- car-leasing five ing four common company, companies, corporations. carriers and 34 noncarrier largest The NH2 the sixth railroad in the North- largest in Region eastern New England. On among ranks passenger-carrying national basis it fourth largest railroads and is one non fréight trunkline' roads. It has some 1,500 miles railroad four Massachusetts, Island, Rhode Connecticut, States — part of New NH reorganization York. has been in under 77 the Bankruptcy Act, § 1474, amended, Stat. S. U. C. since 1961.3 gross § While its revenues run in have excess it has run $120,000,000, deficits since 1958; During the trusteeship its deficits have run from $12,700,000 in 1962 to $15,100,000

I—IHHhH The protesting parties, setting their m the Northeastern

Region and their position on the merger. Altogether some 200 parties participated in pro- ceedings before the Commission, some support of and in opposition others merger. None of the appel- lant challenge railroads merits the merger; how- appellants Milton ever, Shapp J. City Scranton attack both on its merits. from Penn- Aside 2 We ineludé in this discussion since the Commission intends to system it in include as soon as terms conditions PennTCentral agreed to.or fixed. York, In the matter the New New Haven and Rail Hartford Company Debtor, road No. 30226 U. S. D. C. Conn. — 382 in involved there 10 other NH, carriers

Central this proceeding. M,& carriers —B protected

Three of these are I) freight passen B M a operates & H and E-L. & in Massa ger Hampshire, Vermont, service New Maine, . miles of road. 1,500 York over some chusetts and' New some deficits in net income for It has suffered consecutive years appealed and has not frоm the decision of road D H about 750 miles operates District Court. & 50 in Vermont York, with some 600 in New less than 1965 in Its net income in Pennsylvania. and the balance E-L highest year operates was its since 1960. $5,000,000, Jersey, railroad in New New 3,000 some miles of located Its net Ohio, Indiana Illinois. York, Pennsylvania, heavy $3,000,000 in 1965 suffered income was over but it. preceding years. previ As we deficits the seven have applications filed ously noted, these three railroads have Ry. for inclusion in both this case and & W. Norfolk York, Merger, and New C. & St. L. R. Co. Co. — action, I.4 Commission I. C. C. has withheld on B D E-L, H, & M and & in Pénn- the inclusion until is a final determination of Central there their inclu proceeding (N W). sion with Norfolk and Western & proceeding In Commissioner Webb his filed Jatter 22,1966, récommending on December report the inclusion D H in N & system of E-L and & W but was unable B terms for inclusion of & prescribe M—this was left negotiation to private argu between the railroads. On ment here the indicated that antici Commission .has proceeding merger involved This- of the Nickel E-L Plate. sought proceeding along inclusion in this Bwith & M-and D & H. application After E-L had withdrawn the. Commission found “should have no harmful effects” on B M& jurisdiction years D & H. The retained for five permit again E-L, petition B M and D H to & & for inclusion. -I, See, petitioned .324 C. C. 19-31. Each of the roads so and it is proceeding how inclusion before the this, Commission. Juiy final order the matter entering pated these, If three August 1967. this is favorable roads has N system, included in the & W would in such a acquiescence plan. indicated 0, here are the C & railroads Six additional involved Reading Jersey (CNJ), of New B & the Central 0; and the' Western Western, the Norfolk and Company, system & O-B & O (WM). The C Maryland Company 1962. See Chesa proceeding a control result-of Co., R. & O. Ry. Co. — Control—Baltimore & O. peake nom, sustained, sub 317 I. C.C. Brotherhood of States, 221 United Way Employees Maintenance v. (1963). curiam, 375 U. S. aff'd, per F. Supp. 19, miles operate 10,000 roads some two Together these through Michigan from railroad. Their lines extend Ill., Chicago, from Virginia and Virginia Ohio and West Washington, Y., and Mo., Rochester, N. Louis, and St. over in 1965 totaled income operating net D. C. Their voting control % n B owns 38 addition, In & O $80,000,000. Reading has in turn controls CNJ. of'Reading which with net. Pennsylvania railroad in eastern 1,200 miles of has in 1965. CNJ $8,000,000 of some operating revenue Pa., to. extending Scranton, from 514 miles of railroad deficit operating it had net N. J. In 1965 Jersey City, jointly own & O-B & O also $3,000,000. C in excess of The latter has of WM. voting stock 65% Connellsville, from and extending, JPa., railroad miles of In 1965 its Baltimore, Md. Va., to Springs, W. Webster nearly was $8,500,000. income net operating extending in a double miles of railroad has 7,000 N & W on City, Mo., and Moines, Iowa, Des from Kansas. prong on the Pittsburgh, Pa., Buffalo, Y.,N. and west to on Ohio, Va., and Cincinnati, Bristol, from east and .on the east. Md., Norfolk, Va., Hagerstown, west to was approximately for 1965 operating income. Its net noted, proceeding have an As we inclusion $118,000,000.'1 D B & H and E-L pending M, under which & is now system. inclusion in the N & W seek N <feW 11, 1965, & O-B & O and On C October asking approval application an with the Commission filed in- offering to single system of their into a Reading therein, B D and CNJ M, H, E-L, clude & & If effected subject were various'conditions. merger were North- effected, the Penn-Central-NH the. e., i. giant Region systems, then have two eastern & & Penn-Central and C & O-B O-N W. party remains a

Only here, one additional railroad (C Company Illinois & Chicago and Eastern Railroad El). approximately operat- It has 750 miles railroad Ill., Mo., Evansville,- ing Chicago, Louis, between St. nearly income of Ind., operating $3,500,000 with a net Company in. The Pacific has Missouri Railroad to make already by been the Commission authorized of E I part system. E I a of its The fear C & C & merged Penn and Central here was the be competitor than the Central alone and more formidable sought imposition special the here it, accordingly, routing and traffic conditions. appellants City Pa., only Scranton,

The other the D H Scranton is served & Shapp. E-L, and Milton J. merger will It fears that the have adverse and CNJ. city opposes merger. the therefore the effects Shapp as a citizen and stockholder of Penn and is sues merger. to the opposition likewise in has States filed a memorandum in which The United the merits of “quarrel it does not the Penn-Central agencies itself.” Thе of the merger proposal Executive General Branch, reports, the Solicitor “believe that in merger is interest and that its consumma- promptly be tion should effected.” This view, however, assumption place on the “that a based the emerging pattern of consolidation the Northeast can be found region.” It is the Commission’s roads of the for the lesser merger consummation of the of the immediate approval completion proceedings to determine prior of the lesser roads to which the United States place very contends survival objects. It since railroads Penn- protected, the three is threatened provide the Commission must first merger, Céntral absorption by major “a for them until their protection - system like and Western.” To this end the Norfolk suggests States that we hold the case to enable United proceedings the Commision to conclude the related it now has consideration. The con- under United States “Only if cludes that: the Commission is unable from promptly problems resulting merger resolve urge would we deem it appropriate this Court to reach the merits of the appeals and reverse the judgment below.”.

The appellant varying positions railroads take all short attacking the merits of merger. pro- three tected railroads contend should not prior consummated to the final determination of their system inclusion in some major the enforcement of Judicial, protective effective in the interim. conditions they review, say, protective conditions would other- illusory. wise be The C & group O-B & O the N <feW system maintain that the April conditions 6, 1966, protected order give railroads a vested interest the Penn-Central merger which pro- would in the result tected railroads diverting traffic to Penn-Central which normally gone would have They them. say, does States, United the conditions were drawn with- out the benefit notice and hearing, are deficient and enforcement thereof would be to their detriment. C EI& points to what it calls inconsistent findings as to the will benefits it have “of intensified competitive efforts” by its connecting carriers on in competition routes

386 indemnity It contends that

Perin-Central. condi- “compound injury” the economic which tions &,E I as a merger the C result of the would befall and prompted'it request protective measures.

IV. The transportation policy practices national

Commission thereunder. This has pointed Court often out the national transportation policy product long “is- the of a history of trial error Congress Trucking . . . .” McLean States, Co. United (1944). v. S. 67, U. In that case it found that the Transportation Act of 1920 “markéd a sharp change in policies objectives embodied in those In efforts.” Ibid. that Act the Congress directed the Commission adopt plan consolidation of the railroads of the United States into “a limited number of systems.” 41 (1920). Stat. 481 Consolidation would approved by the Commission upon a finding that the transaction was harmony with and in furtherance complete plan of consolidation public interest would be promoted.' But the Commission was “competition warned that preserved shall be as fully as possible.” Ibid. The initiation of this unification, how n ever, Congress left wholly with the carriers. given Commission was ho power to compel mergers. pattern This was carried forward in the Transportation Act 898; 54 Stat. however, § 5 of the former was amended to Act authorize the ap Commission to prove proposals carrier-initiated which it found to be consistent with the upon interest and just and reasonable conditions. (2) § Under (d) additional power given was the Commission to condition ap proval of a upon the inclusion, request, of other railroads operating the territory involved. County said As,we v. States, Marin United 356 U. S.

387 412 (1958), “the result of the ^[1940] Act was a change very means, remained the same. while end in the expresses ‘unification section’ amended language of the industry Congress pro of the clearly the desire system integrаted transportation an national ceed toward at through corporate simplification.” Id., substantial has, therefore, The Commission not proceeded 417-418. by “a or under master for vari plan” consolidation in the regions. ous Following procedure the Commission has refused to consolidate the rail Region Northeastern road or control proceedings into one See case. Chesapeake Ry. & O. Co.— Control-Baltimore O. R. & Co., at supra, 265-266, Ry. & W. Co. and Norfolk York, New & Merger, supra, C. St. L. R. 18. Also at Co. — Way Maintenance Employees Brotherhood v. of States, United 221 Supp. F. 29-31; per aff’d curiam, (1963). 375 U. 216 S.

It is contended fatally the order here is defective for failure comply (2)(b) § with 5 Act requires the approving “enter an order authorizing transaction, such upon the terms and with conditions, modifications, so to be found just and reasonable.” The claim leaving is that future, indemnity open for provisions determination requirements the Commission did not meet section. Once valid order is entered the Commis- sion, it, course, power jurisdiction has the to retain purpose making modifications that neces- it finds sary light of subsequent circumstances to assist in compliance prior previously required conditions or, course, any correct errors. The Commission also power (9) § has under the Act to make certain sup- n plemental (3) may § orders and under correct clerical errors in certificates. do We not find necessary pass question power of naked in the Commission to' does assuming that it here. Even has been done

do what imme- approving we its order find that power, that have merger insupportable on of the consummation diate its findings. V.

Conclusions. that April 6, 1966, in order found its

The Commission to a affected adversely be railroads would protected the they that merger; by the Penn-Central degree” “serious required providing “severely handicapped” be that areas industrialized transportation highly public and “the is “essential” serve, which service they held that preserved.” It then it be service dictates con- merger would of the consummation immediate if conditions only the public with the interest sistent signifi- immediately imposed. And, G were Appendix though approved the it concluded that even cantly, it permitted not be of it would merger, consummation during “are protected protected the railroads the unless . . .'.” to determine their future period necessary brought was C., I. 532. But after this suit C. G Com- strong Appendix voiced, was the opposition of the con- September 16, 1966, withdrew all mission, on ' G save traffic This left the Appendix the ditions ones. protection according protected railroads without sufficient findings. was done ap- own This to the Commission’s objections appel- the parently because vehement G havoc rather Appendix would cause lant railroads that cannot as did District give say, than We shelter. September nothing order meant Court, 16, 1966, imposed by the traffic conditions left it than that more protect pro- sufficient to the three in themselves were merger during railroads the interim between the tected major as to their decision future one and the interpretation systems. This runs face railroad prior findings enumerated only of not above but Appendix conditions of terms and G found specific to be necessary prevent “impairment or serious weak- ening” Id,., of the three carriers. at Indeed, rather than being tentative, requirements of Appendix G rigidly were fixed and established for the period entire inclusion of the preceding protected roads in some major system. finding of consistency with predicated was interest entirely unqualified ac- ceptance Appendix G by Penn-Central. Otherwise the merger put would be off for In years. two effort expedite failed to provide the Commission very protection at the same time declared indis- pensable to the three roads. This leaves ultimate conclusion —that prompt consummation of the Penn- merger clearly would be in public Central the interest— support without and it falls under the Commission’s own findings.

In view of these findings facts and since none of the of the Commission disturbed, amended, were or attacked, we was error permit merger believe it the be effected. we also note that And even in the ultimate order of approval September 16, dated 1966, the Commission pointed out its “finding merger to the being [as public consistent the with was if the that, imme- interest] diate consummation were to be authorized D H E-L, & Band & M require special protection during would the pendency of their petitions for inclusion in a major system.” Nevertheless, in spite of this confirmation of its finding, the merger Commission the ordered imme- diately consummated without “special protection” by afforded Appendix Having finding G. found that the consistency only interest could sus- by tained imposition Appendix G “special protection,” the Commission failed to meet statutory obligation when it arbitrarily removed the special con- ditions of Appendix G while leaving the prior finding- standing. permitting order invalidity of the patent view

In light merger and of the consummation immediate the Com- before proceeding of the status present necessary that it is only conclude that we can mission, railroads protected future of to the decision as inclusion, pribr system be decided major in a and their This is merger. of the Penn-Central consummation recommendations findings and true since the especially of the three Webb, as to the inclusion of Commissioner the full under submission to protected railroads, now thereon a decision should be reached This advised counsel. we are July August con- ultimate little time would have effect short making in the has been summation —which if in the future now—and it resulted years for some decided, serious being finally railroads protected of the Furthermore, there to them would be obviated. losses G Appendix conditions .be no occasion would highly hearing decision on this imposed to be necessary insofar as matter not be controversial Finally, are concerned. protected three railroads problem provide the solution to the such action would . the indispensable protection necessary prerequisite the Commission railroads three found merger. the conditions of charge that the serious Furthermore, hearing notice and imposed were without G Appendix by this course of large part dissipated be in a would protected roads it would be to the three action. As if when their fate is determined. entirely and obviated affected, other railroads Commission could As to the present hearing conclude its and make a quickly more merger upon as to the them decision effect and if protection, any, required.5 5Among these, deprived hearing it CNJ claims been of a has. effect on it of the inclusion of the NH in the on the Penh-Central points out, however, merger. Commission As the the terms and the fact that is also buttressed disposition This be merger of consummation the immediate should the interim condi- later neither at a date and permitted of disposed be favor- proceedings nor the inclusion tions only merger, the continued existence ably to unscramble be to set it aside and remaining would remedy - that not follow It is said this does the consolidation. they indemnity are issue only the terms at since money. blinking reality. The only involve This is at as as traffic, trackage, terminals, etc., fact is well beyond can and corporate will, financial and structures be doubt, quickly combined, changed, abandoned, or con- only solidated. The condition now for the imposed main- any tenance of the quo provision against status is the change routes, traffic, as rates, etc., to business which protected three participate. They roads are сom- paratively small part lines located the most north- eastern coastal would, States percentagewise, be small part routes, the total trafile, rates, etc., of the system. whole Penn-Central There be no restric- tion traffic, as other routes, rates, all etc., well as operations other of the merged including ter- company, warehouses, minals, etc., corporate financial and struc- plan tures. proposes Penn-Central as we follow, briefly have it, sketched only indicates not subject the NH’s inclusion proceedings to further conditions given specifically Commission has to CNJ leave “to seek protection gateways,” C., traffic at that time. 327 [its] I. C. for. Moreover, says, also has hearing it not been CNJ afforded a deprive on its important claim that will also it of over- head coal traffic now delivered CNJ D & H at Wilkes-Barre, might lost, alleges, Pa. This because of the direct connection between D H& and N & W which will be available over the track- age rights being required grant that Penn-Central D & H. nothing We know and, the merits of course, these claims indi- cate no decision However, thereon. we assume will in afford opportunity each instance an CNJ to be heard concerning them. experience action. Our changes quick but

major well, indicate common sense mergers, other and unscrambling is fast but “scrambling” goes accomplished. .effectively and seldom interminable for a merger has been studied The Penn-Central merger agreed to it to the Indeed, parties decade.. has been under Commission ago and it years over five is, course, This since time. ever consideration give weight noteWe expedition. for more reason inclusion Commission that to the estimates . in the & W should be roads N three proceedings relatively short Our remand in “a time.” concluded only very delay a1 before therefore, entail short should, If in court the its order is attacked the Commission. expedited, one, can be as was this an hearing there do not believe that this early determination made. We make as certain high price pay is too a as human ingenuity devise, just disposition can and reasonable parties. this matter for all of the After it is the all, largest merger in if history railroad our not handled properly seriously disrupt irreparably injure could system entire railroad the northeastern section the. country great of the only detriment —to parties here necessity but conveniénce and of the entire Nation. judgment the District Court reversed and

the cause is remanded with instructions that be re- to the Commission for further proceedings not manded opinion. inconsistent with this so n or<¡ered. TO OPINION OF THE APPENDIX COURT.

Appendix G.* E-L, the Protection D H, Provisions B & and M.<fc for Pending 1. final determination of petitions in- D H,& B E-L, clusion filed and & M in proceed- *327 C. I. C. other al., et such Docket No. Finance

ing and in herein- may prescribe, as the of time period ' which on traffic for period, and protective the after called the factors, M competitive are D H & & and.B . E-L, any provide or not publish company shall merged or rates freight practice changed routing new or and/or which carriers, with other locally jointly or services, either in which traffic routes or tend to divert from would divert participated or participates, D H or B nowM,& E-L, & any application filed, or take this was at the time contrary to engage any practice in or conduct action or this condition purpose general objectives in explained report. this in purpose illustrating way

For no limit- —but ing application condition, following Of .the —the specific provisions prescribed: During the protective

A. and as to period, the described trafile, up merged railroads which shall make system separate will be they considered now railroads, as are, purposes for the new establishing routes or rates privileges changes or in present routes, rates privileges. any

B. When freight the described traffic is delivered merged carriers of the system, shall be allocated among system the routes of the in prac- accordance with system’s tices employed railroads at the time this merger application was filed.

C. Where through routes and rates joint are now in via any existence component railroad of merged system and D E-L, H or & B M, & the participation therein of such components shall during maintained the protective period with the vigor same as such com- ponents have heretofore exercised in competition with each other and other carriers, the end of preventing noticeable diversion from such routes to any other route in which the merged company participates. protective period for the merged company

D. The , on joint rates divisions thereof agree shall and. D B & H or & M freight E-L, traffic interlined with advantageous to D H and E-L, under no less & terms M B & than are the terms those three carriers now merged system, carriers component have with the any in changes joint rates, event of such and, any changed divisions shall not be manner which will D B result in & H or & M E-L, receiving proportionally they less than now receive on joint rates with such component carriers. In D conjunction E-L,

E. H B M, & and & merged company during shall, protective period, keep open all routes now force for transportation freight over the lines of companies the three and the component merged carriers of the system; shall maintain thereon equal service to or better being than given on the merger date this application filed; was im- shall (cid:127) prove such- service, to the extent within its power, least as necessary to make the through said fully routes which, competitive with other routes in merged com- pany participates; and, joint where rates are now in effect or in were effect when this application was filed, shall maintain such rates; and change where those rates becomes appropriate, changes shall conform requirement of provision D above.

2. The term “competitive factor” shall be construed to mean that at the date this order or at the time this merger application was D filed, E-L, & H or B & M was both participating in the- particular route, rate or service and was handling traffic thereon.

3. D E-L, & H and B & M shall be by indemnified merged company under the circumstances and according ' plan to, specified, in the report, supra.

4. This appendix constitutes a plan protection against the effects of applicants’ merger and does action or warlike by: hostile (a) caused to loss apply de (de jure or sovereign power or any government (1) (b) insurrec- forces; air naval or military, (2) or facto) disaster; national cetera; (c) war, et rebellion, civil tion, God; act of strikes; (f) (e) depression; (d) economic state of affairs. other similar or (g) enforcement application and interpretation, exclu- governed shall be appendix the conditions this following provisions: sively A; appendix under shall arising All controversies Commerce finality by the be determined with Interstate Commission in the manner indicated below. E-L, (1) supra, whenever Except

B.' section D or B M condi- protective & H & considers that these a will being violated, tions or that result violation from publication the effectuation a tariff which the merged company participates, they may (individually collectively) complaint file Commission, of Suspension, merged Board and with the company, specifying rate, route, privilege, or practice, such constituting alleged matters setting violation and in .a forth statement by an appropriate verified official complainant all giving the data rise to the complaint. In

(2) the event the Board of Suspension shall de- termine that, as to the complained matter D H of, E-L, & or B & M competitive is a factor (as defined in these conditions), shall the of case a tariff publication not yet effective, suspend the tariff forthwith protec- the for, (as tive period defined in these conditions), and shall an investigation conduct the into matter complained of; if the alleged violation is found not exist, Board shall thereupon order the suspension removed; and, in all not matters involving a tariff yet in effect, the Board shall investigate the complained matters of; if in and, any investigation, it finds protective these order cancella- it shall ‍‌​​​‌‌‌​‌​​​‌‌​‌​​‌‌​​​​‌​‌‌‌‌‌‌‌​‌​​‌​​‌​​​‌​​​‍being violated, conditions a where tariff or, provisions violative tariff tion of the of violative conduct. the termination involved, is not as orders and effect shall have force the Board Orders this, enforced as such. shall be Commission and shall arising above, C. controversies under section All by Commission, Finance Board No. 2. be determined an com- Complaints, by appropriate verified officer merged shall be addressed to such Board and the plainant, specifying basis company, complaint both the sought. relief (1)D. All determinations as to D whether & H E-L, Bor M is competitive & a factor shall be made within 10 days complaint filed; after final decisions as to issues by raised a complaint shall be rendered within 90 days the complaint after is filed.

(2) Appeal shall lie to the Commission, division 2, from orders of the Board of Suspension; and to Com- division mission, 3, from orders of Finance Board No. 2. (3) Special rules for proceeding before the Boards and appealing therefrom shall promulgated Com- mission at a future time.

6. Notwithstanding provisions 1, sections. 2, 3, agreement an5, pertaining to the interests of E-L, D & H B M may and/or & be hereinafter entered merged company and the protected-carriers, any them, which shall supersede protection provided by such sections extent the agreement does not vio- provisions late the of the Interstate Commerce Act or the Commission’s regulations rules and thereunder.

7. In the event applicants fail to accede to the above- named conditions, consummation of the proposed merger will be deferred for 2 years or such time as the Commis- sion may determine to be necessary protect D interests of BH,& M& and E-L.

397 administered construed, shall These conditions 8. D H,& E-L, protecting view to with and-enforced upon depends shipping public M B and & of the the effects against transportation, them for forth above. set purposes period for the in addition applied are to be conditions These I hereof. appendix out conditions set the standard Brennan, concurring. Mr. Justice In its determination opinion. Court’s I join interest, public merger is consistent whether to consider discharge statutory duty did not the.ICC failure inclusion, interest the effect E-L, & B The ICC order D H and & M. include, the merger as of the consummation authorizing immediate set therefore be Interest must with the consistent aside.

I. merger is the approval The ICC’s Penn-Central major for consolidation of last of three authorizations was first, eastern In the the C & 0 allowed roads. second, per- control the B In the the & W was & O.1 N merge with the Plate.2 The ICC has mitted Nickel problem been confronted with the of what to do with D B E-L, they petitioned & H and & M since inclusion in the proposed system N & W-Nickel Plate approval. as a condition of precarious E-L’s financial condition led to that carrier’s petition withdrawal of its favor of inclusion negotiation, 324 21, I. C. C. 1, a consequence of the denial of D H& and

1 Chesapeake Ry. & O. 317 Co., Co. — Control—Baltimore & R.O. I. C. C. sustained sub nom. Brotherhood Maintenance Way Employees Supp. (D. 221 F. States, United C. E. D. v. Mich.), aff’d 375 U. S. 216. per curiam, Ry. & W. York, Co. New C. & St. L. R. Co.— Norfolk Merger, 324 I. C. C. 1. meantime, 31-32. In the C„ 324 I. C. M petitions,

B & the Com- had come before proposal Penn-Central the Penn-Central D & fearful that H, mission, before and consummated .might approved be that assured, argued major system was inclusion in by consolidating up be held Penn-Central approval of immediate consummation proceedings, the two that contingent on Plate should be made N & W-Nickel roads in upon terms of the three equitable inclusion * approved. later 324 C. at 30- C., event Penn-Central I. requests, recognizing there, 31. The ICC these denied but Dto H’s fears, jurisdiction was substance & retained years to permit petitions five the roads to'file for inclu- system. sion in the N & W required Inclusion was to be upon equitable terms.if “found public consistent interest,” and consummation of the merger would consti- tute “irrevocable N assent” & W to the condition. C., I. C. at 148. Before N & W-Nickel Plate was the Penn- approved, proposal Central had been filed. roads, The three appre- ciating danger the' Penn-Central pose to their survival, sought inclusion, conditioned denial of their in & inclusion N W. Soon after, negotiations be- tween E-L and N & W for voluntary inclusion apparently broke down, because' at approximately the same time the three roads petitions filed for inclusion in N W,& N&WandC&O filed applications merge with each other, stating only such a merger support could inclusion .of the three roads in N & onW equitable terms and consistently with public interest. The three urged roads in their applications both for inclusion in Penn-Central and for inclusion in N & W, that Penn- Central delayed until their inclusion in one of the systems was assured. This was tantamount to a request the two proceedings be consolidated for decision, and the Department of Justice supported their position. alleged, (1) three roads found, The ICC essential and “is three roads by service rendered it is (2) preserved,” it be dictates interest these system, major in a inclusion without that, “doubtful of, . competition withstand could three carriers All 475, 529, 327 I. C. C. merged . . . .” applicants inclusion however, that recognized, concerned the.parties to inclusion preferable would be N & W of the roads some before would be time and that Penn-Central, jt Rather completed.. was proceeding W inclusion the N & Penn-Central, which delay than consummation' savings and in substantial ICC would result found immediate consumma- improved service, the ICC ordered petitions roads had pointed It out that the three tion. provided that, in N & W pending, for inclusion three denied, in N & W was the the event inclusion year following for petition roads could the ICC one judgment of denial to allow or inclusion of require on if Penn-Central, equitable terms, roads in found to be in the C., Meanwhile, interest. I. C. at 553.- in addition to usual existing conditions for preserving routes and gateways, prescribed “unprecedented” ICC (1) conditions two kinds: traffic conditions requiring Penn-Central to. existing continue practices and route patterns with respect three, to traffic for competed by the (2) roads; conditions guaranteeing the three an roads indemnity computed on'the basis of a fixed share of the combined total of the revenues realized them and Penn-Central; this .was to compensate the for roads income lost from diversion of their traffic to Penn-Central. 327 I. C., C. at 532. These conditions were acceptable Penn and Central but not to the three roads or to N & W and C & O-B & 0.

Proceedings to set aside the ICC order brought were in the District Court and petitions for reconsideration were also filed with the ICC. Some of the latter attacked they ground on the conditions validity H, E-L D & how- hearing. imposed without

were before complaint against approval renewed their ever, system.and in a major inclusion of their assurance the conditions as indefinite and alternatively attacked demanding in to be addition indemnified inadequate, family & their lines for the capital loss. C & O-B 0 and would first time introduced evidence the^merger adversely them, argued affect the indemnifica- tion the original condition of order create a community of interest between the roads and protected Department urged The post- Penn-Central. Justice ponement questions concerning to consider the raised evidence of conditions and the adverse effect offered & C & O-B O.3

3Pennsylvania pass upon аnd Central claim we should not Department of Justice’s contention that Commission should have delayed consummation until inclusion the smaller roads in a major system is, however, presented by was assured. issue itself, Questions in its Presented, ICC statement where it recites that, in refusing enjoin whether the District Court erred consum pending inclusion, mation question assurance of is a embraced general question presented within appeals. on these Brief of ICC, p. A appellants, number of the railroad moreover, they presented properly claim question delay have pending representations amply requirement inclusion. These fulfill the of this 15(1) (c)(1), point Rule Court’s fully has fact been argued. briefed Neither is issue, clearly there merit the claim that raised ICC, C., 528,

before the I. C. 327 at was not raised before the complained Court. Counsel for D & H that the District Commis- way only sion found “the the D protected & II could be through is system, they in some but yet inclusion finding have not a made . . . system any as to whether our inclusion in is consistent with the public interest,” Transcript, p. 58, and counsel for C & 0 was (comment meaningfully answer Judge Friendly’s unable to that his “position really merger cannot be consummated until proceedings all these other carried a id., conclusion explicitly rejected 80. The District Court “the claims that con- indemnity pending conditions a The ICC rescinded hearing they on whether should be modified and whether indemnification capital loss condition should added, ground but on the of laches to hear refused the evidence by the C & offered O. I. C. C. 318. The 304, ICC approval merger reaffirmed its of the subject to Penn- Central’s acceptance of the finally conditions as formu although lated, foreclosing seeking Penn-Central from judicial any review of provision capital loss indemni fication. 328 I. C. atC., 329. District Court The denied interlocutory relief enjoining Penn and Central from going merger.4 forward with the

II. statutory duty (2)(b) of the is clear. ICC Section 5 of the Act, Interstate Commerce amended Transportation Act of 1940, agency authorizes the approve only those consolidations it finds “will be con- sistent interest . . .” 54 . 906, Stat. (2)(b). U. S. C. 5§ The statute creates no presumption mergers generally are either consistent or inconsist- ent with that interest; rather, requires that each pro- posal be in depth examined to determine its upon effects the national transportation system. Thus, the ICC is ex- plicitly directed to “(1) consider The effect pro- posed transaction adequate transportation service to the public; (2) the effect upon the public interest of the inclusion, or failure to include, other railroads territory involved in proposed transaction; (3)- the total charges fixed resulting from the proposed transaction; (4) the interest of the employees carrier merger summation of the should be deferred until conclusion of all pending merger proceedings-. rail Supp. . . 259 F. 4 Although -appeal this case arises as an from the District Court’s interlocutory denial of motions for injunction, parties recognize permitting lawfulness of the ICC’s order immediate con summation inis issue before this Court.

402 The National Trans- (2)(e). § 5 49 U. C.

affected.” S. McLean controlling guide, is the Policy portation Trucking States, v. United 82, Co. 321 and 67, U. S. safe, promote “to requires policy seryice and foster efficient economical, and adequate, among transportation conditions sound economic of developing, . to the end coordi- the several carriers ... system transportation a national nating, preserving means, ade- by water, highway, rail, as well as other of of the commerce quate to meet needs United States, of the Postal and of the Service, defense.” national C., provisions 49 note preceding § U. S. 1. These call for application of discerning judgment to a range wide factors, preclude position purрose that the 1940 is simply promote Act railroad consolidation.5 recognized The ICC has inquiry into a proposed transaction does not with the possibilities end for increased economies, but extends to “the effect of the transac- tion upon adequate transportation service parts to all 6 public which would be so affected,” which encom- 5The ICC’s pronouncement most recent in Great on the issue is N. P. & B. Merger, L. R. p. F. 21478, —, D. No. decided Co.— 31, 1966, March granted January reconsideration 4,' 1967: legislative history “The clearly section Congress shows that the adopt policy did fostering a or encouraging railroad unifica- Transportation tions. It’ was the 1920, Act of Transporta- not the tion Act 1940, policy favoring embodied a railroad consolida- policy tions. ... No such expressed is in section interpret 5. To implying section 5 as policy perversion such a legislative history public and intent. The interest scale is It balanced. is not tipped by slightest presumption against merger.” for or meaningless, It is course, to contend that the Act favors unifica- tions that are otherwise public consistent with the interest; it also disfavors unifications inconsistent with the. interest. Q. Chicago, Control, B. & R. I. C. C. 146. See Co.— Detroit, T. Control, & I. R. also 275 I. C. C. 455,489, sustained Co.— sub York, nom. New C. St. & L. R. Co. v. United States. 95 F. (D. Supp. 811 Ohio). C. N. D.

.403 “duty, con matter, to passes-.the as an administrative competitors on the on the the effect of sider light industry competitive general in the the situation-in transportation policy.” objectives the national of the supra, Trucking States, at 87. Co. United McLean v. prime public in consideration, the “The is interest regard making all have for that determination we must —Control, Toledo, P. & R. relevant factors.” W. Co . 295 I. C. 523, C. my properly applied in

A in factor, critical not view upon public of the case, is “the effect the interest in inclusion, territory failure to railroads the include, other proposed in involved transaction . ...”7 prerequisite The Commission is authorized, “as a to its approval proposed require, upon of the transaction, to equitable terms, the inclusion of another railroad or other territory upon petition by in the railroads involved, such , requesting upon railroad or railroads such inclusion, and finding public a that such inclusion is consistent with the (2)(d). recognizes §5 49 interest.” S.U. C. The ICC required it is to consider the issue of inclusion even , petition proposed when no is filed,8because if a transac- 7 Study by The Staff Transport the Commission’s Bureau of Economics and Statistics on “Railroad Consolidations and the Public (p. 46), accurately Interest” highly important labels this factor “a criterion, since problem it involves the competition among basic Reprinted railroads.” 11, as Exhibit Hearings before the Subcom on Monopoly mittee 3097, Antitrust and on Cong., S. Sess., 87th 2d pt. 2, p. (1962). 859 E-L, example, When for petition withdrew its for inclusion N & W the expressly Transportation stated that Act 1940 “does participation not limit our in carrier-initiated upon passing consolidations proposal on a take-it-or-leave-it specifically enjoined basis. consider, We among things, other public effect . .. inclusion, interest of the or failure to include, territory other railroads proposed involved in the C., Accord, transactions.” 324 I. C. at 26. N. Y. Central Securities Corp. States, 12, 28; Toledo, v. United 287 U. S. P. & W. R. Co.— Control, supra, C., 295 I. C. at 529. operations or'impair other endanger “would tion Q. Chicago, B. & interest,” public contrary carriers inclusion Control, C., I. C. supra, R. Co. — merely by and required carriers is affected interest. public with the consistent determining that although ICC, In this case their service and essential an perform roads three some, required is major system inclusion duty as that’ its position interest, takes dischargéd provides when it sufficiently inclusion Penn- & W or in either N of inclusion possibility impose protective promises meanwhile Central, proposition is not with My disagreement conditions. allow agency in the to wide discretion that the Act vests as to inclusion go forward while conditions merger to authority has out. The Commission broad are- worked “subject transactions to such terms and condi approve just and tions and such modifications as it shall find to be “may time, 5 from time to ,” (2)(b), § reasonable ... good shown, orders, supplemental cause make such any order paragraph (1), made under or of this (2), (7), section, may as it deem necessary (9). § or appropriate,” occasionally jurisdiction (1) It has in fact reserved to work equitable out terms for an already inclusion it has deter by public is required interest, mined the New York Central Unification, 489, 493-494;9 (2) 154 I. C. C. and even determine, after consummation whether inclusion will be by consistent with or required public the interest, Union Unification, Pac. R. Co. 189 I. C. C. 357, 363.10 But 9 Accord, —Acquisition, Alton R. 301, 313, I. C. C. where Co . later, the concluded, 189 I. 271, 285, C. C. public that the necessity convenience require did acquisition of the short lines ihvolved. This is also the course followed the ICC with respect to the New Haven in the proceeding. Penn-Central 10Accord, York, New C. & L. o.—Control, St. 224 I. C. C. R. C 259, 269, Commission, approving where-the in' a control application, that assumption the upon proceed of this sort decisions and that therefore possible, be inclusion will later public consolidation proposed that finding is not assumption This will not be undermined. interest im- to be may out always An inclusion warranted. turn inability equitable of to work out either because possible, have upon which inclusion orders terms, a circumstance con- invariably, conditioned, upon or full been because might contemplated inclusion sideration effects tal regarded proposed be as so. detrimen necessary which made against inclusion would public interest. the,first

The Commission decide, instance, must whether the risk such ultimate developments is acute enough to counsel against approval a consolidation- subject working out the terms of an inclusion or to working out both the terms inclu- and the Jaffe,. sion. See Judicial Control of Administrative Action (1.965). 565-567 But practice resort deferring accomplishment of inclusions or other ends required interest must be carefully weighed and reviewed. Where there is danger little no in- clusion consistent with the public interest and equitable terms might turn out to be it is impossible, sufficiently likely, despite deferral, the Commission , will have fulfilled its statutory basic duty. Where there is a significant possibility, however, that a deferred inclu- sion upon which a' finding public interest is premised will be unattainable or only attainable by setting into motion new forces which have not been weighed in evaluating the basic proposal, then the Commission’s statutory duty to consider all the relevant factors has imposed a requiring condition applicant to abide findings whether applicant acquire should concerning^ certain affected short lines. this action ICC And discharged. properly been

pot creates, than those greater far dangers generally sort apply to fails or court agency an when normally accrue since facts, relevant to all standard governing irreversible, is often allow consummation the decision at only reversible or case, inis concededly ° expense. enormous inclusions on decision deferring Prior authorizations no entailed interest public required' to be held a consolida approved ICC had risk that significant in New When, statutory duty. fulfilling its tion without author supra, the Commission Unification, Central York jurisdiction retained consummation but immediate ized purchase for the be worked out terms would to assure because their required it had purchase of lines whose public , be essential was found to preservation terms could be equitable no there was doubt interest, lines, included were short arranged. The -roads con system, Central so to the New York complеmentary no created proposed unification summation reason were Moreover, effect. the roads expect a detrimental in the the issuerof value to arbitration required submit event, they agree C., When, failed to 154 I. C. . Co., supra, in Union Pac. R. the Commission deferred question until after consummation both the whether required interest inclusion and the matter of working out terms, there was no indication that inclusion might be-impossible because of its effects without render ing the proposed against transaction public interest, equitable terms might for inclusion be unattain able, or that the short lines involved would be subjected to danger from traffic diversion or otherwise during the period between consummation and inclusion. The trans action only authorized accounting changes; change no

407 or contemplated possible. was either operation 363.11 C., C. at I. Allegations

This are made striking contrast. is in case parties other of Justice and numerous by Department the roads in either protected inclusion might by Commission contemplated major systems interest or public consistent with the possible not be that, arguments These demonstrate terms. equitable in the inclusion possible because of difficulties involved .establishing acceptable interim condi- proceeding and tions, “opportunities for. the ultimate inclusion D B E-L, system H & M in . major & and . .” rail which the Commission has create endeavored preserve serious uncertainties.-

The first obviously and more uncertain alternative is inclusion Penn-Central itself. York, In New Control, swpra, C. & St. R.L. one Co.— seeking

two short lines all, inclusion introduced no evidence at while inadequate the other made showing public an interest preservation required showing its pro and no whatever that posed control transaction would result in diversion- of its traffic. C., 224 I. Going way C. 266-268. out of its that the “to end purposes intents may accomplished section 5 ,” be . . . open left they ICC the door to short lines’ inclusion if could necessity desirability. C., demonstrate 224 I. C. at 269. examples Other agency of deferral- of appellees action cited inapposite. employee The ICC protection, has deferred reserv ing jurisdiction impose necessary terms and conditions. A. C. Allyn Control; & 50 M. C. C. 310-311. The likelihood Co.— have, problem that this sort of unexpected consequences very will is slight. Rfg. In Atlantic Comm’n, Co. v. Public Serv. 360 U. S. 378, 392, Court ruled the FPC could issue a certificate without making a final determination of the of price, long vital matter so as the certificate was so consuming “that conditioned may protected justness price while the and reasonableness of the' parties being subsequent hearings. fixed determined” injury was contemplated, likely No and the ultimate issue was not prejudged. to be seek carriers to the three to allow jurisdiction

retained after final year one within in Penn-Central inclusion in N & W. for inclusion any petitions of their denial is the in & W that inclusion N recognize All concerned in Penn- of the roads inclusion solution, since preferable traffic of all rail monopoly a virtual create Central would (See Appendix York.12 England New in of New most Com result.) It is true that this map depicting A for a proceeding in the & W inclusion said N missioner Webb merger Penn-Central indicate that reports that “the the. notwith public interest be consistent would with lessening competition result-- standing any of intramódal D B ing EL, H, M,” & and & inclusion from Norfolk Merger, R. W. 21510, p. 27, & F. D. No. but Co. — the Penn-Central reports this statement refuted themselves. Both the Examiners and the Commission expressly for a question reserved later time the whether inclusion of the roads in Penn-Central would consist ent with public rather interest,13 implying than merger that be in the public interest despite protected inclusion of roads, the Examiners’ Report and the Commission’s opinions indicate that “highly The Examiners likely public found it interest” lies in the direction of inclusion in N <fcW. Report, Penn-Central 21989, 26, 1965, F. D. No. Feb. at 415. The Commission had the N & indicated in proceeding receptiveness W-Nickel Plate inclusion in N & and it W, postponed consideration of inclusion in pending the outcome of the N & W inclusion Penn-Central proceeding. 13The given Examiners stated: “No consideration has been proposed effect of the H, inclusion here of the D & B & M and/or upon competition, E-L and no effort has been made to assess or light accommodate anti-trust laws in of such action. believe We resolution of such premature.” issues would be Report, Penn-Central adopted at'418. The Commission findings, these C., 3271. C. at 481- explicitly reserved, inclusion in N & W was until after denied, question any “whether inclusion E-L, one or all of and & in the B Transportation M D H <fe Company’s system would be consistent ,” interest . . C., . I. C. at 531. assumption protected under the approved was in & W.14 included N would be roads hardly W for inclusion the N & “opportunity” proceeding The N & W risky alternative.

presents less acting as Webb, Commissioner gone hearing has recommending report issued a inclu- Presiding Officer, has D H, authorizing E-L and inclu- <feW of & and sion N parties agree of B M if are able to sion & terms. yet There has as been no action the ICC on the report; objections and based its contents and the raised Court, significant given there is a possibility, present state inclusion in N W circumstances, & might be only unattainable attaináble at price the of competition An England elimination in New New and York among possible anticompetitive was not even the effects of the weighed. contemplated contrary, and To the the Examiners up (Appendix drew a chart Report) incorpo T-2 of their they rated the roads in system, three the N & W and which used to competitive impact. measure Moreover, the Examiners recom approval agree grant mended a condition of trackage that Penn to rights Hagerstown, to N Maryland, & W between N & W’s northern East, most in Wilkes-Barre, terminus the Pennsylvania, and southwestern operations, thereby terminus of D & H connecting the enabling compete roads and to them with for Penn-Central traffic England between northern New York-New and South-southwest. Report, Penn-Central at 429-430. The Commission it found unneces sary uphold to Examiners’-action, parties since the had volun tarily agreement entered into an effectuating the views, Examiners’ application approval since an agreement yet C., had not been filed. 327 I. at Finally, C. appraising in merger upon the effect service New York City, Exam anticipated together iners that E-L and N W provide & one competition. line Report, Penn-Central at 433. The Commission appraising anticompetitive in likewise assumed effect that E-L would compete applicants continue to port with the in area, the New York specifically example continuing cited as an competition lines of join “N E-L, & W Lehigh Valley], can with LV D <feH [the M, among B others, handling & In transcontinental traffic to and from the Port of England N. Y. and New C., 327 I. C. n 517, 514. n public merger against Penn-Central

rendering accomplished could be if inclusion that, even interest, impossible interest, might public with consistent make much Appellees terms. equitable out work merges with consummating its & W, N the fact that three include these “irrevocably agreed Nickel-Plate, among agreed upon system upon terms their petitioners ICC], pro- necessary, prescribed or, [the if themselves to be consistent is found inclusion such vided this, condi- at 529. But C., 327 I. C. interest.” public of both resolution a favorable expressly-assumes tion Webb said Commissioner As dispute. questions report: in the & W inclusion N imposed on & W ... only obligation expressly N “the if the Commission petitioners to include the was with the such inclusion to be consistent found if the Commission also found that interest and to all ‘equitable be effected on terms inclusion could findings subject to be full parties both involved/ Report, & W Inclusion at 16. judicial review.” N disposition recommended reveals Commissioner Webb’s clearly dangers stemming from deferral exist rejected an argument even as to inclusion N & W. He plan absorption C & O that of the three roads merged system mutually into a C & W was & O-N exclu- sive with inclusion of the roads into an independent W, N & and the contentions of C & 0 and others that they adversely would be affected the inclusion. He consistent, found of all inclusion three roads with the public interest, pointing out that the roads would be able to in survive N & W despite significant losses to Penn- Central, greater and that intramodal and intermodal competition and better services would possible. become N & W Inclusion Report, at 31-32. However, he found arguments substance to relating to each of the three roads against inclusion would be required their that merger Since authorization of the Pénn-Cehtrál interest. finding on a that the roads must be included premised arguments system, great in a these relevance major here, myself I address to them. E-L, argued

As to inclusion would be too N&W great light a condition; for, burden its financial although E-L a profit showed modest 1965 for the first years, time in N&W contended it was too soon draw any optimistic conclusion and that it was no more able now absorb E-L it years than had been a few before when the Commission to require refused E-L’s inclusion Nin & W because of E-L’s “precarious plight” financial “the burden another railroad if would assume it absorbed the Erie-Lackawanna now . C., . . .” 3241. C. at 25. recognized Commissioner argu- Webb ment had some merit, and growth characterized E-L’s N “erratic.” & W Report, Inclusion at 17,10. So enor- E-L’s mous is debt, .fact, parties thát themselves agreed “precludes and EL now or N&W at Id., any time in the near- future.” at 84. As conse- a. quence, the Commissioner recommended that only control E-L N & W required, looking be merger, eventual assumption ‍‌​​​‌‌‌​‌​​​‌‌​‌​​‌‌​​​​‌​‌‌‌‌‌‌‌​‌​​‌​​‌​​​‌​​​‍liabilities when circumstances would permit. D & H has problem no'financial which would interfere with immediate merger, but Commissioner Webb only found that the sufficient connection between D & H E-L, and N&W was and therefore recommended that an order D requiring inclusion of in& H & WN l>e con- id., ditioned on of E-L, inclusion which conse- quently makes the arguments relating E-L applicable Dto H respect & as With B well. to & M, Commissioner agreed Webb with N&W and refused to recommend its inclusion in any form be required, because of B & M’s poor financial condition and prospects limited for recovery. He only recommended inclusion agree saw fit to W unlikely N & event in the

authorized, minimum inclusion, a of the years five within pay, value twice their equal M to almost B shares rate for & Id., appraisal. own Webb’s Commissioner under D H E-L & therefore, that clear, entirely not It is likelihood & and the W, in N included will ordered circum- present under B M not be will that & included reasonably possible is Therefore, it great. stances is proceeded has upon which the premise all Penn-Central —that authorizing consummation unat- system may be major in a be included three must — required & W in N because through inclusion tainable may all three not possibly one at least inclusion of it interest. Neither public with the be consistent B M could uncertainty that & answer to this sufficient sys- since value to Penn-Central, be included monopoly possible it make tem because England would make eco- large of New inclusion areas As equitable seen, terms. we have nomically feasible at despite price be worth the whether Penn-Central would dispute, is a matter some ICC result has never considered. duty

The Commission’s to consider all the relevant authorizing of a consolidation before it extends, effects only moreover, necessary whether an inclusion proposed make the transaction with public consistent interest fact is in but attainable, also to whether such an inclusion, though even attainable, might set in motion put events which could the basic transaction proposed in light. a less favorable Thus, even .if it is assumed that and & H in N E-L D inclusion of will occur, & W B leaving & M temporarily independent would not consistency undermine of the Penn-Central merger public interest, is incumbent ,. the ICC to «b.psider potential on effects interest of authorizing consummation. before an outcome such on this there so, record has not done the ICC Clearly, sig- effects of enormous ais substantial likelihood might interest result. nificance to W to consider N & and refused Webb Commissioner smaller with inclusion merger & for plan C O’s issue сould of inclusion he concluded roads, because It is clear, to the how- regard plan. without be settled that- recommendations, ever, from the Commissioner’s may & well be a conse- adoption plan the & W-C O N through merger Penn-Central both its quence of^the directly its effect on the smaller roads and effect respect & W and C & 0. The. to N uncertainties highly inclusion of the in & probative roads N W will be evidence when gets the Commission to around consider- ing the & & proposal. large N W-C O debt, E-L’s . éxample, prevents .outright merger now its &N would W, be less of an if & obstacle W C N and & O were- thereby strengthened. combined and Even more significant B the fact that & M’s inclusion, presently

regardéd as impossible in N W, probably & possible if N & W were combined with C & 0-B & O.15 refusing In to requiring B inclusion, recommend & M’s Com pointed missioner Webb out that expose such a course would N & W to serious risk “and would foreclose B & M seeking from inclusion system in the Penn-Central proposed N & W-C & 0 system which, by on terms strategic reason of improved value or earnings, are more favorable than justified by those the record herein.” N & Report, W Inclusion at 154. An N & W-C & 0 (cid:127)system would, as the Commissioner recognized, be far more able financially to including absorb the risk of M,' B & and would be willing > to offer more than B M’s & value, possibly actual out of the savings contemplated in the N & & merger. W-C fact, In under plan by N & W-C & O for inclusion, offered B & M shareholders would receive almost twice the actual value their holdings, and, significantly, Commissioner Webb settled on this'same amount as the rate which N & pay W must if it minimum decides Id., to absorb B & M. at 156. W and & C & O N moreover, doubt,

There is.no inclusion offering a solution in addition .will,' seriously hurt they stand to be allege problem, they are allowed unless system Penn-Central hear refused to Webb Although Commisioner combine. allegations, prove C & 0 to such offered evidence ground on the also refused although the Commission Penn-Central petition, reopen grant C & O’s laches to agreed ICC diversion, of traffic to introduce evidence Penn- case, in this modify finding of the Examiners the net effect of Penn-Central Report, Central at 305, to C & CNJ and other carriers 0, will not be detrimental transportation serv- ability provide general to or to their finding Instead, the Commission substituted icé. “has not been shown of rec- that a detrimental effect thereby open at it ,” C., ord . . . 328 I. C. and left allege prove to C & to at some later time that its public with & W is in the interest in N least part by of traffic because diversion caused Penn-Central. respect W, With to N & some evidence adverse effect from seems probable light Penn-Central in of Commis- sioner Webb’s refusal from deduct value three anticipated through losses roads diversion traffic Penn-Central, because “N & W has resisted corresponding in adjustments, its earnings despite own. its admissions that it would suffer serious losses of traffic to Penn-Central . . . .” N & W Inclusion Report, at 44. any refusal to deduct of the anticipated losses meant, in effect, Commissioner Webb proceeded upon the assumption that & WN would lose the same proportion of traffic to Penn-Central E-L expected to lose.16

It therefore appears that Penn-Central will increase of, may likelihood actually cause, an affiliation Report-, 16N & W Inclusion at 43. See note 18, infra, for further explanation.-

Oi given thought . no The ICC has Cand & 0. of N & W would-be such an affiliation to whether in some monopoly a virtual rail . It create interest. for (see map depicting B States Appendix southeastern coal traffic in. important which includes result), this area, port the Norfolk the border States between strongly and it abroad, it is exported from is where Had ICC faced opposed both Penn Central. have been to con- inclusion, might led problem cause or possibility sider could Penn-Ceritral of an W-C & affiliation. increase the likelihood N & Only fulfill by coñsidering possibility could the ICC obligation all the relevant factors consider ^before approving the merger.

The “opportunity” reserved the ICC for inclusion roads N & like the therefore, “opportunity” W reserved inclusion in Penn-Central, in doubt shrouded as to whether inclusion could be required consistent with the public interest. Concededly, there is far more reason voluntary believe that inclusion N & W could at least accomplished be consistent the public interest than could inclusion in Penn-Central. But on the other hand, while equitable terms probably arranged could for inclusion in Penn-Central, open it is to serious con- troversy whether equitablе terms will be for attainable of inclusion in N roads & W. Commissioner Webb found, has of course, that equitable terms for B & M’s in inclusion N & W cannot be pos- worked a out, and consequence sible of this will be to pressure create of the N favor & & plan compel W-C or inclusion B M& in D Penn-Central. even as E-L H But and & (because its will probably inclusion be dependent on present E-L’s), controversy surrounding the condi- designed for protection tions interim makes considerably uncertain whether equitable terms will be possible once Penn-Central is consummated. indemnity traffic and conditions purpose

The main- imposed being but now reconsidered is to originally Penn- quo, status between preconsummation tain the end roads. One inferred Central and three obvious prevent irreparable is to harm purpose from this finding inherent in the that the But three roads. in a major inclusion the roads requires intérest eventual protective conditions are in the fact system keeping the roads intact only is the purpose interim equitable possible. on terms will be so their inclusión however, over valid- is controversy, substantial There conditions. proposed each of the ity and effectiveness the Penn-Central reopened fact, has, respects hearings for determine in what proceeding imposed be modified and originally should conditions be im- capital indemnity loss should whether or are to be C., I. C. at 328. posed. Modifications is to judi- and Penn-Central have retroactively, applied indemnity capital on the issue. But only review cial assurances, and other non- the three carriers despite these attack the conditions on several carriers protected lightly of which cannot some grounds, least dismissed. (1) types of conditions involved: traffic

There are three (2) indemnity revenue; for loss conditions; The traffic conditions are indemnity capital loss. (3) from increasing Penn-Central prevent devised to expressly In protected brief, they with the roads. competition taking any from action or engaging Penn-Central restrain “which or any practice would divert to divert tend directly indirectly, . either ,” pro- traffic . . from I. C. atC., tected roads. 327 561. While the ICC’s authority impose this restriction unquestioned, great exists controversy concerning its intended scope. The relying upon three ICC’s roads, expressed intention to “any” loss of “as a prevent revenue direct result” of con-

417 Penn-Central claim that C., 532, 327 C. at summation, I. in which improve service on routes step no to may take for designed, if improvement even they participate, claim competition. They to truck also example, meet retroactively applied should be conditions decision, April original when ICC released its 27,1966, Penn and Cen- possibility order to eliminate the con- tral purpose defeat conditions could begun 27 and tinuing competitive practices April between inter- by instituting changes during or consummation hand, on other vening period. Central, Penn and scope, of a far more limited the conditions’ take view their before the District Court despite assurances shippers.17 the conditions even solicitation prevent proceeding, Their based position reopened. at 'maintaining pre- the Commission’s reference to at is that quo,” C., 532, consummation 327 C. “status I. any quality free to offer amount or they should be perform after which could individu- they, service interpretation ap- merger. or ally jointly before This for parently free, example, Penn-Central would leave formerly any rates on route was all-Central reduce which existing joint route all-Penn, any presently or on for flexi- Penn and or to their cars better Central, pool though might even actions result diversion bility, these Brief protected generally from a line. See traffic G Nos. Conditions, on F. D. Appendix the United States 1967, pp. Jan. 8-12. Whether 16, preventing will the deteriora- traffic conditions succeed point equitable the three roads to tion is a diffi- may question some terms be unattainable represented in the Court for Penn and Central District Counsel from prevent the traffic conditions Penn-Central that he construed moving get normally on the force traffic Using solicitation Tran to the lines of Penn-Central. of the three roads routed lines p. script,

culty. limited in their usefulness Traffic conditions are entirely general they more cannot eliminate the because (such through as consolidation often obtainable benefits tracing simplified management, schedules, better unified greater switching inspection and cars, of of and less cars, opera- they advertising resources), cannot be and because upon shipper. the traffic ICC Since the tive the deemed protect imposed roads, the essential to conditions rigid limited conditions are the traffic since even most question roads of the three whether the view value, the adopted as is should be or of Penn and Central important state con- unsettled difficult, as it is and its to doubt as to inclusion. tributes the being indemnity recon- now revenue, for loss The any payable three to the be ICC, sidered the is'to dur- fails to realize, in event it lines threatened gross indemnity period, ing in same revenues gross proportion of Penn- revenues the combined to indemnity protected formula line as and the Central period. protected in- base The line in the fixes up obviously designed demnity make for losses to is despite conditions. the traffic traffic to Penn-Central indemnity argued should have that the roads The three position payments, take the but modified to increase be would be inade- modified, the conditions that, even indemnity nonprotected quate. roads claim the indemnity clearly, would Quite is unlawful. condition protected provide divert lines to financial interest normally they would handle traffic Penn-Central to O, N & and C & other such as W carriers, connection proportion of their increase Penn-Central’s to order thereby to increase their own revenues combined Correspondingly provide would an in- indemnities. protected to divert traffic to the to Penn-Central terest proportion of combined revenues their lines increase indemnity payments. thereby reduce avoid unlawful or community Whether this interest is against otherwise be not defin- interest has itively settled, process been since ICC is still reconsidering position. here, It is relevant how- viewed ever, simply indemnity, to note that protection, meaningfully ICC as essential interim challenged inadequate, both as unlawful and as there- fore that it too cannot be relied eliminate the protected may doubt whether roads concerning an that would damaged during the interim to extent make equitable terms unattainable. by for indemnity capital loss is advanced the three

roads as essential if the is to be consummated problem is related prior directly to inclusion. It in assuring equitable that terms for inclusion N & W can be reached. Commissioner later Webb’s definition proposed clear the purpose: condition’s makes EL, N ‘capital loss,’ by W, “The term as used & D B M reconsid- petitions & H and & in their for eration in the Penn-Central losses of case, refers to B M D & & traffic to Penn-Central EL, H, and by gains extent not traffic attributable offset system, in N & with the net to their inclusion W if at an income, any, capitalized annual loss of N & Inclusion appropriate Report, 25, rate.” W at n. 21. guarantee effect,

In condition would the three this they would lose to roads the difference between what gain they what inclusion Penn-Central adoption in its would facili- Unquestionably, N & W. adopted, it has not been but the fact is that inclusion, tate subject would be adoption any judicial in form Moreover, and Central. request of Penn review indemnity approach capital has been the usefulness of the They N & W. assert by C & O challenged vigorously in keeping- the three will not succeed- indemnity in traffic, diverted, roads viable since once is condition, they claim, should likely stay not, The ICC diverted. indemnity accom- rely upon provision an fails to to be so has found plish the service continuation Capital Indemni- & 0 Brief on Loss essential. & O-B C In 28, D. No. November fication, F. an they again specter raise once connection is the merger, arguing proposal W-C their N & & O inclusion only acceptable problem. solution to the arguments merit appears There some necessary to capital indemnity some sort attainability equitable terms for inclusion. assure Penn- in the Commissioner Webb left to the ICC While Central loss indemni capital the issue whether case inclusion paid' fication should be he conclude that did “in chosen system the Com three roads transportation furtherance of national mission any which reflect objectives should be on terms to the traffic capital diminution of value attributable words, In impact system. of the other other diversion anticipating petitioners penalized not be should rail competition preserve the Commission’s desire to they Report, serve.” N & W Inclusion territory the of roads, therefore, the smaller did 28. His valuation at be anticipated diminution of válue to not reflect the by Penn-Central, apparent and his conviction caused not be terms could worked out on equitable was that granted. basis, capital indemnity unless were any other these, id., In light 43.18 it can See, conclusions purpose working the value of E-L’s stock for the of an In out W, Webb, exchange applying, principle N <fe Commissioner the with reciprocal adjustments, to deduct from refused E-L’s value the impact deducting without estimated Penn-Central also from impact estimated N N & W’s value the Penn-Central. Since & W evidence, proceeded upon assumption he the that the submitted no upon proportionate impact N & would be W with the estimated enable,him result to impact E-L. The of this was to discount

to indem capital unresolved issue seen that the readily to objections the therefore important, and is nity over, as this score as well whether uncertainty on it create possible. terms are equitable by deferring. here inclusion done the ICC has

What confronting defer numerous diffi- roads is to of the three issues, substantial which cast doubt important cult and major in any can be the roads included upon whether the purpose the consistent with system contemplated for In equitable process on terms. public interest and an irreversible consolidation which approved it has upon the public only premise be in the interest found to major in a affected roads would be included system. By the ICC proceeding manner, has my duty failed to view fulfill fundamental to deter- public mine whether consolidations interest on the basis of all problems the relevant facts. The by a obviously required created inclusion are relevant the question whether which proposal makes their necessary inclusion in the public where, interest. And here, many problems created are far- serious and reaching, Commission must consider* them before at and arriving implementing finality its ultimate conclusion. I

. While consider it the responsibility weigh ICC’s feasibility of an and effects inclusion it re- deems quired I interest, recognize importance leaving great flexibility agency with the deal with emergency situations in order to damage avoid serious national system. transportation But it is clear there is no pressing need here justify could ICC’s action. Commission represent counsel in this Court the ICC has found “that completely capital E—L’s loss. If this method of valuation were approved, noted, question he capital “the loss indemnification . . . will [in become Penn-Central] moot.” Id.. at 47. shipping for the service substantially improved

result million for savings $80 of at least and in annual . . . p. 52. C., Brief I. C. company merged commonly service and economies Improved consolidations, proportionately rail results of claimed case are savings anticipated this improvements many mergers. other More- than no more substantial saving annual is to be over, anticipated $80,000,000 ..the eight years consummation, after reached about even this does take C., 501, I. C. estimate sharp account .into curtailment would-result protective from the interim conditions which were formu- maintaining pre- lated with the avowed intention of status quo, C., consummation see 327 I. C. at 532.19 The ICC stressed the financial of Penn condition and Central, including their “persistently low rates of return” and their need for improved equipment, ground as a authorizing immediate consummation, I. C. C., at 501-502, but again, once is a stock reason for merger, usually alleged by party. at. least one The fact that a merger will provide financial assistance militates in favor of approval, only but it is many one of the important factors which and, must be considered, in the case of Penn and Central this point has lost much of its force, since both had have substantial and consistent increases n in their earnings in years. recent See Brief of the I. C.,C. p. 55. While this does not necessarily lessen long- 19In fact, the more protective effective are the conditions, greater will be their interference with planned achievement of the improvements. economies and Penn Large Vice-President recently reopened testified at the hearings that “the first two million dollars we save as a result of good years is a five away.” Transcript Hearing 15, December 21989, p. F. D. Qualified by the statement that he had made no studies on matter, he testified that he any saw “no chance of savings substantial in the Id., years.” next two at 22344.

423 there is little it does show consolidation, for need term ground. on consummation this immediate for need of Haven survival the New that argument pressed undelayed consummation upon depends intensity with which it was embraced with the here samp Judge C., C. 312. agency level. See I. at at. proper perspective this matter Friendly’s opinion put suppose it is “unrealistic out by pointing Company can be Transportation in the inclusion of NH conclusion of the Commission’s before accomplished-.» Supp., in this case . . . .” F. reconsideration longer argument that, here is consumma- The tenable more will become the task of delayed, tion is difficult reorganizing company, Trustees in and the more NH’s possible unanticipated change it becomes due to some of merger may through fall entirely. circumstance every While effort consistent with the public interest protect should be made to the invaluable services the NH performs, anticipated the difficulties largely specula- If merger proponents greatly tive. this is to benefit its as they contend, fragile it is no package. although And unnecessary no risks should be taken even a plan so enthusiastically supported elaborately and a designed,' proper concern for the public interest pro- and tection of the roads threatened should have led the ICC delay consummation.

The projected effects*of D Penn-Central on E-L, & H Band & M are anything speculative. but Those roads unquestionably will be destroyed unless included major system, and the fact that inclusion somewhere is implicitly assured us may be further cause for concern, in light of the contemplated alternatives the diffi- culty and consequences involved the.adoption of either If them. the ICC should ever be allowed to depart statutory from its duty to consider all the relevant factors before determining public interest, it certainly should favorable of factors recitation mere

not be dangers speculative adoption plan’s Congress The reason parties. private inconveniences inclu- effects of including the factors, that all has ordered danger avoid considered, is to include, failure to sion or action, by precipitate caused interest public to the danger evidence ample than is more there unhesitating enforcement to warrant in this case interest Congress’ directive. III. delay until that argues ICC to a inclusion would amount are assured

three roads in Penn-Central proceedings consolidation least for decisiohal proceeding, at W inclusion the N & a return to the and that this would constitute purposes, approach for railroad unification “unsuc- plan” “master cessfully Transportation 1920, under the Act tried any major probably preclude consummation would regardless of Brief of unification, rail its merits.” The Commission ICC, pp. points 43-44. out that it has “consistently refused to consolidate the Eastern rail- id., merger or control proceedings,” road and that at. position here is the same as its Government’s unsuc- C the & O-B & 0 cessful contentions for in consolidation N & W-Nickel Plate proceedings. It is difficult exactly to understand what is ICC arguing. Certainly no one contends that the Commission is as it was required, by the Act of 1920, to “prepare and adopt plan a for the consolidation of the railway proper- ties of the continental United States into a limited systems.” number of 41 Stat. 481. Nor is it argued the ICC is required to draw up regional plans for~ consolidation.

theOn other hand, it can hardly be said that the ICC powerless is to consolidate or proceedings, for that matter to enable step reasonable any other take or to plan obligation as custodian statutory its perform itself a national interest public in the development told to longer is no the ICC system; transportation planning so when to do mean it is unable does plan is told The ICC its duties. necessary to fulfill any under proceedings to “conduct 1940 Act best conduce as will manner law such provision to the ends of business dispatch proper recog has in fact and it (3), 17§ S. C. U. justice,” circum appropriate power “the possesses it nized that in which the proceedings consolidate either stances postpone or to closely related, similar issues inter required when so decision particular at 266. But Control, C., 317 I. C. supra, C & est.” O - a close is clear from it power, explicit from this apart the ICC’s 1940 Acts that 1920 and appraisal therefore, and, now are far broader responsibilities of these comparison to find in a be anomalous sweeping a basis for legislation pieces of two longer plan. can no the Commission contention that respects. in several 1940 Acts are similar The 1920 and for consolidation initiated both, applications Under public in the if found to be by the parties approved be com- may a consolidation and under neither interest, is that the 1920 Act salient difference under pelled. The for all up plan to draw the required the ICC was railroad was called properties, Nation’s and. for railroad filed with

judge proposals consolidation plan in terms of the master it private parties it had Proposals created. that advanced the plan’s fulfillment greater stood a far chance of approval than those that only in this sense not, parties did could it be said that to initiate own plans were unable their choice. While planning function is broad procedurally, however, designed only was to serve limited Congress’ ends. its chief problems,” with financial “largely was concern which arose from problem being to overcome aim provide reasonable “rates would fact systems permit weak lines strong returns for iL were raised to take care of the survive, and rates prosperous enjoy more roads would roads, weak returns.” Railroad Consolidation Leonard, excessive Act Transportation 1920, 57, (1946). Under encourage The decision to consolidation into a limited systеms was of designed number course to establish a stronger industry, grounded railroad but it “was riot operation on the from ^premise economies and the competitive avoidance of wastes would be the principal insuring means of an efficient railway and economic system , but, rather, . . . on the conclusion that prosperity financial of rail carriers would be promoted and effectuated if the weak and the strong railroads which were to be con- exist side territory side the same solidated into systems balanced railroad with respect to earning power.” Rep. S. No. Report on the National Transportation Policy by the Special Study Group of Committee on Commerce, 87th 1st Cong., Sess., p. 234 (1961). In fact, the Act specifically ICC, .directed in drawing up plan, to preserve competition as fully possible and to maintain existing routes and channels of trade practicable. wherever In other words; although the ICC was directed to draw up a national plan against which it was to judge whether applications for consolida- tion were’ the public interest, the judgment was to be made rather mechanically, and plan itself was to be designed to achieve limited, primarily financial goals.

In contrast, as we have seen, the purposes sought through consolidation under the 1940 Act are wide- ranging, and interest includes consideration of all factors relating to the National Transportation

427 inadequate, was deemed manipulation Financial Policy. numerous, often con- weigh was ordered to ICC of the “enlarging light In of this considerations. flicting, into con- agency an must take values which factors or Society, Planned The Law of the sideration,” Reich, incongruous to (1966), 1248 it seems 1227, 75 Yale L. J. approach 1920 Act to change assert from the to change planning 1940 from signifies that of the Act a hoc strictly adjudication. ad clear,

It should be in from a full consideration fact, failing to powers, consequences the ICC’s and of the use those of other powers, that consolidation and the use procedural agency’s techniques only is not within if fulfill func- authority, but often it is to its essential guardian (3), tion as 17 public interest. Section referred to sufficient to authorize above, appears adopt procedures develop Commission calculated to to complete public records with interest respect particular merger separate and to coordinate proceedings, merger proceedings necessary when the best secure. possible Tucker & The Public Interest O’Brien, results. (1962). 42 L. 184 Mergers, Railroad U. Rev. B. case-by-case approach, the Com- Within context (11) “employ § mission is authorized under such for attorneys necessary proper representa- as it finds ... public tion of the interests in made investigations whether proceedings pending it, or cases or before at the upon complaint ,” commission’s own instance or . . . may upon and it has done so.20 It and often has called develop pending staff to information In cases. proceeding, Plate it called example, the N <&W-Nickel Compliance upon Inquiry study its Bureau power, called Under Mr. Louis D. Brandéis, represent Brandéis, later Mr. Justice in a Case, Five Per Cent general increase ease. rate I. C. C. 351. 428 report

and on which railroads would be affected merger. It possesses, appropriate with broad safeguards, powers notice,21 merger of official and in recent cases has frequently arguments referred to facts and other, related cases. Moreover, like most other agencies assigned functions, similar it has in- broad vestigative power, may which in- used the context adjudication simply provide background. or (2) Section 13 authority confers “full power any time to an institute on own inquiry, any its motion, thing case as to or any matter . . . which concerning any question may any arise under provisions relating this chapter, of any enforcement provisions of this chapter,” includes 5.§ ICC has resorted to various of investigations forms to perform obligations. studies enable itself See generally 10, Monograph S. Doc. No. Attorney General’s Committee on Administrative Procedure, Part 11: Interstate Commission, Commerce Cong., 77th 1st pp. (1941). Sess., Particularly 93-96 noteworthy is the Study Staff on Railroad Consolidations and the Public Interest, by the Commission’s Bureau of Transport Eco- nomics and Statistics, which contains an analysis of the decisions;in Commission’s railroad consolidation cases. Reprinted as Exhibit 11, Hearings before the Subcom- mittee on Antitrust and Monopoly on S. 3097, 87th Cong., pt. 2d 2 Sess., (1962).

Finally, although the ICC does not promulgate general plans for consolidation, it has the power under (2) § 5 (b) to approve consolidations “subject to such terms and conditions and such as it shall modifications find to be just and reasonable . . . This authority encompasses power (2) (d) § under 5 to make inclusion of a rail- road a prerequisite to approval of a merger, and it does

21 generally 2 Davis, See Administrative Law (1958). 15.01-15.14 §§ in private party request any upon depend to enable broadly construed It been has volved. conditions found implement previously ICC with, v. g., United circumstances, e. States changed cope Co., Ameri 419; 340 U. S. Motor Transit Rock Island States, 141; Trucking United U. S. can Assns. v. Co., Frisco S. Trucking American Assns. v. U. has applied power, when it thé Commission has

and. liberality. gone It has so, great seen do even fit to conditioning to of its of point approval applications the to not consolidate to be railroads actions taken even the party proceeding.22 sum, In Commission’s practice-certainly is consistent its here not with assertion “only power” that its ‘planning’ the 1940 Act is under to region. include railroads the p. Brief the 46. ICC, pre-eminently agency,

The ICC is an “directly and immediately with virtually concerned the outcome of all proceedings before is conducted It to it. not intended passive a arbiter -guardian but the general the public duty interest,’ to see that this interest all effectively protected.” at times H. 678, R. Doc. No. Practices and Procedures of Governmental Control of Transportation, p. 78th 53 Cong., 2d see Sess., (1944); Southern Class Rate Investigation, 100 I. 513, C. C. empowered 603. It is investigate to gather evidence beyond presented by that the parties where exercise of will power the advance determination of best what

22 case, In the Penn-Central the Examiners recommended, as a approval merger, condition to required that Penn be to sell Valley were, Lehigh to O, C & O-B & if such sale later found public to interest, City be in the in order to assure New York an competitive Report, additional line. Penn-Central at 434-435. The pass upon felt it did have to this recommendation, agreed Report since Penn after the Examiners’ was issued to sell LV C., to & C & O-B O. 327 I. C.

430 agency To same end,

serves the interest.23 in fashioning procedures, has wide and a broad latitude power In approval proposals. to condition its other prisoner parties’ is not the sub- words, ICC Rather, agency’s duty weigh is to alter- missions.24 according choice its judgment natives and make its to goals how National best achieve advance Transportation Policy.25 body regulatory “A such as the Interstate Commerce Commis discharge ignorant of properly duty

sion cannot if it remains its simply they relevant facts because were not introduced in evidence. supply It in the Commission should itself deficiencies record. parties bring light should material which the have either over willfully looked or have failed call to attention. It should through parties adequately aid those who lack of resources are unable present expert their It use of cases. should make full ‍‌​​​‌‌‌​‌​​​‌‌​‌​​‌‌​​​​‌​‌‌‌‌‌‌‌​‌​​‌​​‌​​​‌​​​‍knowl edge staff, transportation of commissioners and of the mass of through yеars.'’ information has accumulated R.H. supra, p. 678, Doc. No. 70. See Eastern-Central Motor Carriers States, 208-210, Assn. United 212, v. U. S. 216-217. position Pennsyl It was the Chairman of the Board'of Congress vania before the ICC should leave the fate of smaller principal mergers roads to be worked out after the had approved. Hearings been on S. 3097 before the on. Subcommittee of; Monopoly Judiciary Antitrust and Committee, Senate 87th Cong., (1962). Sess., p. 2d 385 He attempt testified that if an was stop proceedings, process made to main the three the entire “would stop, it,” id., 384, there responded is no doubt about at to query whether buy the ICC “has no but package alternative to nothing all,” ,” or id., at that “It is the fact . . . at 397. 25 planned There are indications that along ICC has all for systems. striking three most The is these the use the Penn- merger’s Central a chart Examiners to evaluate the anticom- petitive effect which accounts for all the smaller roads. Penn-Central Report, Appendix hardly T-2. It need be said that the ICC would proceeding unlawfully determined; if it had or without notice three-system hearing, that a essential, structure was and had then gone through adjudication. the motions of

431 -I am therefore not reassured representa the ICC’s “consistently” has to it refused consolidate tion merger proceedings eastern railroad or any purpose for any degree. prior -consolidate refusals ICC’s entirely distinguishable, are since none of entailed them the risk under the rail findings Commission’s own that a performing road essential des service could be troyed.26 But more generally, while consolidated con provides simple sideration no answer the ICC’s see problems, generally Shapiro, The of Rule- Choice making or in Adjudication Admin Development of Policy, 78 Harv. L. very istrative 921 (1965), Rev. suggests complexity of task consid consolidated may procedural device, eration be a useful of an short investigation prearranged offsetting least plan, at disadvantages part case-by- isolated inherent approach, in formulating applying both gase policy. case-by-case a Although may advan- offer adjudication tages flexibility exposure to sit- continual concrete uations) disadvantages through “the of developing policy a cases numerous sequence limited are both impressive.” sig- H. A supra, p. R. Doc. No. disadvantage is nificant proceedings that individual “sel- dom if ever produce comprehensive sufficiently records for the adequate questions solution of of major impor- Id.; tance.” at 82. all the Obviously, without relevant facts, the satisfactory chance disposition is dimin- Although ished. complete ICC assemble tools has records, factual virtually none employed of them in these highly interrelated proceedings,27 including the

26 finding The ICC made no that either C & O-B & or N & W- Nickel Plate would lead to any the destruction of other road. See C., 265-266, 282; I. C., C. 324 C. I. at 27-31. There abundant evidence that the proceedings three recent ' highly petitioned'for general interrelated. Central proceedings on common issues. consolidate the

power * rigidly segregated, the cases have been lead- Rather, extraordinary, interim condi- ing ICC to resort fate of the resolving definitively tions instead This- has undesirable three threatened roads. had the control enabling each of the major effect of carriers for judgment by deciding the basis what to offer evidence withhold, depending or on which course best served its own competitive impact interest. has been Evidence proceeding only pro- withheld one to appear at later investigation during alleging proceeding, the C & & 0 O-B that the upset existing competitive not ICC should balance before evaluating determining part proposal all the facts and should each play problem. in the solution of the Numerous eastern railrоad petitioned parties other in that case also for consolidation of the proceedings, hearing decision, either for with N W-Nickel Plate & and later with Penn-Central. case,, Department argued N

In the & W the Justice inadequate competitive impact record was to determine and stated through only picture can “that consolidation a clear be obtained Pennsyl- of the effects Norfolk & Western-Nickel Plate and mergers Erie-Lackawanna, on vania-Central Delaware & Hudson, England relationship and the New lines.” The between proceedings N Plate palpable, the & W-Nickel and Penn-Central was only ground Central, competed on that Nickel Plate with (1) but also because the facts that Penn controlled N & W and position only had taken that it would divest it when knew how respect application merge stood with to its Central, with only (2) through acquiescence it was managed Penn’s that N & W purchase Sandusky to contract .108-mile line which to link its enabled it main line line, Nickel Plate’s main C., I. C. at 74. Commissioner felt Webb that neither the N pro- &" inclusion W

ceeding “nor the fully Penn-Central case can be understood if con- sideration one is divorced from the Unfortunately, other. deciding action separately.has Commission’s the cases tended to , blur vital issues common proceedings.” to both N &-W Inclusion Report,

433 company- in that- the ceedings the form evidence with another com- merge to permitted must be affected anticompetitive impact protect itself, or that the pany to of the increased light will be limited in of the later companies already of the ability compete to strength well aware of merge.28 The carriers have been allowed to practice provides them, Commission’s opportunity by the statement of the Chairman of as is illustrated Pennsylvania that “if the & & 0. is C. O.-B. Board approved, going help is to' case Nickel-Plate going and if approved, going help case, that is it is our go right supra, 24, around n. Hearings, the circle.” at 397. possible example happened The best is what this case. Evi might presented

dence which Central have form of earlier in the appraisal of an the effects of C & 0-B & 0 and N & W-Nickel ability operate, Plate took the form in the Penn-Central proceeding merger, that, of the contention without a Penn-Central competitive disadvantage both Penn and Central be would at a since “separately compare neither with C & 0-B & O or N & W- any strength, by Nickel Plate in element of whether tested traffic volume, results, improving financial or the means for service.” Applicants, 21989-21990, 1, 1964, Brief F. D. Nos. dated June p. appraising anticompetitive 141. And in of a Penn- effects “ merger, that, [although Central Examiners this case stated categories, brought by in certain . . . the increases about [to merger] significant, degree relative dominance comparison roads, P. R. R. in with the other been has decreased significantly as a result of the consummation of the N & andW C & 0-B & 0 transactions reason of the fact that these latter systems two have also their increased relative share.” Penn-Central Report, Commission, too, at 424. The indicated its conviction that justifiable Penn-Central more systems became now that the other authorized, by citing growing strength were “the of the N & W and systems” against possible C & 0-B & 0 as a check abuse of economic power by Penn-Central, by pointing applicants out “that will increasing competition face greatly from strengthened those two rail systems.” C., 327 I. C. what has been unaware ICC has is not that It first of the Tucker, Commissioner going on. been large the “failure out trilogy, pointed recent against consolida evidence present railroads eastern self-interest of their own consequence a natural tion ... Control, C & reciprocity silence.” which dictates O - despite The fact is C., that, I. at 326. C. supra, the Commission has contrary,29 lip-service some impact assumption compеtitive proceeded under of the railroads position evaluated with the is to be very in Thus the Examiners in this much mind. affected upon by Department the Justice case, when called weigh possibly, serious adverse effect of Penn-Central upon W, others, pointed & C & O-B & O and N out that allegedly the roads affected had no introduced evidence of They adverse effect. added, realistically revealingly: fully cognizant “We are of the fact in evolving merger picture in the northeast section of nation, carriers may involved well have participation refrained from in proceedings these or - influenced their subsidiaries not to participate on grounds they did not upset desire to their own merger prograna. Such action, however, infers managerial a decision each that the anticipated benefits from its individual merger program will said, in the C & O-B & O The Commission example, for “Notwithstanding case: Central’s withdrawal proceed from these ings, proposed the effect of the operations transaction on the traffic of Central and other carriers is an issue to be considered.” C., 317 I. C. at insignificant It took steps, however, to resolve concerning conflicts evidence competitive impact upon Central, entirely weigh and failed the combined effects on Central of both C & pending O-B & O and the N & W-Nickel merger. Plate See 9 . C., 317 I. C. at 31 result may harm any injury or outweigh Report, merger plans.” Penn-Central from other n at 304.30 many of the which this statement approach upon based practices reveal is rulings and Commission’s simply It unreal assumptions. unacceptable a series that all will for to believe the railroads example, istic, even of own in estimate their best always be correct their incorréctly its When railroad has estimated interests. may upset its well self-interest, moreover, reaction upon which the private agreements understandings findings has in Commission effect allowed rest. when might Thus E-L realized that Penn-Central approved voluntary before it had secured inclusion N W,& agreement W, abandoned its with N & which the petitioned relied, and inclusion thereby Penn-Central, setting into motion the contro versy this case. See 324 I. C. 61-62 C., (representa tion. quoted of counsel in dissenting opinion). Most recently, C O-B O, & & and their family lines, sought to reopen Penn-Central to introduce evidence of traffic diversion. The Commission in observed, refusing to hear the evidence, that the findings Examiners’ net that.the

30The in the C & Court, O-B & O District case, basically took the position same when, in rejecting the Department’s Justice con tention that proceeding ought the to be others, consolidated with “significant” it considered the fact no joined that railroad had the' Department request in its and stated that self-interest would have required them to do so if impact the actually adverse was serious. 221 F. Supp., at 31. The Penn-Central Examiners were more appraisal, accurate in they their impliedly since recognized that appear decision not to only meant the road had decided the benefits from its plans outweighed own disadvantages to it of another merger, and not that contemplated railroad in fact itself; no impact serious adverse upon

'436 to these not detrimental merger of the

effect adequate -service ability provide their toor carriers petitioners several failure of on a based “are as much injurious of proof with assertions forward come no showing ^affirmative any as on diversion traffic revealing first time 317. For the C. atC., 328 I. effect.” ICC long condoned, practice a toward indignation silence” “measured deliberate stated they inference that “the hearing supports at the railroads system- own thereby their to be saw more gained oppo from forceful would result than building aspirations opposition. Now, counter likely sition to arouse merger and the C & O-B O control & Plate & N W-Nickel safely beyond petitioners .. have chаllenge,.. transactions breaking perhaps gain by to lose nothing much their silence.” Ibid.

Ultimately, reliance however, reason objec their own estimates railroads of best interests is is simply tionable the best interests the railroads necessarily consistent interest, with the it is the latter which the directed to ad Commission.is (cid:127) It may be, early vance. as Commissio'ner Tucker stated game “gigantic has dominoes” playing, C., been I. C. “that has each carrier private right to the unalienable abdicate its prerogatives any to oppose consolidation. primary responsi It bility of Commission, preserve however, the devel opment transportation system sound the public, application where an interest, may offer the possibili ties public injury, the Commission strive to .must obtain a record which con comprehensively covers.public Control, C & C., siderations.” 317 I. C. at 326. See O - Merger generally, Railroad Problem, Report of the Subcommittee, on'Antitrust Monopoly the-Senate

437 Committee, (Comm. 1st Sess. Cong., 88th Judiciary statesman industrial 1963). The commendable Print many occasions railroads on by the ship demonstrated only because of serves, recent in these proceedings 405, supra, p. cit. demonstrates, Jaffe, op. see cohesion this of the danger “grows out aggravate the 11-13, their compromise giant corporations these tendency of unorganized expense public,” own at the differences regulatory 2 n. Davis, op. supra, 21, cit. at 378. compromise. It against be the bulwark such agency must 31 viability,” is “a for administrative requisite “[t]he greater powers the Commission and its must outlook of may of that than the interest of the railroads or P. I. & Chicago, affect those interests.” C. C. v. R. I. Co., R. Hudson 88, 103. 218 U. S. See Scenic Preservation C., F. (C. v. P. 354 F. 2d cert. Cir.), A. 2d Conference denied, 384 U. S. merger may

This be in well as well public interest, as in the interests of the railroads involved. But has go failed to deciding this question about in a designed accomplish manner statutory responsi bility. “Deference to administrative decisionmaking assumes procedures which assure a fair hearing to the affected interests . . . .” Jaffe, cit. op. supra, at 566. “As soon as the search for the public interest, even seem ingly, becomes a secondary consideration in cases involv ing more than the adjudication private rights, no matter how conclusive the exigencies of the situation

31 Huntington, The Marasmus of the ICC: The Commission, Railroads, and the Interest, Public (1952). Yale L. J. Compare'Morgan, A Critique of “The Marasmus of the ICC: The Commission, the Railroads, and the Interest,” Public 62 Yale L. J. 171 (1953). is doomed Commission independent

appear, C & O- of government.” an instrument impotency as Control, (dissenting opinion).32 at 297 C., 317 I. C. Douglas, part. dissenting

Mr. Justice of the terms agree I with the Court While proposes attach Commission conditions we before merger should be approve this known go I much Court, of opinion I join while by a underlying brought issues to us There are further. face. Those issues which we should parties few of the of merger adequacy merits of the but the present not.the not for us to findings. is, course, It of the Commission’s whether is determine desirable or undesirable. planning agency. We do not sit as a Nor are we entrusted making large task of policy with the decisions that approval underlie new disapproval concentra- transportation power tion of and wealth. Our task one of review within (2)(c) § the narrow confines of which Congress provided Act has standards for the Commission. sole task Our is to determine whether the Commission has findings satisfied the standards provided by Congress. I do not think it has.

A word should be said as background of this irresponsible ICC decision. The early indi- surprising find it

32 I my today’s Brother Fortas refers to decision as days judicial “a reversion to the negation govern mental sphere.” action in the economic days In those the Gourt took power a restricted view of the Congress agencies and its regulate economy. our That long view “has since been discarded.” Fergusоn Skrupa, v. position 372 U. S. 730. Our today, shared by the Department Solicitor General and the Justice, is not one judicial negation but of insistence that Congress’ ICC fulfill supervise directive to in the destiny interest of this transportation system: Nation’s

[05] CO a of most eastern its for consolidation preference cated (1) C O-B systems: O; into three & & rail carriers Plate; (3) Penn-Central. The W-Nickel (2) N & to the carriers. The Commission never initiative was left a sought, proposed, plan. or examined into master On 27, a 1960, petition June it indeed denied of New York embark requesting upon Central the Commission “to general investigation the unification, consolidations, mergers Freight of the rail carriers within Central and Trunk Line territories” with a view to Association formulating “principles by which both [the Commission] and the carriers governed shall be Section 5 cases 1 mergers the future.” making upon was based “any alliances truly “attainable” rather than bal- competitive anced basis.”2 Today’s predicament was prophetically only years ago:3 forecast a few

'“Although superior may lineups exist, sug- gested that it is better to mergers’ have ‘attainable (approved by big financial interests) rather than none at all. However, by the helter-skelter method mergers these become ‘attainable’ have decision has developed complicated problem into a 1Petition of the New York Co., Central R. No. Docket Transportation Prior 1940, Act of duty it was the prepare plan under 5 to “a for the § consolidation” of railway systems “into systems.” a limited number of The 1940 Act relieved the duty. Commission of Rep. 1217, H. R. No. Cong., 76th Sess., 6 1st See States, Schwabacher v. United 334 County 182, 192; U. S. Marin States, v. United 412, 356 U. S. 417. But Congress there is no deprived- indication that the Com power propose one,' though power mission to enforce proposed by one reorganization it in a was denied § St. Joe Paper Co., Co. Atlantic v. Coast Line R. 347 U. S. a narrow four-to-three vote. Merger Problem, Report The Railroad of the Subcommittee on Monopoly Judiciary Antitrust'and of the Senate Committee, 88th Cong., Sess., (Comm. 1st 1963). Print 3Id., at 31-32.

440 East. in particularly the Commission, the

for approval the Commission’s begins with story eastern Western & the Norfolk between merger the competitive successful two Virginian the York Central the merger, New By roads. coal territory it coal the Pocahontas its access to lost had more less connection friendly a lost Thus the road. a Central been considered always the Central 'attainable’ apparently Virginian, the com- a to enhance position placed now was controlled Pennsylvania (which power of petitive merger, plus This Western). & the Norfolk & Ohio to Chesapeake intention announced Ohio, sharpened control of the Baltimore & acquire survival competitive interest m its the Central’s system which against Pennsylvania was the massive well in the rich Pocahontas entrenched coalfields ports. in the The Central tried to out- Tidewater B getting O, C & 0 control of & point largely it but lost because couldn’t convince out, Swiss, any advantage bankers financial in the merger. negotiated Then the Central with & OC three-way respective for a between the com- panies, president which th<>.Central’s Perlman be- provide lieved balanced, compétitive system would the Pennsylvania. At the time, same Perl- Mr. stating man was aB,& O-C & union seriously In hurt Central. meantime, n & Norfolk Western had filed for merger with the Plate,

Nickel for a leasing of the Wabash, and for the purchase Pennsylvania’s This Sandusky line. was apparently the last for straw the Central. It had outmaneuv'ered, been did arid thus only thing left agree merge it could Pennsylvania. with the do— That merger was and is now the crucial 'attainable/ most reorganizations.” determinant of rail requests denied east The Commission consolidate proceedings decision. See Chesa ern consolidation Co., R. R. & Ohio Co. — Control—Baltimore & Ohio peake Co. and 261, 266; 317 I. C. C. & Western R. Norfolk York, R. Chicago Merger, New & Louis St. Co. — 1, I. C. C. 19. the piecemeal, approach hands-off to Commission’s by Trans- the

merger problem however, not commandеd is, portation Act of 1940. is no that Con- There evidence gress policy, intended entirely planning to remove the respect Commission with to rail consoli- function Indeed, ignores, a mandate of position dations. such the preamble 1940, provides to the Act of that its provisions shall be administered with a “pro- view to- mote . . . adequate, economical, and service and efficient foster sound economic in transportation .conditions among carriers; all the several ... to the end of devel- an,d oping, coordinating, preserving a transpor- national system.” my tation As Brother Brennan notes, significantly 1940 Act broadened the re- Commission’s it sponsibility; “incongruous assert . ge chs from approach the 1920 Act to that the 1940 signifies change a planning strictly Act from hoc ad Ante, adjudication.” p. 427. The has ample a authority to insure approach co-ordinated railroad consolidations; jacketed by disjointed is not strait case-by-case approach. contrary Yet attitude of the Commission is in this Department evident case. The argued of Justice the eastern district should be Penn, Central, systems: served four C & O-B & O, and W N & into which merged. E-L. should be If it wás shown that the traffic could not support four systems, Department proposed that Penn should be consoli- dated N & W and Central with C & O-B & O. The answer to this was that it Commission’s could not compel Department alignments suggested of Justice by the carriers. alignments suggested and was limited to indicates, a sub- my Brother Brennan suggests, This estimates, railroads’ servience of the Commission evaluations, railroads’ proposals, railroads’ of the future. prophecies railroads’ 317 I. C. C. approved, & 0 was The C & O-B curiam 375 per aff’d Supp. 19, 221 F. sustained, 261, merger was approved, & W-Nickel Plate U. S. 216. The N litigated. This is legality was not 1; I. C. C. but presented has been question legality the first time the argument. full to this Court after being pushed here; button” is and we “panic Now the hurriedly become the in turn asked to act being . cartel on the coun- foisting final this new instrument try. generate on the great pressure^ Some cases Court. - Mr. Justice Holmes once remarked those cases make “bad Northern law.” Securities Co. v. United States, “For cases great U. S. are called great . . . of some because accident immediate over- whelming which appeals feelings interest and dis- torts the judgment. These immediate interests exercise hydraulic pressure kind of previously makes what was clear seem doubtful, and before which even well Id., settled of law will principles bend.” at 400-401. We I should, submit, decline present the invitation.

We are here (2) (c) concerned with § 5 of the Act which, governs railroad mergers provides:

“In passing upon any proposed transaction under ,of provisions this paragraph, the Commission give weight shall following considerations, among (1) others: proposed effect trans- action upon adequate transportation service to the public; (2) the effect upon interest of the or inclusion, failure to include, other railroads in the territory involved in. proposed transaction; (3) the total fixed charges resulting from pro- of the carrier (4) the interest transaction; posed employees affected.” only exem- are not exclusive but

The four items listed among others.” they only “considerations, for plary findings many on omits The Commission’s decision if are, think, I questions, all of which relevant critical statutory ingredients public interest are to be §5(2)(c). evaluated under United writing Justice the Court in Brandéis,

Mr. Co., R. v. & O. States B. emphasized 464, U. S. 454, findings entirely cannot “left that basic inference.” in United emphasized point again Mr. Cardozo Justice Chicago, Co., M., States P. & R. St. P. v. S.U. 511, saying, “We must know what a means decision before duty say right becomes ours to whether it is wrong.” recently emphasized necessity More we findings to responsible review: judicial

-“Congress has provided also for judicial review as an additional аssurance that policies be executed. certainly That review entails an inquiry as to whether the Commission has employed statutory those stand- If inquiry ards. is at the halted threshold reason impossible fact that say whether or not those standards have been applied, then that review has indeed become a perfunctory process. If, likely seems as, an here, erroneous statutory con- struction, lies hidden vague findings, then statu- tory rights will be away. whittled An insistence findings which Congress has made basic and essential to the Commission’s action is no intru- sion into the administrative domain. It is no more and no less than an insistence the observance of those standards which Congress has made ‘prereq- uisite operation of its statutory command.’ Opp Mills, Cotton Inc. v. Administrator, 312 U. S. a mere . is requirement Hence 144.

126, have statutory standards when the Only one. formal reached as the question can applied been by evidence.” supported findings are whether S. Corp., Carriers U. Carolina States v. United by the necessary for evaluation issues, Many crucial record, let alone in this Commission, exposed not even are judicial makes findings The these appraised.' absence impossible. review cartel? What is the nature financial

What stockholders Only largest of the control it? one interests remaining largest stock- is known. The applicants holding and Swiss banks brokerage houses holders are beneficial owners customers. The nominal title their no concern unknown, apparently Com- are requested to specifically The was mission. Commission stock who are the beneficial owners determine merged company. Com- would control who request. to accede to the Nor did the mission refused that, through consider it relevant interlock- ing proposed merged directorates, directors in corporations of and interested company directors deal the railroads or that the control ®f rail- steadily being roads is concentrated the hands of large insurance and- other banks, companies, financial interests.

What effect on other roads within area by served will these carriers result merger? from the What-effect on competition rail outside area will What result? will be the effect on the towns by served the two roads? dry up? Will some the community Will dislocations be tangible gains?. offset of these questions

None answered the Commis- (2) (c) Yet of the Act, § sion. which governs railroad findings ingredients on the various mergers, demands public interest. community dislocations are Concededly, relevant public interest. For the Commission considered concluding merger in this would not them crucial unless the New Haven were included.4 approved be mir- Haven? Its.need What is the New need.of well-being England in New rored the economic of the how attract carrier, they States. a rundown can With new new factories how can factories? Without their needs met? employment in community

If needs are relevant these basic why they are not relevant when Haven, case of New we of the communities turn to the needs served merged? other roads which are about to be are told We mergers' mentioned, including present the three many will one, result being communities reduced “from secondary main line to line status” —a “par- condition ticularly with respect between the true Pennsylvania and York Central New when of the most York gateway New to western traffic will be routed over the Central’s northern route.” healthy smaUtowns stretched along these railroads may be important more in terms of “public interest” than the and loss profit statements of the or carriers, market prices of their or the securities, power of the small oligarchy that will sit at' the head of this behemoth that will be turned loose. mergers Rail only one form regional planning. And whatever the attitude of the Commission may have been, it light cannot in §5(2)(c) delegate that duty to the carriers or become 4 “(cid:127) (cid:127) (cid:127) find that merger, complete [W]e without inclusion of NH, would not be consistent with the interest, and, accord ingly, require we will all the New Haven railroad to be included applicants’ 475, transaction.” 327 I. C. C. the. 5Report, supra,-n. 2, n. 52. of the relate to the standard stamp fail to

thfelr rubber merger on the various impact “public interest” lines. communities served these ' gave its entire report practically The Commission merger. consideration to two The first aspects of the with the financial on dealt needs two carriers and company this the Commission new concluded the the strength would have financial re- power and and sources to contingencies deal with all the difficult in the years ahead. The second main consideration related to the problem competition region within served the the two roads. The although that, indicated will be there less the competition, improved transpor- tation service was a justified price to pay for that loss.6 usually The reasons support mergers advanced in of railroad (1) are: improve consolidations will ailing financial condition (2) constituents; consolidations will result in a reduction of operations; (3) cost of improve capa consolidations will service bility. premises underlying justifications The these have been seriously questioned. suggested It has been that the financial condi industry tion of poor merger is not applicants as as suggest. See, g., Keyserling, e. Mergers Move Toward Railroad 72-74 (1962); Merger Report The Railroad Problem, of Subcommittee on Monopoly Antitrust Judiciary and of the Senate Committee, 88th (Comm. Cong., Sess., 1963). 1st 49-54 Print Some have maintained the wave of mergers, resulting railroad and the contraction of physical plant, impair will improve rather than the roads’ financial dampen and condition development. See, g., Nation's "economic e. Keyserling, supra, at 75-78. Others present have noted that industry condition of the is due to a causes, multitude of and that solutions must strike at problem the roots of the rather than ac cept temporary palliative merger. g., See, Nelson, e. Rail Transportation road Policy and (1959); Public Meyer, 327-435 Peck, Zwick, Stenason Competition & The Economics of Transporta in the (1959); tion Transportation Industries 242-273 National Policy, S. Rep. Cong., Sess., No. 87th (1961). 1st 67-71 sug It has been gested alignments may that massive result in diseconomies, serious savings predicted by not in the proponents. their g., See, e. Healy, on these two report reflects one who reads Yet Commission, and their treatment considerations any they justify why wonder would not help cannot but — n eastern roads and the southern conceivable roads —or and the western roads —all the eastern roads roads so that the western southern and southwestern transportation' up we two rail would end with one or way argu- systems. I the matter because put generalized so and so ob- ments the Commission are they easily viously apply could mere rationalizations that any merg- of all merger; theory promoters ers, exposed many year§ ago,7 Mr. Justice Brandéis mergers by power to justify increased financial improved service. power The size company new be awe-

. will some, say and some It has been excessive. estimated that the new will company assets, account for 51% of trackage, the operating revenues, the 50% of 52% of 75% miles, passenger the revenue and almost the of 58% of railroad employees the eastern area. The combine will system be almost twice as as large the next and. large three times system. as the third experts Some have concluded that company the new will have a dominant position with respect negotiation the of rates and its relatiоns with public government, detriment other railroads and other modes of competition. It will a vast have of power amount over the decisions of the Association of American Rail- roads respect transportation rail policy. Its power will extend well beyond the eastern district.. The Merger Railroad Problem, Report of the Sub- committee on and Monopoly of the Senate Antitrust The Effects of Scale in the Industry (1961).. Railroad The Com- mission does not address problems. itself to these Brandéis, See The Bigness Curse seq. (1935). 185 et (Comm. Sess., 8-9 Cong., 1st

Judiciary 88th Committee, 1963). Print through parallel each other applicants

The routes many points. common systems and have respective their common, many and areas They serve communities road; other'is the sole others in several one or the . alone The Commission realizes that compete. applicants many choice for existing will eliminate downgrades severity It shippers and communities. impairment competition. And the Examiners’ frankly Report position takes that interrailroad is competition very important industry because the by oligopoly, rendering is characterized price competition competition unimportant.8 nonexistent and The service competition Commission thinks intermodal will prevent company new from misusing tremendous power,9 size even though recognizes rail- Conant, Mergers 8Cf. Railroad and Abandonments 25-40 ( 1 9 6 4 ; ) argued competition It is intermodal is not sufficient to protect public interest,' competition necessary that intramodal is progress, efficiency, Only insure prices. and lower the firms in industry products. the same have the same cost structures and Thus, no advantages firm has a sheltered market due to inherent firms, competition over other a condition which obtains when only Meyer, Peck, Zwick, intermodal. Stenason & Economics Competition Transportation (1959). in the Industries 240-241 Fur ther, position competition protect that intermodal is sufficient to ignores regulated interest the fact that the- number' trucking important rapidly entry decreasing, lines on routes is due to mergers industry. present control and in the motor If carrier continues, may very trend we soon see a limited number of firms— perhaps serving any given one from each route. If that mode— happens, possibilities oligopolistic lessening competition of of explicit agreements likely. without and rate market is See Chamber- lin, Theory Monopolistic Competition (1956). 46-53 transportation advantage an inherent have roads Report The' Examiners’ 'traffic. long-haul bulk competition among suggest that opinion the Commission’s is to be avoided being nprm, than railroads, rather Comparing the Commission’s “inefficient.” because it is merger of this competitive effects handling of the proposed effects competitive of the its treatment Pacific Railway Compány-Northern Great Northern the cases Railway merger gives impression one'the regulatory rather than by different bodies were decided In Great case the the same com! fission. Northern anticompetitive Commission was sensitive to the effects neces- merger recognized competition sary to also protect interest. Commission competition enough intermodal is not fur- .noted nish impetus prices service, for lower and increased especially with respect shipments low-rated bulk long-haul Burling- See Great Northern & traffic. Pacific - Lines, Merger—Great ton Northern Co., R. Inc.— C. C. —. I. problems

These apparently bother the Commission be- cause in spite of its findings concerning improved financial position of these improved two carriers and the transportation system even with the loss of competition, it nonetheless . to approve refused unless the road, New Haven which is in notoriously desperate condition, is included. So what ’ saying effect is is that the increased financial prowess company the new improved and the transportation service are enough themselves not satisfy (2) (c) § 5 of the Act. What §5(2)(c) satisfies ap- the Act parently is opportunity salvage the New Haven situation. I This, is a admit, relevant consideration if merger. there is to be a if salvaging But the New Haven so as to economy maintain the England New is rele- economy then what about of the cities and

vant,10 along the lines of these two counties stretched roads merged? degree which What of obsolescence will will they suffer? are production

Railroads critical and dis- factors goods tribution of and in of supply They materials. transporters goods are still the basic of bulk low-cost, long-haul efficiency merchandise. Their rates and competition. of service affect industrial Adequate rail- road transportation, costs, at reasonable is essential development any region the economic or area. The Report. plight The facts are detailed in the Examiners’ typical: Rhode Island is only serving

“N. is the I H. Class railroad State of Rhode the. percent population Island. Over 50 Island em- Rhode ployed manufacturing industry industry greatly in the and such is dependent upon provided by H., particularly rail service N. for the points inbound movement of raw materials from outside of New England. 1962, 35,000 consigned shipped by In cars were to or industries in Rhode located Island via N. H. from which the latter $5,000,000 important, derived in revenue. Three naval stations in Newport, Quonse.t Rhode Davisville, Island are located at Point and Narragansett Bay area, employ and in the the naval installations 10,000 freight pro- over civilians. In addition to service, the N. H. important passenger vides State, an service in the and estimates indi- approximately passengers 1,200,000 utilizing cate that service rail originate or terminate within the annually. confines of this State Providence, city population 200,000 with a Metropolitan 1,000,000, has water shipments facilities to receive Area of bulk commodities, general but since freight World War II service water to from Providence has been discontinued. Governor Rhode Island evidenced his concern at

.“The hearing proposed that fie failure include the N. H. in the may loss of provided by result in a service N. H. in the State. It his service, was belief that without such the State would little have attracting industries, industry; existing chance new might plants relocate their and that without service, rail the Federal Gov- may ernment well determine to reduce or existing, terminate defense ; installations, Report, . .” at 278. curtailment of rail transportation bound have an adverse on effect rely the areas and communities wh’ich on railroads to their industry service eco- nomic health is dependent. Many along communities dependent the lines are upon the employment furnished by .merger railroads. will the of this be on What effect these communities? industry Will locate elsewhere be- cause of rail inadequate transportation? the firms Will in region located the cease to expand or move other areas? employment decreased opportunities mean Will the residents of these elsewhere, towns must move creating ghost thus more of already towns which the we along many see of the trunklines? None of these ques- tions even by is considered the After very Commission. a generalized discussion, the Commission concluded that the seriously impair Pennsylvania’s would not eco- nomic health. “finding” But this is foreshadowed expressed Commission’s if view railroads have little any responsibility furthering develop- the economic of an area ment and the Examiners’ position that the Commission need not consider tax, employment, developmental merger. effects of the And what about States so vitally other and communities interested effects of this The combination? opin- Commission’s ion totally unenlightening. is The Examiners’ Report long is no better. It contains a list of interesting statis- state-by-state a tics, basis, on but no attempt makes the effects of the evaluate combination.11 Compare Stan- Transport Commission’s own Bureau of Economics and recognized importance community has Statistics dislocations “public evaluating aspects proposed merger. interest” of a regional impact Commission should consider local and “[T]he consolidations, economically socially, separate as a criterion Separate or sub-criterion in its decisions .... consideration opportunity affording local effects would have the merit of for the distinguish importance determine Commission the relative Impacts of Railroad Institute, Selected ford Research (1965). Mergers is it, apparently preceding ones merger, like the

This regional part a by financiers manipulation Interstate of the function ultimate is the planning of the imprimatur if the Yet Commission. Commerce financiers of the plans put is to be on What interests them. known about should be much more those will powerful How company?' new will control will control Are interests which interests be? basie interests company antagonistic new putting Is the Commission region being served? banker-management tíf of. on a new form imprimatur the New Haven and disastrous to rail carriers that was so exposed People's Other Justice Brandéis that Mr. in. (1933)? Money 129-136 an excellent ex- Haven Railroad indeed New of financial interests

ample manipulation at the hands management by operators. railroad Mr. rather than Justice Brandéis said: monopoly presents rise of Haven “The the New n example of as a de- striking

another combination of financial veloper concentration; and it illustrates 'large use to security also the put. issues' are 1892, “In when Mr. Morgan entered the New directorate, very Haven it was a prosperous little with capital railroad liabilities of $25,000,000 paying 10 per dividends, cent and operating 508 miles of line. By 1899 the capitalization grown had to $80,477,600, aggregate mileage but grown had also (mainly through or leases of lines) other to 2017. years Fourteen later, 1913, when Morgan Mr. died of such factors.” Railroad Interest, Consolidations and the Public Report Transport Staff of Bureau of Economics and Statistics (1962). just mileage was Mellen.resigned, and Mr. liabilities 1899; capital but the less than 20 miles . . dditional $425,935,000. . [A] increased had paid company needed, also, because were issues it earned'. ... more than [0]f out in dividends was $200,000,000 expended over capital increase, securities some of the stock other acquisition railroads, railway-, street steamships, 121 other water-companies. It was electric-light-, gas- and necessary which made properties, these outside $67,000,000, per issue, much six bond cent, discussed large expensive security as well as other issues. For years improvements in these fourteen on the new on including equipment cost, railroad have Id., a only $10,000,000 year.” 121-122. average, (cid:127) grievous most fault this banker- “[T]he has managed railroad been its financial recklessness— already fault that has brought heavy losses to many thousands investors throughout small New England for whom supposed bankers are nat- guardians. ,In ural a community where its railroad generations stocks have been absolutely deemed safe investments, passing of the New Haven . .. dividends after an unbroken gen- dividend record of erations comes aas disaster. disaster is mainly due

“This to enterprises outside the legitimate operation these railroads; for no has railroad equaled the New Haven in the quantity and extravagance of its enterprises. outside . . . ' scrutiny “Close of the transactions discloses no justification. On the contrary, scrutiny . serves only to make more clear gravity errors ihe com- mitted. mеrely Not were recklessly extravagant acquisitions in made pursuit mad of monopoly; but the financial judgment, the financiering itself, was Id., conspicuously bad.” 130-131. emerged from bank- Haven New years passed, McGinnis Patrick B. in 1954 reorganization,

ruptcy and became the road control fight for proxy awon stock; very preferred little owned group His president. in which common, on the dividends pay to in order but cash divi- pay first had to interested, he heavily he was paid were These cash dividends preferred. on dends showing the amounts, the record very large in out following: $3,440,180

1954 .. 2,457,700 1955 .. outlays severely were time, maintenance At the same ways outlays for maintenance and struc- cut. Total in $27,641,046 1953, $19,647,313 from dropped tures in 1954, $18,338,714 in Total maintenance decreased from equipment $24,306,984 1953, $22,794,715 $21,933,318 in 1955.

It this cabal is estimated that of financial interests lost money $7,000,000 railroad’s in months. Cash ?0 reserves dwindled, current liabilities ‍‌​​​‌‌‌​‌​​​‌‌​‌​​‌‌​​​​‌​‌‌‌‌‌‌‌​‌​​‌​​‌​​​‌​​​‍mounted, long- did term debt. “It’s speculation a stock venture instead business” railroad said one Time, director. January 30, . 1956, p. 76.

Is the new Penn-Central Company also to be milked by predatory finance?

Alternatively, if a regime as big as powerful as this is to be turned loose, it stay should private hands? How big can an enterprise of this character get without stepping over into the públic domain? “How far should the consolidations be go allowed to before they cross the threshold of private enterprise and enter the domain of private government?” Is the power and the control so

12Report, supra, 2,n. at 80.-

455 ownership13 public great we should think terms that private ownership? rather than very of§5(2)(c) go vitals

These considerations They of the Act and none of them answered. emphasized by apparent worry in the mind spite arguments all for the that in Commission approve merger it not to advance, that it could decided Bailing out unless the New Haven was bailed out. public may very important in be the. New Haven I context of these said. interest, have But mergers spectre modern there is the terrible that may creating Frankensteins be new Federal Government way people running country in a who will be can ill afford. by the Commission’sdefault as

The alarm is increased respects eastern rail carriers. There are three the other “protected” Delaware Erie-Lackawanna, so-called roads— &Maine. The found Hudson, and Boston Commission & merger destroy independent those three as that this imposition protective proposed the con- railroads and protective those will be we do What conditions ditions. they capital indemnity, If not know. include “protected” disappear lines will in from the substance competitive competition bought off scheme. Should manner? “protected” go

Should the three carriers into this monopoly and create a of rail Penn-Central 13 railroad, experts suggested Some have the trend toward consolidations, may dependence upon in the result Nation’s power, may prelude mammoth combines with excessive be a g., industry. See, Meyer, Peck, nationalization of the e. Stenason Competition Transportation Zwick; <fc in the Indus Economics.of .(1959); Merger Legislation, Hearings Rail before the tries Monopoly Judiciary on Antitrust and Subcommittee the Senate (1962) Committee, Cong., Sess., (testimony 2d 87th of Professor Healy). Kent T. of New York north east Buffalo

transportation any effort even never made has City? The in Penn-Central such an inclusion whether to consider in the interest. would be “pro- perhaps three suggestions are There system. N & W-Nickel Plate belong in the Unes tected” logical E-L recognized that was merger was In that was not equitable on terms but inclusion addition 324 condition. .poor'financial of E-L’s because possible juris- therefore reserved 22. The Commission 1, I. C. C. five its financial give years improve E-L diction to in & W on eligible for inclusion N position to become The Penn- C., terms. I. C. at 28-29.14 equitable merger purpose threatening Central has frustrated D B & H and & M inde- very E-L, survival they If not to become members of pendent roads. are only alternative to be Penn-Central their seems system, in N & The failure of the Commission inclusion W. possibility consolidate the distinct these cases raises “protected” may not be included in three carriers system, being pressure unable withstand any Penn-Central, of the As Brother destroyed. my will points out, Brennan the inclusion these roads in-the system risky N & is no less than their inclusion W system. Penn-Central merger’

The whether the Penn-Central is in question therefore cannot be until “public interest” resolved roads is of these three protected fate determined. 1966, 22, Commissioner Webb the ICC recom On December H, of the D the Commission direct inclusion E-L and & mended that M B & the N & The inclusion W. Com and authorize “Unfortunately, that, perceptively noted the Commis- missioner (Penn-Central deciding Plate) . N and & sion’s W-Nickel action separately tended to blur vital issues common to cases has both York, R. Co. and New proceedings.” Western C. & Norfolk 21510, p. Co., Merger, No. Finance Docket St. L. R. They too and bondholders. have stockholders They too They too communities. consumers, shippers, service in the system competitive part important an exer- can the Commission before truth is that East. merger, Penn-Central on the judgment an informed cise which this impact the serious deal with it must carriers. “protected” on the three have will car- rail eastern unprotected also seven There are emphasized fate is Their is in doubt. future riers whose before pending now merger application anew a new has said, the Commission I have As Commission. C & East —the in the systems three promoted & n and N & W the C 0 Now and Penn-Central. W, N & This merge. proposal approval applied have have men- I roads “protected” the three would include Jersey and Central of New It would also include tioned. commence merger will Hearings on Reading. that have If we will merger approved, is April 17, that rail rather three. huge eastern cartels than two creation of the new Penn-Central behemoth Was the one? to create this second for the desire the reason lines “protected” three happen will to both the What regime a of two unprotected ones under and the seven as they will best to maintain cartels? Where fit eastern possible? competitive system as much merger the say can because entire present at No one solution. the is nowhere near Until of the East problem impossible. is an decision plan known, is informed total the not even know what effect does Commission The Jersey which have on Central of New will inclusion NH not be author- of NH should the inclusion claims that in one of the least included is ized, unless CNJ §5(2)(c) the Commission large systems. Under new interest consider “the effect required is in include, other railroads inclusion, or failure to of the In in transaction.” proposed territory involved States, S. Trucking McLean Co. United U. v. duty has the “to 87, we the Commission stated merger competitors on consider effect of the in general competitive industry.” on situation regard is here. Those conspicuous Its default findings plan made or cannot be until a master required designed place for the and the each plans East rationalized and system finally rail carrier the new determined. approved now privately Commission has three

The mergers embracing railway over of the planned 85% (cid:127) entire railroad market. operating revenues eastern question crucial is whether the re- The unresolved but maining presently roads can survive or cpnstituted; they can be they cannot, if how best restructured' competition against one more promote or new systems. The case must be remanded to the so regime of two or competitive the East under or. rail cartels can three four five be determined. The region on the of the be impact communities must deter- The balance of several competitive mined. combines appraised. position of each rail carrier in must ' the new must be established. the financial And picture exposed cartels- must be so that hierarchy new known. when all Only centers of control will be -these required known Commission make the facts are can the Only findings §5(2)(c). judicial then will review under possible. .only kind be It is when responsible of a findings are made that we will be able to required know opinion really means and the Commission’s to what statutory whether standards have been determine Corp., Carolina Carriers United States v. 315 met. See 480-489. S., at U. here what we say said in Securities and

We should Chenery v. Exchange Corp., 80, U. S. 94, be upheld merely action Commission’s cannot “The might made findings have been and considera- because as an appro- its order justify tions which disclosed safeguard protected the interests the Act. priate . . . There responsible finding. There must be such finding here.” no such I would reverse lower court and remand the cases to not only spell the Commission out the terms and also, specified by conditions to make Court but necessary findings on the reach and merits required by§5(2)(c) the Act. Harlan, Fortas, Justice

Mr. with whom Mr. Justice. Mr. Justice Stewart Mr. join, Justice White dissenting.

For more years than 45 been policy, has the national in congressional reflected the railroads legislation, country should be into a number limited combined of systems. policy gained The acceptance 1919, when, following World I,War planning Government was to return the private railroads to ownership the frail many condition the smaller apparent. roads became Transportation Act of 1920 directed Commis- sion to formulate a plan national master of consolidation pursuant which, it was hoped, the railroads would submit voluntary plans for consolidation. The Commis- sion so, did the opposition but program was over- whelming goal and the could not be In achieved.

the Commission asked of the burden of relieved working out a plan, national but 1940, until its request in congressional did result action. In that year, Congress enacted Transportation Act of governs remains effect present proceedings. Act, Under all of years since 1919 or 1920, the national policy effecting consolidations the rail- into a roads limited number of systems has been un- technique of the author- of the failure Because

changed. in the 1940 law abandoned Act, Congress by the 1920 ized power left the plan, and formal national idea the hands and consolidations the mergers to initiate rather than judge The became Commission carriers. Co. v. Atlantic Joe Paper St. generally, See architect.' (Appendix) 315-321 Co., S. 347 U. Line Coast R. (1954). more two or provided that expressly 1940 Act management, merge or otherwise could combine

carriers ICC the ownership, operation if the approval and gov- key basically provision, were obtained. The (2): is “If the present case, § the erns and and such such conditions that, subject to terms finds reasonable, just be and it find to modifications as shall scope of within subdi- proposed transaction is the will be consistent with (a) vision [section] approving shall enter an order interest, public terms and con- authorizing transaction, upon such modifications, just so found to be ditions, and with the Among the §5(2)(b). considera- ....” and reasonable is give are: weight which the Commission tions to upon transaction proposed The effect of the ade- “(1) public; (2) transportation service to the effect quate public inclusion, interest of the or failure to territory other railroads in the in the include, involved (3) transaction; total proposed charges resulting fixed proposed from transaction; (4) interest employees carrier 5 (2)(c). § affected.” Jurisdiction “to enforce, enjoin, annul aside, suspend, set in whole yested any any or in part, order” of the ICC, is in the by district courts § 28 U. S. C. 1336. It clear, beyond is argument confidently prior assert to tоday’s —one particular decision —that mergers whether serve railroad interest, including antitrust is ingredient, the standards of judged Transportation ICC, not initially by the applied of 1940 as Act this Court. Act, judgment the 1940 the Commission’s

Under As this Court said antitrust laws. governed by States, 67, 321 U. S. Trucking v. United in McLean Co. the Commis- is “little that (1944), there doubt at 84-85 . . . for all-rail consoli- proposals to measure sion is not. of the laws.” In the anti-trust the standards dations three-judge of a district Term of a decision Court, last merger of ..a was re- setting approval aside ICC court decision, in a per quoting curiam versed Court Trucking, from because the the above statement McLean to overturn applied District Court. antitrust standards Air Line R. v. Seaboard United ICC decision. Co. States, (1965). case, 154 In Court 382 S. U. merger might otherwise “It said: matters - has been laws; the antitrust the Commission violate Congress merger of by the approve authorized findings in adequate if it makes accordance railroads merger would be quoted above that such the criteria ” S., 382 with the interest.’ U. at ‘consistent 156-157. provisions Act, despite the of the 1940 recently,

Until accomplished policy to effectuate the national little was systems. few combining major roads into a The con- ,and overlaps rivalries, conflicting flicts and needs great and, ambitions are so. the task is formidable appeared hopeless. from has time, Finally, time approved acquisition the C 1962, ICC. & O’s of con- B In it approved trol of the & O.1 the combination 1964, And, the N & and the Nickel Plate.2 more W after elaborate years corporate maneuvering 10 than 1 317I. sustained sub Brotherhood Maintenance nom. C..C. (D. Supp. 19 D. States, v. 221 F. C. E. Way Employees United aff’d, per curiam, (1963). Mich.), 375 U. S. 216 " 2324 I. C. C. 1. and the New York Pennsylvania in 1962 the negotiating, proposal their filed with the ICC Central Railroads proceedings followed, Lengthy administrative merge. rendered April not until of 1966 that the ICC and it was merger subject to condL decision, approving final York Central Pennsylvania Co.-Merger-New R. tions. Co., R. I. 475. It modified those conditions C. C. If Penn- I. C. 304. September 16, on C. will be three effective, becomes the result Central operating in and sometimes large systems, each various Northeast, middle Atlantic overlapping parts opinions States. The Commission’s and midwestern consequences, indicate its view that the the three cases progress will be a measure of long fást, substantial goal successively announced in the trans- towards of 1920 and 1940. portation laws approved by ICC, the was merger, The Penn-Central a by parties temporary injunction various and attacked in District of The sought was the Southern New York. railroads, a of several af- complainants included number and one Milton Shapp. fected communities As the mat- only Court,3 plaintiffs ter comes to this the who complain merger Shapp about the itself are and the City of Scran- ton, Pennsylvania. Shapp, shaky whose rather standing participate in these appeals predicated is upon his participation the before Commission and the bare cir- cumstance that he is a shareholder in Pennsylvania the Railroad and citizen of Pennsylvania, asserts here, as he did in the District Court, in calculating the neces- sity for the merger and the benefits to be derived there- from, the ICC upon relied an unwarrantedly pessimistic forecast as to railroad prospects, and that as a result it 3 Other aligned communities City themselves with the of Scranton in the Court, District but have either declined to or, seek review inas the of Township case the of Weehawken, have abandoned their appeal. serious anti- will have which a transaction approved

has inflict economic and will in East the effects competitive A Pennsylvania. of Commonwealth the harm upon City Scranton, Pennsylvania, the in community single in analysis argues and addition Shapp’s concurs , E-L, inclusion the merger expected the system or will reduce another D & H and CNJ one Scranton, available to rail service now quantity smaller by those three roads. presently is served which States, questions which correctness The United E-L, protecting the' procedure used M, challenge merger D & H B does not itself. and & Indeed, represented the Solicitor General has agencies of Court that “the the Executive Branch that responsibilities have for the substantive formulation transportation economic policy believe that merger interest that its consummation promptly should be effected.”

None objects railroads itself as unlawful unfair. None of the objects. States affected Pennsylvania Commonwealth of at one had point opposed the merger withdrew its opposition, and -now urges approval of the Vigorous ICC order. attack, was however, and is launched the ICC’s order various of the railroads provisions because of in the order addressed to complications arising from the situation of three smaller roads, the D E-L, & H, B&M.

The three-judge District in an Court, opinion by Cir- cuit Judge Friendly for himself and District Judge Levet, declined to a issue temporary injunction to enjoin ..merger, Judge Weinfeld dissenting. 259 F. Supp. 964.

This granted Court a stay expedited and the case for con- sideration. The today Court sets aside the ICC’s order.

4 Memorandum for the United States in 642, 680, 691, p. Nos. ruling any upon the issue expressly

It reserves entirely upon bases decision merger. It merits of the - adequate to make failure of the Commission alleged prior to author- three smaller roads for the provision separate In opinion, a izing consummation. Justice Mr. Douglas he also hold concurs, concludes that but approval illegal itself and the Commission’s merger I be- respectfully I dissent. for this reason. unlawful the order of the District Court we should affirm lieve Commission’s action. upholding the attacking our there is no tolerable basis Certainly, To so would be to sub- on its merits. do merger on for that of the Commission judgment our stitute least, speculative based grounds which, say and con- competing economic superiority claimed upon the if do liberty this, not at We are siderations. high degree do a so, require free it would we were which, a on such a basis to intrepidity overturn result incorpo- imperfections, generally if assume its even we which a direction national significant step rates generations. Con- sought for several This is policy has gress’ task, courts, but responsibility, The designated instrumentality, Congress’ ICC. rail to refurbish revitalize communi- national need say of The urgent desperate urgency. cations is —some merger ICC has found here will result in econ- omies aggregating $80,000,000 and efficiencies annu- ally by eighth year, will it asserts enable the badly roads to effect the needed modernization of their may step wrong facilities. This be a in the direction, Douglas my Brother argues; but we have neither say power franchise to so nor the to do better. presented problem respect to the three smaller roads assumes a different urged form. Here, it is specifically the Commission failed to carry out its statutory, duty should not be con- its facts are as complete. summated-until task is The follows: has cannot roads, found, three the Commission large, integrated

survive without inclusion in one systems. The has as I shall de- assumed, they will in either the N & W scribe, that be included systems. or the Penn-Central The three roads filed applications both the N & Plate and the W-Nickel resulting Penn-Central for inclusion in proceedings, system. They preference have indicated their for inclu- sion in approved the former. The Commission N & W-Nickel Plate merger and its order has ^become not, final. It did however, pass upon application of the three roads for the other hand, inclusion. On made effective subsequent assurance determina- tion the issue and the Its effectuation the result. approval order of provided that the ICC would retain jurisdiction for years five N require the & W to include roads three on terms pre- the ICC would itself scribe agreement, the absence of and it required the irrevocable consent of N & such order a con- W to of consummating dition merger. gave The N & W consent. On December 1966, pursuant reserved jurisdiction, Commissioner Webb of the ICC authorizing recommended inclusion of the roads in three system.5 anticipated It is that a Commission order will be entered July or August 1, 1967. When if final, order becomes it provides for inclusion of three roads the N & system, W will settle their ultimate fate and will significance terminate the of the conditions to which herein Court objects which have resulted in setting aside the ICC’s order. It

5He recommended that the Commission “authorize and direct” inclusion of D H, the E-L and & and “authorize” inclusion of the1 B Western B. York, Co. and New & M. C. & St. L. R. Norfolk Co., Merger, Finance Docket No. 21510. the Commission’s however, remembered, must be past if review; judicial will be subject order will be resulting proceedings guide prediction, say no one can short, In and bitter. complex, long, home ultimate roads will find the three their whether year or the next.6 during calendar this the re- the denied proceeding, ICC present 2. In the Penn-Central for inclusion of the thrée roads quest included they if were not provided it that system, but matter they might resubmit system, Nthe & W It to note that essential petition. by supplemental provisions on these proceeding no attack is made roads. fate of the three relating to ultimate required three roads that ICC concluded 3. The “when the various con- protection because interim some through and the new yards equipment and solidations effectuated, a contemplated by applicants routes E-L, of traffic could diverted from substantial amount Accordingly, impose D B & and & M.” decided H I describe, certain conditions which shall and it re- acceptance “their active quired applicants and implementation in the cooperation pend- conditions” ing decision as to ultimate the inclusion of the three systerti. in a In major roads this connection, the Com- mission made the statement that provided has the basis of attack. It said: “It is doubtful that, without inclu- in major sion system, these three carriers could with- competition stand the of the applicants merged, and, they unless are protected during the necessary to period determine their we future, would not authorize consum- mation at this time, even though merger.” approving 531-532; 327 I. C.,C. at

4. The conditions consisted of (1) measures for traffic maintenance, temporary preservation of present prac speculated The court below the ICC should finish its work on the during matter calendar 1967. 259 Supp., F. 969, at n. 4. to cover indemnity payments (2) patterns; tices and pro (3) any; if traffic, diversion losses due conditions. these disputes under determine cedures to however, specifically provided, The- three above, applicants notwithstanding the al agreement an for could enter into carriers protected protection supersede “which shall ternate protections if not otherwise violative by. sections” provided such App, G. C., 327 I. C. law.

. carriers protected complained three 5. The protection their adequate conditions were they specifically demanded, improvement in addition indemnity provisions, an indemnification the traffic (cid:127) against capital impairment. hand, a num- On other Appendix ber of roads on ground other attacked G indemnity provisions the induce manipula- tion diversion traffic and both Penn-Central and- which three roads would be All harmful them. of them complained that there had been no and hearing, the nonprotected complainants alleged indem- nity really conditions pooling amounted to arrangement a which have been should but was not considered under §5(1) of the Act.

6. On September 16, after the present suit had been filed, the granted Commission the various petitions to reconsider Appendix G. Pending hearing and decision on reconsideration, it indemnity provi- rescinded sions but left effect the traffic subject conditions whatever modifications might be made. 328 I. C. C. 304. The Commission said that “Since the applicants have willingness indicated to accept post-merger modification of the protective conditions, they may proceed with con- summation of the merger upon our authorization thereof becoming effective. Such consummation will constitute irrevocable assent part on the of the applicants any modification resulting, from the further consideration n to be found ordered described

herein agreement irrevocable well as reasonable; as just fully with the conditions comply .to applicants n ruling, to this 31, pursuant October On modified.” as protective interim on the hearings were commenced conditions. may consummated merger be ruling

It is the objectionable the Court finds these circumstances that halts this transaction which the Court and on the basis of concededly major to the'Nation: importance which is order as it now The Court reasons that the Commission’s findings respect to the stands fails to implement it so roads, three smaller and unless and until does may not be consummated. I Fundamentally, submit, this is based mis- conception findings. of thé ICC’s The Commission firmly clearly that, held a condition to.consumma- tion it merger, necessary was to assure that would, three protected roads pending their inclusion in systems. one of larger But it is clear that the Com- mission' did not find that was necessary to fix the terms of such protection prior to consummation of merger. theOn contrary, prescribed traffic and indemnity provisions in must, what all fairness, be regarded aas setting: tentative prescribed conditions were, as the court below noted, “unprecedented in their.severity in history mergers.” railroad 259 F. Supp., They had not been focused or defined prior to the report Commission’s apparent reason, understandable to anyone familiar with the administrative process, that they must have been crystallized in the post-argument deliberations of the Commission and its staff. They had not been in the included Hearing Examiners’ report. The condi- tions are complex. Interim protection of the three roads against possible traffic diversion and resulting financial upon depends which unknown events future loss realignment in- of the- sort largely A vast unknowable. only always unique, and of the has elements here volved ipiles separated approach, lie a doctrinaire quiet in this condemnation theoretical between problems pressures in the ad- of realistic Court and agency, explain this Court's readiness ministrative can solution be an and unknowable to insist that unknown prescrip- prescribed can be found, in advance. Solutions implement de- written, tions can be the Commission’s protection adequate interim must be termination insist- furnished three roads. Commission’s protection beyond dispute. ence such is Its de- part, prescription specific ferral, of the measures to light effect at least of the in- understandable difficulty problem. (1) Ap- herent of the clear: This is pendix parties I G, noted,’ as have in effect invited the agreement to work out their own in substitution for the (2) formula; Commission’s the Commission further only experience demonstrated awareness that time and perfect would the interim conditions its admonition comply merely to Penn-Central to with the letter spirit protective (3) but. with the mandate; commendably, suggest, hearing Commission, I ordered litigation reconsideration the conditions after apparent. commenced and the need therefor became The Commission,as I have noted, left effect the traffic subject provided conditions,' to modification, and indemnity рrovisions might whatever specified be would be retroactive to the merger. date consummation of the With the assurance that accept Penn-Central might whatever respects,7 ordered in these it authorized merger. consummation of the 7The not, Commission did however, applicants foreclose the from

seeking judicial any review decision might be made as to capital indemnification. C., I. C. at 329.

470 'this immediate approving holds that

The Court order not merger “insupportable,” is of the consummation Commission lacked but because power, the. because own implementation of its deferred full protection that interim findings indispensable it was concedes provided three roads. Court purp some may jurisdiction retain for the Commission necessary pass not “find It does it oses.8 to do what power the Commission question naked solely Its action is inducéd has done here.” drastic been to effect interim of the decision because Commission’s and Penn- of the three roads —to protection traffic prescribing only fully Central committed — hwit deliberation proceed and to presently conditions indemnifica complex controversial and to work out the that, I agree with the Commission provisions. tion accept complete applicants of the consent view ultimately no reason to defer fixed, there is the terms until this is done. the consummation procedure choice of the Com any event, In unreasonable; is Court mission has made not upset magnitude a decision of the involved should reasons of merger except significant in this for substance.9 action; is no reason of substance the Court’s There impaired or is no substantive value that lost there has proceeding as the Commission ordered. by. has no objection As Court there been

(1) found, of the traffic conditions substance which will con- 8 g., Co., States v. Island Motor Transit e. United Rock 340 See> (1951) (to keep “auxiliary S. 419 motor routes railroad U. Unification, supplemental”); New York Central 154 I. C. 489 C. Chicago Ry. (1929) (inclusion lines); Merger, & N. W. short Co. (1946) (employee protective provisions). 261 I. C. C. legal prescription, pro of a clear the absence reasonable “[I]n judicial Jaffe, decision should withstand cedural interference.” (1965). of Administrative Action Judicial Control in effect, except suggestions tmue Indem- details'. provisions nification will be retroactive made to the date of will consummation of the therefore bé as and .

fully if originally prescribed. effective as

(2) Effective review judicial of ultimate condi- . tions will If they any respect fully be available.' fail lawfully implement finding

and to Commission’s to the necessity protection roads, for of interim the three they presumably It all will be modified. with re is, spect, say nonsense to be only remedy that (cid:127) to “unscramble the consolidation.” At issue are the

indemnity only terms. These are the ones that have They not been prescribed. only guaranty involve of payment of money on whatever formula the Commis sion may prescribe in own or motion after direction by the An courts. of the order Commission or courts payment make such can fully easily imple be by processes. mented conventional condi traffic are be immediately. effective They are not tions under substantial If they attack.. are modified in this hearing, nothing is more than an exercise power modify its order which the Court concedes to be power within the Commission’s under (9) § Act. Cf. United States v. Rock Island Motor Transit Co., 419 (1951). S.U. hand,

On the other order, the Court’s which I submit is insupportable as matter of law and of sound admin- istration of the principles judicial review of decisions unfortunate, agencies, administrative will have- conse- quences. know, I do not I submit the cannot Court know, long how it will just to satisfy the Court’s .take -'rigid prescription that the interim.protective provisions be says

must settled. The Court it will “a entail short, very delay”; will three roads included & W that the.N Commission’s interim order prediction with I view this perfected expedition. will be Too profound skepticism. many interests have too gain delay; from obstruction and the maze much to proceeding judicial administrative review delay. The inhospitable ingenious counsel bent on history proceedings dilatory is a book for ICC source good burial of tactics and a monument to the successful manipulated projects procedures over-elaborate experts Meanwhile, policy in the art. national continues urgent improved long- needs unfulfilled; national desperate impeded; haul and local rail service rapid pace; erosion of the New contiúues at a Haven urgently and the need and communities improved rail continue to suffer. service

If this law —if Court’s compelled by were the result upon practical decision rested fault of substance —the consequence grace. be But have to suffered that is not so. The Commission insisted that the three protection smaller roads had to receive interim and re- quired applicants agree to to as a condition of this merger. consummation of the has not It modified this. implement It has not failed to it. On the contrary, it think, commendably upon has —I a proce- —embarked assuring while that -protections will be which, dure forthcoming, subject to judicial review, possible makes working-out the careful deliberate its and terms disrupting the same time avoids timetable If were merger. we to comment it, we should, think, compelled applaud I to be flexibility unusual of method demonstrates and which has not always practices. ornamented Commission But we should The, indulge in this kind second-guessing. not plain vio-, conclusion is Commission’s order does not any principle late law. It does not fail to implement findings. merely Commission’s provides It for the stages objective firmly of an stated accomplishment committed. This fully applicants to which it and should we affirm. powers, within is well Addendum: requires concurring opinion Brennan’s

MR. Justice He concedes that “this comments. these additional he con- merger may public interest,” be in the but well author- approving that the Commission’s order cludes izing merger must consummation be set aside completed job pro- because Commission has viding for the D future the three roads: & H E-L, and & M. Mr. Justice Brennan does not contend B that, as an matter, abstract settlement of the ultimate destiny necessary precondition of these is a roads. approval of merger. recognizes the Penn-Central He such contrary contention would statute, precedent, practical sense. The clearly power has reserve for the future problems merger. some to a incident Faced —as this Court is not —with urgent need of coping with the realities of life, the Commission must frequently content itself with perfection. less than Ac- cordingly, Mr. Justice Brennan agrees that “the Act vests wide in the agency to discretion allow a go forward while conditions as to inclusion are worked He argues, out.” however, specific situation, the failure to settle, by order, definitive the ultimate fate of the three roads is error which requires that the order approving the merger Penn-Central be set aside. In my judgment, analysis lays his bare the specu- tortuous lation which the Court’s nullification of merger this is based.

Mr. Justice Brennan’s argument, in net effect, is that when Commission really the comes grips to with the problem of including the roads in one of the great sys- thing lead to another and the eventual

terns, one will merger the Penn-Central result will be that —to to contrary become the object not otherwise he does —will point, reaches this public When the Commission interest. including three from the will either have to refrain systems, N & or the in either Penn-Central roads W it will have findings, contrary which would though inclusion of go ahead even grit its teeth make the systems in one three- roads I contrary public interest. Penn-Central unfortunate. of these would be most agree that either there no basis from the fact that is My difficulty stems my' all catastrophe. respect, With for the forecast from to this journey present Brother Brennan’s trip through space a horrifying requires future outer we in which I do not believe make, which I cannot rocketry be more than indulge. There should should justify national our nullification action impor- agency with the tance which has been authorized heavy responsibility repairing deplorable our national (cid:127) network., railroad “[a]negations says that Justice Brennan

Mr. Department of other made” Justice numerous of the three roads in parties inclusion either “might possible not be consistent with major systems Now upon equitable interest or- terms.” made allegations are is less interesting, fact but than pointing after dispositive; so out Mr. Justice Brennan,' (cid:127) agreement general there seems to be that the three -that in the N W, says be included & that “there roads should present possibility, given state of significant might inclusion in N & circumstances, W be un- only price rendering or attainable at the attainable merger against- public interest, Penn-Central accomplished if inclusion could be consistent that, even

475 might impossible to work public with the interest, equitable out terms.” is I a

Now, “significant possibility” not, think, con- for of an admin- judicial ventional basis nullification istrative order. See Illinois & R. Co. W. C. v. Norfolk Co., R. S. there 57, 69 cases cited. (1966), U. true, It is as Mr. Justice Brennan argues, there problems and difficulties inclusion the roads about largely stemming in from the systems, poor one financial condition of two the three roads. These diffi- argue for inclusion of the prompt culties themselves roads great in systems, one of the a result which the three struggle may fierce for the of flesh roads’ ounce last if paradoxically judicial pessimism, But it is defeat.10 lead administrative should have a nullification, present is, more substantial basis than is here. There fact, assuming in no here for that the will basis roads W; in the or be included N & that the terms and condi- ; will equitable not be. or that will the result make tions the Penn-Central contrary public interest —. if that, any happened these at the Commission’s hands, corrective measures could not be mandated courts.

The N & asW, Mr. Justice Brennan recognizes, has “irrevocably agreed to include these three in petitioners system their , terms ... if prescribed necessary, Commission], provided such inclusion [the is found be consistent with the interest.” 327 I. C.,C. at 529. There no reason for us to doubt Commission will complete fact of working task out terms conditions inclusion. If deemed neees-

10Judge Friendly jockeying referred to “the of these roads and plaintiffs three O, Cthe & B & and N & W actions price position respect of other mergers which, despite' — words, suspect all the is what we mostly these actions to be about.” Supp., at 981. F. juris- retain Court District the order that could we sary, accomplish the speedily could courts the that diction so fail. should the Commission if result the darkly argues that Brennan But Mr. Justice will three roads including the problem of the pressure in some south- monopoly rail creating a “virtual in result This it. prove a tomap áttaches He States.” eastern when the Commission because about, says, he will come three roads of these inclusion down to really gets irresistibly impel will W, burdens the financial the N .& to C & 0 & W and thé N to allow the Commission effect, to bear in order monopolistic with affiliate, therefore, result, The net roads. weight of the included increase the likeli- Penn-Central will argues, he is “that an affiliation of N & W may actually cause, of, hood Commission did points C & He out that O.” That’s But possibility. not consider true. Brennan consequence remoteness of the that Mr. Justice divulges can, that neither we nor the Commission such consider I reason, required respectfully all it. disagree my Brother Brennan “Only- by that con- . possibility sidering this could the ICC fulfill obliga- tion to all the consider relevant factors approving before merger.” I not do believe that we require can Commission the rich and resourceful imagination to fore- see the consequence relatively minor problem presented by the three roads will precipitate a vast if monopoly, nor, the Commissioners gifted, were so as to envisage such a result, could we expect response a from them as problem presented other than a solemn they oath that will city build to house a mouse. a,nd In any if event, they yielded virtue judgment response to the urgencies of these three roads, the courts always could- overrule them.11 That the courts would 11 1do not any opinion intend to indicate as to the merits of a possible N & & 0 W-C affiliation. in the to intervene or deferential reluctant, timid, not be today’s proposition is a decision Commission’s beyond dispute. establishes decision Brother by my conceded point repeat: -I Given power permit has Brennan problems incident go forward while merger to great systems in one of three roads of these inclusion repudiating is no basis for being out, worked there power in this case. the exercise of necessary analyze It is not Justice Brennan’s Mr. protective the Commission’s interim detailed attack being recon- conditions for the three roads. These are hardly ripe judi- and are Commission, sidered cial underlying question is, again, review. The whether the may allow the “merger go forward while conditions . . . are worked out.” Mr. Justice contends that “the Act vests wide ‍‌​​​‌‌‌​‌​​​‌‌​‌​​‌‌​​​​‌​‌‌‌‌‌‌‌​‌​​‌​​‌​​​‌​​​‍discretion Brennan in agency” the to do I this, and confess bafflement as to why this discretion is enough not broad us to require tolerate the Commission’s action here. this,

The.basic fact of matter, I is that submit, case, is not a in which the Commission has refused or to consider, failed or to findings make or provide for measures, effective with respect to a aspect material of a merger. gave It elaborate, meticulous consideration to presented problem the three roads. It made find- bt ings with respect to their needs which apparently evoked an enthusiastic response perhaps excessively enthusi- —

astic —in this Court. It worked provisions out for assur- ing the protection interim of the roads and their eventual destiny. It made clear, effective provision for accom- plishing the result necessary: found that the three roads ultimately be included in one of the major systems and that meanwhile they receive traffic and financial protec- tion and It benefits. did this by requiring advance consent and reserving jurisdiction. The integrity subjected to court review. process may of the

adequacy of I escape cannot the conclusion that dimensions major departure this have from induced governing judicial established principles sound economic judgments complex review of in administrative perhaps probable, is, course, possible, situations. It of including parties merger, affected action aided shock of the Court’s roads, three way will find a the national herein, to avert mischief. avoiding aborting merger and of of the Penn-Central condition two deplorable continuation if . persist will the Penn-Central three roads which I think, respect, all merger is effectuated. But wrong principle that the Court’s decision in this case is to. It a reversion consequence. is unfortunate action negation governmental days judicial be conservative sphere. the economic We should no. say where all we can restrained, think, I. more agency The administrative deserve problems of the solutions áre entitled understanding and its efforts find today than the Court has shown. respect more may guardians courts be the liberties principal They not the of its people. chief administrators destiny. economic

Case Details

Case Name: Baltimore & Ohio Railroad v. United States

Court Name: Supreme Court of the United States

Date Published: Mar 27, 1967

Citation: 386 U.S. 372

Docket Number: 642

Court Abbreviation: SCOTUS