FEDERAL MARITIME BOARD v. ISBRANDTSEN COMPANY, INC., ET AL.
No. 73
Supreme Court of the United States
May 19, 1958
356 U.S. 481
Argued December 11, 1957. *Together with No. 74, Japan-Atlantic and Gulf Freight Conference et al. v. United States et al., also on certiorari to the same Court.
Elkan Turk argued the cause for petitioners in No. 74. With him on the brief were James M. Landis, Wallace M. Cohen, Seymour J. Rubin, Carl A. Auerbach, Herman Goldman, Benjamin Wiener and Elkan Turk, Jr.
Philip Elman argued the causes for the United States and the Secretary of Agriculture, respondents in both cases. On the brief were Solicitor General Rankin, Assistant Attorney General Hansen, Daniel M. Friedman, Robert L. Farrington, Neil Brooks and Donald A. Campbell.
John J. O‘Connor argued the causes for the Isbrandtsen Co., Inc., respondent in both cases. With him on the brief were John J. O‘Connor, Jr. and Robert J. Crotty.
John R. Mahoney, Elmer C. Maddy, Alan B. Aldwell, Walter Carroll, Allen E. Charles and David Orlin filed a brief in both cases for the Steamship Conferences et al., as amici curiae, urging reversal.
MR. JUSTICE BRENNAN delivered the opinion of the Court.
The Isbrandtsen Co., Inc., filed a petition in the United States Court of Appeals for the District of Columbia Circuit to review, under
After the war, Isbrandtsen entered the trade as the sole non-Conference line maintaining a regular berth service in the Japan-Atlantic trade. From 1947 to early 1949, Isbrandtsen operated from Japan to Atlantic Coast ports via the Suez Canal. Since 1949 Isbrandtsen has operated an approximately fortnightly service from Japan to United States Atlantic Coast ports via the Panama Canal as part of its Eastbound, Round-the-World Service.5
Although Conference membership is open to any common carrier regularly operating in the trade, Isbrandtsen has refused to join. Isbrandtsen‘s practice, between 1947
Since outbound tonnage from the United States exceeds the inbound tonnage, the Japan-Atlantic and Gulf trade is presently overtonnaged, and both Isbrandtsen and Conference vessels have had substantial unused cargo space after loading cargoes in Japan. Total sailings in the trade rose from 109 in 1949 to more than 300 in 1953. (Cf. note 6.) The re-entry of the Japanese lines in the trade after World War II, four in 1951 and four in 1952, greatly contributed to the excess of tonnage. For the years 1951, 1952, and the first 6 months of 1953, the Japanese lines carried approximately 15 percent, 49 percent, and 66 percent, respectively, of the trade‘s total liner cargo. For the years 1950, 1951, 1952, and the first 6 months of 1953, American flag lines, including
When, in late 1952, Isbrandtsen announced a plan to increase sailings from two to three or four sailings a month, the Conference foresaw a further increase in Isbrandtsen‘s participation which, because of the nationalistic preference of Japanese shippers, would probably be at the expense of the non-Japanese Conference lines. To meet this outside competition the Conference first attempted, in November of 1952, a 10-percent reduction in rates, but Isbrandtsen answered with a reduction of its rates 10 percent under the Conference rates.
On December 24, 1952, the Conference proposed the dual-rate system and filed its plan with the Board as required by the Board‘s General Order 76, 46 CFR § 236.3, which permitted proposed rate changes to become effective after 30 days unless postponed by the Board on its own motion or on the protest of interested persons. Protests were filed by Isbrandtsen and the Department of Justice. The Secretary of Agriculture intervened as an interested commercial shipper opposed to the proposal. On January 21, 1953, the Board ordered a hearing on the protests but refused, pending the Board‘s determination, to suspend operations of the dual-rate system. Isbrandtsen, therefore, filed a petition in the United States Court of Appeals for the District of Columbia Circuit for a stay of the Board‘s order insofar as it authorized the Conference to institute the dual-rate system. The court announced on February 3, 1953, that the Board‘s order would be stayed and the stay was entered on March 23, 1953.7
It has long been almost universal practice for American and foreign steamship lines engaging in ocean commerce to operate under conference arrangements and agreements. At least by 1913 it was recognized that such agreements might run counter to the policy of the antitrust laws; several cases were pending against foreign and domestic water carriers for alleged violations of the
Both inquiries brought to light a number of predatory practices by shipping conferences designed to give the conferences monopolies upon particular trades by forestalling outside competition and driving out all outsiders attempting to compete. The crudest form of predatory practice was the fighting ship. The conference would select a suitable steamer from among its lines to sail on the same days and between the same ports as the non-member vessel, reducing the regular rates low enough to capture the trade from the outsider. The expenses and losses from the lower rates were shared by the members of the conference. The competitor by this means was caused to exhaust its resources and withdraw from competition.
More sophisticated practices depended upon a tie between the conference and the shipper. The most widely used tie, because the most effective, was the system of deferred rebates. Under this system a shipper
But the Alexander Committee also found evidence of other predatory practices. Shippers who patronized outside competitors were denied accommodations for future shipments even at full rates of freight, or were discriminated against in the matter of lighterage and other services. Outside competition was also met by dual-rate contracts, by contracts with large shippers at lower rates for volume shipments, and by contracts with American railroads giving conference vessels preference in the handling of cargoes at the docks, and delivering through shipments of freight to conference vessels. Report, at 287-293.
The Alexander Committee recommended against a flat prohibition of shipping combinations because it found that the restoration of unrestricted competition among carriers would operate against the public interest by depriving American shippers of desirable advantages of conference arrangements honestly and fairly conducted. The Committee mentioned advantages such as “greater regularity and frequency of service, stability and uniformity of rates, economy in the cost of service, better distribution of sailings, maintenance of American and European rates to foreign markets on a parity, and equal treatment of shippers through the elimination of secret arrangements and underhanded methods of discrimination.” Id., at 416. The Committee believed that these advantages could be preserved “only by permitting the
In passing the Shipping Act of 1916, 39 Stat. 728, 733, as amended,
But it must be emphasized that the freedom allowed conference members to agree upon terms of competition subject to Board approval is limited to the freedom to agree upon terms regulating competition among themselves. The Congress in § 14 has flatly prohibited practices of conferences which have the purpose and effect of stifling the competition of independent carriers. Thus the deferred-rebate system (§ 14 First) and the fighting ship (§ 14 Second) are specifically outlawed. Similarly, § 14 Third prohibits another practice, common in 1913: to “[r]etaliate against any shipper by refusing . . . space accommodations when such are available . . .“; that prohibition, moreover, is enlarged to condemn retaliation not only when taken “because such shipper has patronized any other carrier” but also when taken because the shipper “has filed a complaint charging unfair treatment, or for any other reason.” (Emphasis added.)
The reason the “resort to” clause was added to the statute as an independent prohibition of practices designed to stifle outside competition is revealed in the Alexander Report. From information contained in the Report of the British Royal Commission and a communication from a major New York carrier organization, the Alexander Committee was aware that the outlawing of the deferred-rebate system would lead conferences to adopt a contract system to accomplish the same result. The British Royal Commission believed that ties to shippers were justified and that the abuses of the deferred-rebate system should be tolerated in the interest of achieving a strong conference system. Hearings, 369-381. However, the Alexander Committee, and the Congress in adopting the Committee‘s proposals, reached a different conclusion. Congress was unwilling to tolerate methods involving ties between conferences and shippers designed to stifle independent carrier competition. Thus Congress struck the balance by allowing conference arrangements passing muster under §§ 15, 16, and 17 limiting competition among the conference members while flatly outlawing conference practices designed to
Since the Board found that the dual-rate contract of the Conference was “a necessary competitive measure to offset the effect of non-conference competition” required “to meet the competition of Isbrandtsen in order to obtain for its members a greater participation in the cargo moving in this trade,”14 it follows that the contract was a “resort to other discriminating or unfair methods” to stifle outside competition in violation of § 14 Third.
The Board argues, however, that Congress, although aware of the use of such contracts, did not specifically outlaw them and therefore implicitly approved them. But the contracts called to the attention of Congress bear little resemblance to the contracts here in question. Those joint contracts were described by the Alexander Committee as follows:
“Such contracts are made for the account of all the lines in the agreement, each carrying its proportion of the contract freight as tendered from time to time. The contracting lines agree to furnish steamers at
These contracts were very similar to ordinary requirements contracts. They obligated all members of the Conference to furnish steamers at regular intervals and at rates effective for a reasonably long period, sometimes a year. The shipper was thus assured of the stability of service and rates which were of paramount importance to him. Moreover, a breach of the contract subjected the shipper to ordinary damages.
By contrast, the dual-rate contracts here require the carriers to carry the shipper‘s cargo only “so far as their regular services are available“; rates are “subject to reasonable increase” within two calendar months plus the unexpired portion of the month after notice of increase is given; “[e]ach Member of the Conference is responsible for its own part only in this Agreement“; the agreement is terminable by either party on three months’ notice; and for a breach, “the Shipper shall pay as liquidated damages to the Carriers fifty percentum (50%) of the amount of freight which the Shipper would have paid had such shipment been made in a vessel of the Carriers at the Contract rate currently in effect.” Until payment of the liquidated damages the shipper is denied the reduced rate, and if he violates the agreement more than once in 12 months, he suffers cancellation of the agreement and the denial of another until all liquidated damages have
It is urged that our construction “produces a flat and unqualified prohibition of any discrimination by a carrier for any reason” and converts the rest of the statute into surplusage. But that argument overlooks the revealed congressional purpose in § 14 Third. That purpose, as we have said, was to outlaw practices in addition to those specifically prohibited elsewhere in the section when such practices are used to stifle the competition of independent carriers. The characterizations “unjustly discriminatory” and “unjustly prejudicial” found in other sections (§§ 15, 16 and 17) imply a congressional intent to allow some latitude in practices dealt with by those sections, but the practices outlawed by the “resort to” clause of § 14 Third take their gloss from the abuses specifically proscribed by the section; that is, they are confined to practices designed to stifle outside competition.15
The Board and the Conference argue that, if the Court in these earlier cases had thought that § 14 Third in any way makes dual rates per se illegal and thus not within the power of the Board to authorize, it would not have found it necessary to require that the Board first pass upon the claims. But in the Cunard case the Court said:
“Whether a given agreement among such carriers should be held to contravene the act may depend upon a consideration of economic relations, of facts peculiar to the business or its history, of competitive conditions in respect of the shipping of foreign countries, and of other relevant circumstances, generally unfamiliar to a judicial tribunal, but well understood by an administrative body especially trained and experienced in the intricate and technical facts and usages of the shipping trade; and with which that body, consequently, is better able to deal.” 284 U. S., at 485.
Similarly, in the Far East Conference case:
“The Court [in Cunard] thus applied a principle, now firmly established, that in cases raising issues of fact not within the conventional experience of judges or cases requiring the exercise of administrative discretion, agencies created by Congress for regulating the subject matter should not be passed over. This is so even though the facts after they have been appraised by specialized competence serve as a premise for legal consequences to be judicially defined. Uniformity and consistency in the regulation of business entrusted to a particular agency are secured, and the limited functions of review by the judiciary are more rationally exercised, by preliminary resort for
It is, therefore, very clear that these cases, while holding that the Board had primary jurisdiction to hear the case in the first instance, did not signify that the statute left the Board free to approve or disapprove the agreements under attack. Rather, those cases recognized that in certain kinds of litigation practical considerations dictate a division of functions between court and agency under which the latter makes a preliminary, comprehensive investigation of all the facts, analyzes them, and applies to them the statutory scheme as it is construed. Compare Denver Union Stock Yard Co. v. Producers Livestock Marketing Assn., ante, p. 282. It is recognized that the courts, while retaining the final authority to expound the statute, should avail themselves of the aid implicit in the agency‘s superiority in gathering the relevant facts and in marshaling them into a meaningful pattern. Cases are not decided, nor the law appropriately understood, apart from an informed and particularized insight into the factual circumstances of the controversy under litigation.
Thus the Court‘s action in Cunard and Far East Conference is to be taken as a deferral of what might come to be the ultimate question—the construction of § 14 Third—rather than an implicit holding that the Board could properly approve the practices there involved. The holding that the Board had primary jurisdiction, in short, was a device to prepare the way, if the litigation should take its ultimate course, for a more informed and precise determination by the Court of the scope and
This consideration, moreover, is particularly compelling in light of our present holding. Since, as we hold, § 14 Third strikes down dual-rate systems only where they are employed as predatory devices, then precise findings by the Board as to a particular system‘s intent and effect would become essential to a judicial determination of the system‘s validity under the statute. In neither Cunard nor Far East Conference did the Court have the assistance of such findings on which to base a determination of validity. We conclude, therefore, that the present holding is not foreclosed by these two cases.16
Finally, petitioners argue that this Court should not construe the Shipping Act in such a way as to overturn the Board‘s consistent interpretation. “[T]he rulings, interpretations and opinions of the [particular agency] . . . , while not controlling upon the courts by reason of their authority, do constitute a body of experience and informed judgment to which courts and litigants may properly resort for guidance. The weight of such a judgment in a particular case will depend upon the thoroughness evident in its consideration, the validity of its reasoning, its consistency with earlier and later pronouncements, and all those factors which give it power
Affirmed.
MR. JUSTICE FRANKFURTER, whom MR. JUSTICE BURTON joins, dissenting.
The Court today holds that any dual system of international steamship rates tied to exclusive patronage contracts that is designed to meet outside competition—howsoever justified it may be as a reasonable means of counteracting cutthroat competition—violates § 14 of the Shipping Act of 19161 and cannot be approved by the Federal Maritime Board pursuant to § 15 of that Act. The Court thus outlaws a practice that has prevailed among international steamship conferences for half a century,2 that is presently employed by at least half of
The agreement involved in this case is typical of the contracts used by the loose associations of steamship lines known as “conferences” to effectuate their dual-rate systems. See Marx, International Shipping Cartels, 207-210. The contracting shipper agrees to forward all of his shipments moving in the “trade” or route of the conference by bottoms of conference members (§ 1). In return, the conference members, “so far as their regular services are available,” agree to carry the shipper‘s goods at rates below those charged to noncontracting shippers; rates are subject to reasonable increase upon specified notice (§ 2). The conference members agree to maintain service adequate to the reasonable requirements of the trade, and if they fail to provide the shipper (who may ordinarily select which of the conference members’ vessels will carry his goods) with needed space, he may obtain space from nonconference carriers (§ 4). If the shipper makes any shipments in violation of the agree
Such differences as exist among the dual-rate systems that have for long been in wide use in international ocean transportation are irrelevant if each such system is to be judged by the new test laid down by the Court: is it aimed at meeting outside competition? Of course these exclusive patronage contracts and the dual-rate systems of which they are an integral part are designed to meet nonconference competition. And there should be no doubt that today‘s decision outlaws such systems. This result cannot be clouded by the Court‘s reliance upon “findings” of the Board that it
“consider[s] the inauguration of a dual-rate system to be a necessary competitive measure to offset the effect of non-conference competition in this trade.” 4 F. M. B. 706, 736, 1956 Am. Mar. Cas. 414, 450.
and that
“a reduction in the amount of conference sailings or other solution to the overtonnaging problem would not mitigate the conference‘s need to meet the competition of Isbrandtsen in order to obtain for its members a greater participation in the cargo moving in the trade.” 4 F. M. B., at 737, 1956 Am. Mar. Cas., at 451.
These statements in the Board‘s opinion are nothing more than a recognition of the dual-rate system as a device for
While limits have been imposed upon enterprise in meeting competition, which is itself the governing principle of our economic system, these limits, embodied in the antitrust laws, were found to be inapplicable to, because destructive of our national interest in, the international ocean transportation industry. The United States obviously could not completely regulate the foreign carriers with whom American carriers compete (not to mention the carriers that serve foreign shippers with whom American shippers compete). In view of the prevailing characteristics of the industry, it early became apparent that it would, on the whole, be in the national interest to tolerate some practices of steamship lines that in other industries would be deemed inadmissible. For the alternative, so it was concluded, would be to put it within the power of unregulated foreign carriers seriously to injure American firms—both carriers and shippers—if not, indeed, to put them out of business. And so, in the development of a scheme for regulating this international industry, self-protective measures by way of collective action were not left to the condemnation of the Sherman and Clayton Acts. In order to appreciate the Shipping Act of 1916 as an attempt to balance the need for some regulation with the economic and political objections to sweeping the shipping industry under the antitrust concept, the circumstances that begot the Act must be recalled.
The second half of the Nineteenth Century saw a tremendous rise in the development of ocean transportation by steamship. Unfortunately, the supply of available cargo space increased during this period much more
The terms of the resolutions that gave rise to the historic investigation of shipping combinations by the House Committee on the Merchant Marine and Fisheries in 1912-1913, H. Res. 425 and H. Res. 587, 62d Cong., 2d Sess., 48 Cong. Rec. 2835-2836, 9159-9160, manifest the concern of Congress over these steamship conferences and their practices. The investigation was thorough and detailed. The Committee, under the chairmanship of Representative Joshua W. Alexander of Missouri, elicited great quantities of relevant data from shippers, carriers, trade organizations and the Departments of State and Justice, including copies of many kinds
In 1914 the Committee submitted its comprehensive report. In summarizing the competitive methods used by steamship conferences in the American foreign trade, the report discussed, under the heading “Meeting the competition of lines outside of the conference,” deferred rebate systems, the use of fighting ships, agreements with American railroads, and such types of contracts with shippers as individual requirements contracts, contracts giving preferential rates to large shippers, and the following:
“(a) Joint contracts made by the conference as a whole. Such contracts are made for the account of all the lines in the agreement, each carrying its proportion of the contract freight as tendered from time to time. The contracting lines agree to furnish steamers at regular intervals and the shipper agrees to confine all shipments to conference steamers, and to announce the quantity of cargo to be shipped in ample time to allow for the proper supply of tonnage. The rates on such contracts are less than those specified in the regular tariff, but the lines generally pursue a policy of giving the small shipper the same contract rates as the large shippers, i. e. are willing at all times to contract with all shippers on the same terms.” Report on Steamship Agreements and Affiliations in the American Foreign and Domestic Trade, H. R. Doc. No. 805, 63d Cong., 2d Sess. 290.
In making its own recommendations (id., at 415-421), the Committee recognized that steamship lines almost universally form conferences and enter into agreements for the purpose (among others) of “meeting the competition of non-conference lines.” Id., at 415. The Committee recognized that it had to choose between prohibition of these conferences or subjection of them to government supervision.
“It is the view of the Committee that open competition can not be assured for any length of time by ordering existing agreements terminated. The entire history of steamship agreements shows that in ocean commerce there is no happy medium between war and peace when several lines engage in the same trade. Most of the numerous agreements and conference arrangements discussed in the foregoing report were the outcome of rate wars, and represent a truce between the contending lines.” Id., at 416.
Among the specific recommendations of the Committee were that carriers be required to file for approval with the regulatory agency (the Committee recommended use of the Interstate Commerce Commission) any agreements among themselves or with shippers, with the agency being empowered to cancel agreements it found to be “discriminating or unfair in character, or detrimental to the commercial interests of the United States” (id., at 420); that the agency be empowered to investigate and institute proceedings concerning rates that are “unreasonably high, or discriminating in character as between shippers” (ibid.), and
“. . . That the use of ‘fighting ships’ and deferred rebates be prohibited in both the export and import trade of the United States. Moreover, all carriers should be prohibited from retaliating against any shipper by refusing space accommodations when such are available, or by resorting to other unfair methods of discrimination, because such shipper has patronized an independent line, or has filed a complaint charging unfair treatment, or for any other reason.” Id., at 421.
The report of the Committee was filed in February 1914, and four months later Representative Alexander introduced a bill, H. R. 17328, 63d Cong., 2d Sess., incorporating its recommendations. The bill provided, among other things, that carriers be required to file for approval with the Interstate Commerce Commission any of a wide variety of agreements, that the Commission be empowered to cancel or modify agreements that it found “discriminating or unfair as between carriers, shippers, exporters, importers, or ports, or between exporters from the United States and their foreign competitors, or that it may find to operate to the detriment of the commerce of the United States, or that may be in violation of this Act,” and that agreements when approved should be exempt from the antitrust laws (§ 3). Where the Commission was of the opinion that rates, charges, classifications, regulations or practices were “unjust or unreasonable,” it was empowered to determine and enforce what would be just and reasonable under the circumstances (§ 7). And the bill (§ 2) provided that it should be a misdemeanor (punishable by fine of up to $25,000) for any carrier to allow deferred rebates, use a fighting ship, or:
“Third. Retaliate against any shipper by refusing, or threatening to refuse, space accommodations when such are available, or resort to other discriminating or
unfair methods, because such shipper has patronized any other carrier or has filed a complaint charging unfair treatment or for any other reason.”
As no action was taken on H. R. 17328 in 1914, it was reintroduced by Mr. Alexander in the 64th Congress late in 1915 as H. R. 450. Shortly thereafter he introduced H. R. 10500, a bill “To establish a United States Shipping Board for the purpose of encouraging, developing, and creating a naval auxiliary and naval reserve and a merchant marine to meet the requirements of the commerce of the United States with its territories and possessions, and with foreign countries, and for other purposes.” That bill authorized the Board to purchase or charter commercial vessels to be leased to private concerns in peacetime and used as a naval auxiliary in wartime; the bill also (§§ 9, 10) provided for very general regulation by the Board of the ocean transportation industry.
Approximately two months later, in April 1916, Mr. Alexander introduced H. R. 14337, which adapted his earlier regulatory bill (H. R. 450) to the administrative framework of the Shipping Board bill (H. R. 10500). The bill was considered in committee with a view to substituting its provisions for the general regulatory language of §§ 9 and 10 of the Shipping Board bill. See Hearings before the House Committee on the Merchant Marine and Fisheries on H. R. 14337, 64th Cong., 1st Sess. 5. In these hearings, there was no discussion of the “retaliation” provision of the bill; attention was concentrated on its more controversial aspects, such as the power of the Board to regulate rates.
At the close of these hearings, in early May 1916, a new Shipping Board bill, H. R. 15455, in which the substitution of the more detailed regulatory provisions had been made, was introduced by Mr. Alexander. The bill added a “Fourth” to the prohibitions against deferred
As enacted, then, the statute provided for the following scheme of regulation. Carriers subject to the Act must file with the Board copies of agreements establishing (inter alia) preferential or cooperative arrangements. Such of these as the Board finds “to be unjustly discriminatory or unfair . . . or to operate to the detriment of the commerce of the United States, or to be in violation of this Act,” it may disapprove, cancel or modify; all others it must approve, and those approved are exempt from the antitrust laws (§ 15). As to any “rate, fare, charge, classification, tariff, regulation, or practice” of carriers that the Board finds to be unjust or unreasonable, it may take corrective measures (§ 18). As an exception to, or qualification upon, this scheme, certain practices
“... Retaliate against any shipper by refusing, or threatening to refuse, space accommodations when such are available, or resort to other discriminating or unfair methods, because such shipper has patronized any other carrier or has filed a complaint charging unfair treatment, or for any other reason, ....”
and treat or contract with shippers in certain unfair or unjustly discriminatory ways; violation of this provision is a misdemeanor punishable by a fine of up to $25,000 (§ 14).6
The form that this regulation takes, considered in light of its legislative background, makes clear the congressional purpose. It was found that abuses and discriminations were inherent in the international shipping trade when it was conducted on the basis of cooperation among competitors. It was further found that the alternative to cooperation was cutthroat competition leading to monopoly and, more particularly, working to the serious detriment of American carriers and shippers and to the advantage of their foreign competitors. The conclusion was that the system of cooperation must be domesticated
“Your committee at the conclusion of such hearings and after consideration and due deliberation made its report to Congress upon the subject with many valuable recommendations. Among the recommendations made in such report to Congress were that laws should be passed prohibiting the grossest and most vicious of such unfair practices . . . .”
“It was found by your committee that many of the unfair practices had become so firmly established and contained in many instances elements of usefulness that, with the exception of some of the more prominent ill practices, it was considered that a system of regulation and control of water transportation would be for the best interest of both the public and those interested in water transportation.” 53 Cong. Rec. 8095.
It is important to keep in mind the relation of this scheme of regulation to the antitrust laws. Prior to the enactment of the Shipping Act, the ocean transportation industry was, of course, subject to the antitrust laws, and, indeed, as has been noted, proceedings under the Sherman Act had been brought against several conferences by the Government. Congress might have provided that, in addition to being subjected to the general surveillance involved in a comprehensive pattern of regulation, the steamship owners must continue to conform to the affirmative policy in favor of a high level of competition that
It is in the light of this background that we must consider § 14 Third of the Shipping Act of 1916, which both the Court of Appeals and this Court have construed as prohibiting the dual-rate contract system. The section imposes a heavy fine for conduct it makes criminal and so should be strictly construed. See Yates v. United States, 354 U. S. 298, 304-305. It deserves narrow construction also on the ground that it is an undoubted exception to a comprehensive and complex scheme of regulation by the Board. For it must be construed not as though it were an isolated piece of writing but as part of a reticulated scheme of government for the shipping industry. No form of conduct should be brought within its terms that was not designed to be included. As the foregoing survey of the legislative history demonstrates, there is no evidence of such purpose with respect to the dual-rate contract system. The evidence in fact points to the intention of its exclusion.
Under no fairly applicable meaning of the word “retaliation” can the conclusion of the Court of Appeals, that
But if the dual-rate contract system is not “retaliation,” then it does not violate § 14 Third, for it seems evident that that section was directed only at retaliation. It is, indeed, rather inartfully drawn, but under the circumstances, and particularly in light of the legislative background, its ambiguities should be resolved in favor of the narrower construction. The recommendation of the Alexander Committee, supra, a body on which Congress placed an extraordinarily high degree of reliance with respect to the regulatory aspects of the Shipping Bill, contemplated nothing but “retaliation.” When, four months later, the recommendation had been put into the language of proposed legislation, it took substantially the form it takes in the statute as enacted. No doubt, the intention to limit the application of the provision to “retaliation”
The Court‘s construction makes of the latter portions of § 14 Third a general catchall. The relevant words, as abstracted from the entire provision, would be these: “No common carrier by water shall, directly or indirectly . . . resort to . . . discriminating or unfair methods . . . for any . . . reason.” Such a provision—even if it be limited to conduct designed to “stifle” competition—would not only make the remainder of § 14 redundant but would be inconsistent with the whole
Nor is there any merit to the suggestion that if Congress made “deferred rebates” unlawful, the practice of dual-rate contracts—although not specifically prohibited—should also be unlawful because it has “the same objectionable purpose and effect.” This mode of approach is a judicial utilization of the salesmanship that offers something as “just as good.” This Court certainly has not the power to say that conduct is unlawful simply because it is “just as bad” as some conduct that Congress has specifically prohibited. The principal basis that the Alexander Committee set forth for its conclusion that deferred rebates were objectionable was precisely that the rebates were deferred. The Committee, in outlining the objections that had been made to steamship agreements, noted that “[b]y deferring the payment of the rebate until three or six months following the period to which the rebate applies ship owners effectively tie the merchants to a group of lines for successive periods.” Report, supra, at 307. The Committee recited the contention that “the ordinary contract system does not place the shipper in the position of continual dependence that results from the deferred rebate system” (ibid.); it is not unlikely that they had in mind the dual-rate contract system. This Court in Swayne & Hoyt, Ltd. v. United States, 300 U. S. 297, 307 n. 3 (1937), adopted that point of view when it said:
“The Committee recognized that the exclusive contract system does not necessarily tie up the shipper as completely as ‘deferred rebates,’ since it does not place him in ‘continual dependence’ on the carrier by forcing his exclusive patronage for one contract period under threats of forfeit of differentials accumulated during a previous contract period.”
Twice this Court has rejected the contention that it now accepts. Twice this Court has held that the Shipping Act of 1916 did not render illegal per se a dual-rate contract system enforced by a combination of steamship carriers essentially like the one now before the Court, whereby lower rates are tied to an agreement for exclusive carriage. Such were the decisions, upon full consideration, in United States Navigation Co. v. Cunard S. S. Co., 284 U. S. 474 (1932), and again in Far East Conference v. United States, 342 U. S. 570 (1952) by a wholly differently constituted Court. In both these cases the claim was that such a dual-rate system constituted a combination in violation of the Sherman Act, for which relief by way of an injunction could be had by a competing carrier outside the conference, as in the Cunard case, and by the United States, as in the Far East Conference case, under § 4 of the Sherman Act. The immediate issue in both cases was, of course, the applicability of the principle of “primary jurisdiction“—that is, whether the legality of a dual-rate system could be adjudicated by a United States District Court without a determination by the Federal Maritime Board as to whether “the matters complained of” (United States Navigation Co. v. Cunard S. S. Co., supra, at 478) and whether the dual-rate system “on the merits” (Far East Conference v. United States, supra, at 573) offend the Shipping Act of 1916. The doctrine of “primary jurisdiction” was recognized by Mr. Chief Justice Taft as an achievement whereby its author, Mr. Chief Justice White, “had more to do with placing this vital
By virtue of these two decisions, an independent shipowner who claimed to be hurt by the operation of a dual-rate contract system, employed as a competitive measure against him by a shipping conference, could not bring his complaint to court as might a manufacturer hurt by an analogous combination competitor. Such a shipowner would have to appeal to the Federal Maritime Board, as did Isbrandtsen. The ensuing Board proceedings would probably be similar to those in this case. On Isbrandtsen‘s protests, filed January 12, 1953, and amended on January 19, hearings were conducted before a Board Examiner from October 5 to December 23, 1953, in which was compiled a record of over 4,500 pages of testimony and over 150 exhibits. The examiner rendered his recommended decision on September 13, 1954, but on October 6 the Board remanded the record for supplemental findings of fact; these supplemental findings were served on January 17, 1955. Eleven months later the Board filed its detailed, comprehensive report approving the conference‘s dual-rate system (as amended in accordance with the Board‘s report) as not unjustly discriminatory or unfair, nor likely to operate to the detriment of the commerce of the United States, nor in violation of the Shipping Act. But all this elaborate process and determination are legally meaningless. The agency is made to serve as a circumlocution office. The sole function of this carnival of procedural emptiness is that of a formal preliminary to a suit in a federal court. For such a suit, the Court now holds, is to proceed in complete disregard of all the hearing, weighing and interpreting of evidence before the Board. The Court is to make a ruling of law with entire indifference to all the findings of the expert body set up to make appropriate findings on the basis of
Until today the doctrine of “primary jurisdiction” was not an empty ritual. Its observance in scores of cases was not a wasteful futility. In denying to the District Courts jurisdiction in situations like those in the Cunard and Far East Conference cases the doctrine of primary jurisdiction was not devised for the purposeless delay of giving the same jurisdiction to Courts of Appeals, on condition that they use the administrative agency as a sterile conduit to them. Such a view would denigrate and distort the significance of one of the most important movements in our law. Legal scholars have rightly compared it to the rise of equity, a view endorsed by this Court through Mr. Chief Justice Stone, himself a scholar. See United States v. Morgan, 307 U. S. 183, 191. The utilization of these administrative agencies is a legislative realization, judicially respected, that the regulatory needs of modern society demand law-enforcing tribunals other than the conventional courts. The doctrine of primary jurisdiction, based as it is on the discharge of functions for which courts normally have neither training and experience nor procedural freedoms, is an essential aspect of this modern administrative law. It is a means of achieving the proper distribution of the law-enforcing roles as between administrative agencies and courts. It gives these agencies the necessary scope for exploring a wide realm of facts, not to be confined within the exclusionary rules of evidence controlling proceedings in courts, to weigh such facts with an expert‘s understanding and
Contrariwise, where a decision of a case depends on determination of a question of law as such, either because of explicit statutory outlawry of some specific conduct or by necessary implication of judicial power because not involving the exercise of administrative discretion or the need of uniform application of specialized competence, the doctrine of primary jurisdiction has no function, because there is no occasion to refer a matter to the administrative agency. Great Northern R. Co. v. Merchants Elevator Co., 259 U. S. 285 (reaffirmed in United States v. Western Pacific R. Co., 352 U. S. 59, 69); Texas & Pacific R. Co. v. Gulf, C. & S. F. R. Co., 270 U. S. 266; Civil Aeronautics Board v. Modern Air Transport, Inc., 179 F. 2d 622, 624-625; see Davis, Administrative Law, 666-668. The course of decisions was accurately summarized in Montana-Dakota Utilities Co. v. Northwestern Public Service Co., 341 U. S. 246, 254: “. . . we know of no case where the court has ordered reference of an issue which the administrative body would not itself have jurisdiction to determine in a proceeding for that purpose.” It would be a travesty of law and an abuse of the judicial process to force litigants to undergo an expensive and merely delaying administrative proceeding when the case must eventually be decided on a controlling legal issue wholly unrelated to determinations for the ascertainment of which the proceeding was sent to the agency. Such, however, is the result in this case.
The Cunard and Far East Conference decisions mean nothing if they do not mean that the denial of jurisdiction to the District Courts to entertain the suits in those
Nor can these cases be distinguished on their facts. The complaints in both cases alleged that the conferences had initiated the dual-rate contract system in order to eliminate competition. See United States Navigation Co. v. Cunard S. S. Co., 284 U. S. 474, 479-480; Transcript of Record, p. 6, Far East Conference v. United States, 342 U. S. 570. And the dual-rate agreement involved in Far East Conference was, if anything, more coercive and more closely analogous to a system of deferred rebates than is the one involved in the cases before the Court. It provided (§ 4) that if a shipper violated the agreement, the agreement was void, and the shipper became liable to pay “additional freight on all commodities theretofore shipped with such carriers for a period not exceeding twelve months immediately preceding the date of such shipment, at the non-contract rate or rates . . . .” Transcript of Record, p. 18. Such an accumulation of potential liability was much more likely to result in “continual dependence” on the conference than is the liquidated damages provision in the agreement before us. The latter provides for damages of 50 percent of the freight that would have been paid under the agreement (i. e., at the lower, or contract rate) for the shipment made in violation of the agreement; the agreement
Since this Court has twice rejected the theory that dual-rate contract systems violate § 14 of the Shipping Act, and since there is nothing in that statute or its legislative history to suggest that those cases were wrongly decided in the light of new knowledge not before the Court when they were decided, the question in this case is, as it was in the earlier two cases, one lying within the Board‘s administrative discretion. As I see no reason for overturning the detailed, well-reasoned report of the Board in these proceedings, I am of opinion that the decision of the Court of Appeals should be reversed.
MR. JUSTICE HARLAN, dissenting.
Except in one respect, I agree with the dissenting opinion of MR. JUSTICE FRANKFURTER. I do not think that this Court‘s decisions in United States Navigation Co. v. Cunard Steamship Co., 284 U. S. 474, and Far East Conference v. United States, 342 U. S. 570, have the effect which that opinion attributes to them. Despite the logic of the argument flowing from the doctrine of primary jurisdiction, and the lack of any substantial factual distinction between the agreements in those cases and in this one, I am unable to read Cunard and Far East Conference as having determined, without any discussion, the far-reaching question which has been decided today. See especially Cunard, 284 U. S., at 483-484, 487. On the merits, however, I dissent for the reasons set forth in MR. JUSTICE FRANKFURTER‘S opinion.
Notes
“No common carrier by water shall, directly or indirectly, in respect to the transportation by water of passengers or property between a port of a State, Territory, District, or possession of the United States and any other such port or a port of a foreign country—
“First. Pay or allow, or enter into any combination, agreement, or understanding, express or implied, to pay or allow a deferred rebate to any shipper. The term ‘deferred rebate’ in this chapter means a return of any portion of the freight money by a carrier to any shipper as a consideration for the giving of all or any portion of his shipments to the same or any other carrier, or for any other purpose, the payment of which is deferred beyond the completion of the service for which it is paid, and is made only if, during both the period for which computed and the period of deferment, the shipper has complied with the terms of the rebate agreement or arrangement.
“Second. Use a fighting ship either separately or in conjunction with any other carrier, through agreement or otherwise. The term ‘fighting ship’ in this chapter means a vessel used in a particular trade by a carrier or group of carriers for the purpose of excluding, preventing, or reducing competition by driving another carrier out of said trade.
“Third. Retaliate against any shipper by refusing, or threatening
to refuse, space accommodations when such are available, or resort to other discriminating or unfair methods, because such shipper has patronized any other carrier or has filed a complaint charging unfair treatment, or for any other reason.“Fourth. Make any unfair or unjustly discriminatory contract with any shipper based on the volume of freight offered, or unfairly treat or unjustly discriminate against any shipper in the matter of (a) cargo space accommodations or other facilities, due regard being had for the proper loading of the vessel and the available tonnage; (b) the loading and landing of freight in proper condition; or (c) the adjustment and settlement of claims.
“Any carrier who violates any provision of this section shall be guilty of a misdemeanor punishable by a fine of not more than $25,000 for each offense.”
4 F. M. B. 706, 737, 739-740, 1956 Am. Mar. Cas. 414, 451, 454.| Calendar year | Number of sailings | Cargo carried (revenue tons) | Average carryings per sailing | Percentage of total liner cargo | ||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Isbrandtsen | Conf. | Total | Isbrandtsen | Conf. | Total | Isbrandtsen | Conf. | Isbrandtsen | Conf. | |
| 1949 | 6 | 103 | 109 | 18,099 | 135,635 | 153,734 | 3,016 | 1,317 | 12 | 88 |
| 1950 | 21 | 137 | 158 | 120,381 | 229,829 | 350,210 | 5,730 | 1,678 | 34 | 66 |
| 1951 | 21 | 174 | 195 | 93,450 | 219,343 | 312,793 | 4,450 | 1,261 | 30 | 70 |
| 1952 | 24 | 221 | 245 | 98,834 | 281,308 | 380,142 | 4,118 | 1,273 | 26 | 74 |
| 1953—6 months | 12 | 153 | 165 | 37,308 | 189,503 | 226,811 | 3,109 | 1,239 | 16 | 84 |
“Every common carrier by water, or other person subject to this chapter, shall file immediately with the Federal Maritime Board a true copy, or, if oral, a true and complete memorandum, of every agreement, with another such carrier or other person subject to this chapter, or modification or cancellation thereof, to which it may be a party or conform in whole or in part, fixing or regulating transportation rates or fares; giving or receiving special rates, accommodations, or other special privileges or advantages; controlling, regulating, preventing, or destroying competition; pooling or apportioning earnings, losses, or traffic; allotting ports or restricting or otherwise regulating the number and character of sailings between ports; limiting or regulating in any way the volume or character of freight or passenger traffic to be carried; or in any manner providing for an
exclusive, preferential, or cooperative working arrangement. The term ‘agreement’ in this section includes understandings, conferences, and other arrangements.“The Board may by order disapprove, cancel, or modify any agreement, or any modification or cancellation thereof, whether or not previously approved by it, that it finds to be unjustly discriminatory or unfair as between carriers, shippers, exporters, importers, or ports, or between exporters from the United States and their foreign competitors or to operate to the detriment of the commerce of the United States, or to be in violation of this chapter, and shall approve all other agreements, modifications, or cancellations.
“Every agreement, modification, or cancellation lawful under this section shall be excepted from the provisions of [the Antitrust Acts] . . . .” 39 Stat. 733, as amended,
Petitioners’ reliance on Swayne & Hoyt, Ltd., v. United States, 300 U. S. 297, is similarly misplaced. In that case the Court upheld the administrative determination that a dual-rate system gave an “undue or unreasonable preference or advantage” under § 16 of the Shipping Act. Because the Court sustained the finding as supported by substantial evidence it did not need to reach the more contentious problem of whether that particular contract was illegal under § 14 Third.