Interstate Commerce Commission v. J-T Transport Co. , 82 S. Ct. 204 ( 1961 )

MR. Justice Douglas

delivered the opinion of the Court.

These are appeals from judgments of three-judge district courts, 28 U. S. C. § 1253, which set aside orders of the Interstate Commerce Commission denying applications for permits as contract carriers. 185 F. Supp. 838; 188 F. Supp. 160.

Appellee J-T Transport Company asked to extend its present operations as an irregular-route contract carrier of airplane parts to include carriage of aircraft landing gear bulkheads for Boeing Airplane Co. Boeing supported the application. Common carriers opposed the application, as did another carrier, U. S. A. C. Transport, Inc., appellant in No. 18. Boeing indicated it preferred the applicant over the other because of its unsatisfactory-experience with the latter in other operations. Boeing indicated that contract carriage was more practicable in its experience than common carriage, as a contract carrier’s operations could be better integrated with a manufacturer’s production. Though the examiner recommended a grant of the permit, the Commission denied it (74 M. C. C. 324, 79 M. C. C. 696) saying that no attempt had been made to ascertain if the existing services were capable of meeting the needs of the shipper. It ruled that “There is, in effect, a presumption that the services of existing carriers will be adversely affected by a loss of ‘potential’ traffic, even if they may not have handled it before.” 79 M. C. C. 695, 705. It held that the applicant had not established a need for this contract service and that the applicant had not shown “the existing service” of the other carrier to be “inadequate.” Id., 709. It indicated that a service “not needed” cannot be found consistent with the public interest or the National Transportation Policy, as those terms are used in § 209 (b) of the Interstate Commerce Act as amended, 71 Stat. 411, 49 U. S. C. § 309 (b). It said that the shippers did not require a distinct type of service that could not be provided by the protesting carrier, which was indeed in a position to provide any service needed and which would be adversely affected by a grant of this application, even though it never had had the business in question.

Appellee Reddish made application to carry canned goods as a contract carrier from three points in Arkansas and one in Oklahoma to various points in thirty-three States and to carry other goods on return. His application was supported by his prospective shippers and opposed by motor common carriers, appellants in No. 54, and by rail common carriers, appellants in No. 49.

Reddish showed that he delivered to customers who ordered goods in less-than-truckload amounts. These customers maintained low inventories and needed expedited deliveries in small quantities and on short notice. Some accepted deliveries only on certain days, a requirement calling for integration and coordination between shipper and customer. The shippers said that common carriage was an inadequate service for these shipments, as they were in such small lots that they often had to be carried in consolidated loads which caused delays in shipments. Moreover, it was shown that not all points would be served by one common carrier, making it necessary to unload the shipments and reload them on another carrier causing delays, misconsignment, and damage to goods. The shippers also testified that the cost of common carriage was prohibitive for less-than-truckload shipments and that if the Reddish application were denied they would use private carriage. The protesting motor common carriers testified they could render adequate service for these shipments and provide multiple pick-up and delivery services to most of the points by transferring the shipments to other carriers. The Examiner recommended that the application be granted. The Commission denied it, saying, inter alia, that the services needed by the shippers could be performed by existing common carriers, that they would be injured by the loss of potential trafile, and that the shippers’ desire to obtain lower rates for less-than-truckload shipments was the primary reason for their support of the application, but was not a sufficient basis to justify a grant of authority to this contract carrier. 81 M. C. C. 35.

The cases turn on the meaning of language added to the Act in 1957.

Our decision in United States v. Contract Steel Carriers, 350 U. S. 409, held that a contract carrier, rendering a specialized service in the sense that it hauled only a limited group of commodities over irregular routes, did not become a common carrier because it reached for new business within the limits of its license. That decision caused concern to the Commission which proposed amendments to the Act.¹ It proposed that § 203 (a) (15) be amended so as to define a contract carrier as one who engages in transportation by motor vehicle “under continuing contracts with one person or a limited number of persons for the furnishing of transportation services of a special and individual nature required by the customer and not provided by common carriers.” It also proposed that § 209 (b) be amended by adding an additional requirement for issuance of a contract carrier permit, viz., “that existing common carriers are unwilling or unable to provide the type of service for which a need has been shown.”

These amendments were vigorously opposed in some quarters.² The addition to §203 (a) (15) was objected to on the ground that many contract carriers would be driven out of business because they could not meet the test of performing a service “not provided by common carriers.” The change in § 209 (b) was opposed because it would be impossible for a contract carrier to prove that competing common carriers were “unwilling” to render the service and very difficult for it to prove that common carriers were “unable” to render the service, as the applicant would have no intimate knowledge of the business of the opposing carriers.

The Commission bowed to these objections;³ and the bill as it passed eliminated the proposed changes except the ones that changed the result of our decision in United States v. Contract Steel Carriers, supra.⁴ Section 203 (a) (15), however, was amended, so far as material here, by adding to the description of the term “contract carrier by motor vehicle” one who furnishes “transportation services designed to meet the distinct need of each individual customer.” ⁵ And § 209 (b) was amended by adding a sentence which sets forth five factors the Commission shall consider in determining whether the permit should issue:

“In determining whether issuance of a permit will be consistent with the public interest and the national transportation policy declared in this Act, the Commission shall consider (1) the number of shippers to be served by the applicant, (2) the nature of the service proposed, (3) the effect which granting the permit would have upon the services of the protesting carriers and (4) the effect which denying the permit would have upon the applicant and/or its shipper and (5) the changing character of that shipper’s requirements.” (Numerals added.)

It seems clear from these provisions that the adequacy of existing services is a criterion to be considered by the Commission, as it is instructed to consider “the effect which granting the permit would have upon the services of the protesting carriers,” as well as the effect of a denial upon the shippers. Or to put the matter otherwise, the question of the need of the shipping public for the proposed service necessarily includes the question whether the extent, nature, character, and suitability of existing, available service makes the proposed service out of line with the requirements of the national transportation policy. But the adequacy of existing facilities or the willingness or ability of existing carriers to render the new service is not determinative. The “effect which denying the permit would have upon the applicant and/or its shipper and the changing character of that shipper’s requirements” have additional relevance. This is a phase of the problem reflected in the broadened definition of a “contract carrier by motor vehicle” — one who furnishes transportation services “designed to meet the distinct need of each individual customer.” §203 (a) (15). It means, we think, that the “distinct need” of shippers for the new contract carrier service must be weighed against the adequacy of existing services. The Commission indulged in “a presumption that the services of existing carriers will be adversely affected by a loss of ‘potential’ traffic, even if they may not have handled it before.” 79 M. C. C. 695, 705. The effect of the presumption is in substance to limit competing contract carriage to services “not provided” by existing carriers — a provision that the Commission sought unsuccessfully to have incorporated into the Act. We see no room for a presumption in favor of, or against, any of the five factors on which findings must be made under § 209 (b). The effect on protesting carriers of a grant of the application and the effect on shippers of a denial are factors to be weighed in determining on balance where the public interest lies. The aim of the 1957 amendments, as we read the legislative history, was not to protect the status quo of existing carriers but to establish a regime under which new contract carriage could be allowed if the “distinct need” of shippers indicated that it was desirable.

We cannot assume that Congress, in amending the statute, intended to adopt the administrative construction which prevailed prior to the amendment.

By adding the five criteria which it directed the Commission to consider, Congress expressed its will that the Commission should not manifest special solicitude for that criterion which directs attention to the situation of protesting carriers, at the expense of that which directs attention to the situation of supporting shippers, when those criteria have contrary implications. Such a situation doubtless exists in these cases, for granting the permits might well have produced some consequences adverse to the protesting carriers, while denying them may just as certainly prove burdensome to the supporting shippers. Had the Commission, having drawn out and crystallized these competing interests, attempted to judge them with as much delicacy as the prospective nature of the inquiry permits, we should have been cautious about disturbing its conclusion.

But while such a determination is primarily a responsibility of the Commission, we are under no compulsion to accept its reading where, as here, we are convinced that it has loaded one of the scales. By indulging in a presumption “that the services of existing carriers will be adversely affected by a loss of ‘potential’ traffic, even if they may not have handled it before,” and by assigning to the applicants the burden of proving the inadequacy of existing services, the Commission favored the protestants’ interests at the expense of the shippers’ in a manner not countenanced by anything discoverable in Congress’ delegation to it of responsibility.

It is argued that the Commission, in holding that U. S. A. C. is willing and able to render the service, did not rely on the presumption. We are, however, not convinced. The Commission seems to have placed the burden of proving inadequacy of existing services on the applicant, for it said that the applicant had not shown that the service of U. S. A. C. was “inadequate.” 79 M. C. C. 695, 709. Such a burden is improperly placed on the applicant, as the rejection of the proposed amendment to § 209 (b) suggests. The capabilities of protesting carriers are matters peculiarly within their knowledge. In the Reddish case the Commission made the same error, as is evident from its statement that the “shippers have failed to show that they have been unable to obtain reasonably adequate service upon request.” 81 M. C. C. 35, 42.

The proper procedure, we conclude, is for the applicant first to demonstrate that the undertaking it proposes is specialized and tailored to a shipper’s distinct need. The protestants then may present evidence to show they have the ability as well as the willingness to meet that specialized need. If that is done, then the burden shifts to the applicant to demonstrate that it is better equipped to meet the distinct needs of the shipper than the protestants.

Moreover, as we read the Act, as amended in 1957, the standard is not whether existing services are “reasonably adequate.” It is whether a shipper has a “distinct need” for a different or a more select or a more specialized service. The protesting carriers must show they can fill that “distinct need/’ not that they can provide a “reasonably adequate service.”

In the Reddish case the Commission ruled that the desire for lower rates offered by the applicant was irrelevant to a shipper’s needs, that if the rates of existing carriers were too high, shippers should seek relief for their reduction. 81 M. C. C. 35, 42-43. We think the matter of rates is one factor to be weighed in determining the need for the new service. In a contest between carriers by motor vehicles and carriers by rail, we held in Schaffer Transportation Co. v. United States, 355 U. S. 83, that the ability of a particular mode of transportation to operate with a lower rate is one of the “inherent advantages” that one type may have over another within the meaning of the Act. 54 Stat. 899. By analogy, contract carriage may be more “economical” than common carriage by motor or rail within the framework of the national transportation policy, as it is defined in the Act⁶ — “the Commission’s guide” to the public interest. McLean Trucking Co. v. United States, 321 U. S. 67, 82. It would seem hardly contestable that if denial of the application meant, for example, that a shipper’s costs of transportation would be prohibitive, the shipper had established a “need” for the more “economical” service. See Herman R. Ewell Extension — Philadelphia, 72 M. C. C. 645. This does not mean that the lawfulness of rates would be injected into certificate proceedings. The issue of whether or not the proposed service offers a rate advantage and if so whether such advantage establishes a “need” for the service that overrides counterbalancing considerations presents issues that fall far short of a rate proceeding.

We agree with the court in the J-T Transport Co. case that, while the 1957 amendments changed the result of our decision in United States v. Contract Steel Carriers, supra, by giving the Commission power to limit the number of contracts which a contract carrier can maintain, the amendments in other respects put the contract carrier on a firmer footing. That court said, “Under the statute a shipper is entitled to have his distinct needs met.” 185 F. Supp. 838, 849. We agree. We also agree that though common carrier service is reasonably adequate and though another carrier is willing and able to furnish the service, a permit to a contract carrier to furnish this particular service still might be wholly consistent with the national transportation policy defined in the Act. For it is “the distinct need of each individual customer” that the contract carrier is designed to fill. §203 (a) (15). And “the changing character” of the shipper’s “requirements” is a factor to be weighed before denying the application. § 209 (b). Hence the adequacy of existing services for normal needs and the willingness and ability of an existing carrier to render the service are not the end of the matter. The “distinct need” of the shipper may nonetheless not be served by existing services, if the new service is better tailored to fit the special requirements of a shipper’s business, the length of its purse, or the select nature of the delivery service that is desired. The fact that the protesting carriers do not presently perform the service being tendered and that the grant of the application would not divert business from them does not necessarily mean that the grant would have no effect "upon the services” of the protesting carriers within the meaning of § 209 (b). But where the protesting carriers do not presently have the business, it would seem that the grant of it to a newcomer would have an adverse effect on them only in the unusual case.

We intimate no opinion on the merits, for it is the Commission, not the courts, that brings an expertise to bear on the problem, that makes the findings, and that grants or denies the applications. Yet that expertise is not sufficient by itself. Findings supported by substantial evidence are required. Public Service Comm’n v. United States, 356 U. S. 421, 427; United States v. United States Smelting Co., 339 U. S. 186, 193.

Since the standards and criteria employed by the Commission were not the proper ones, the causes must be remanded for further consideration and for new findings. American Trucking Assns. v. United States, 364 U. S. 1, 15-17. Accordingly the judgments below are

Affirmed.

1 Hearings, S. 1384, Subcommittee of Committee on Interstate and Foreign Commerce, 85th Cong., 1st Sess., p. 6.

2 The proposed amendments were objected to by the Department of Justice as being "unduly restrictive” (S. Hearings, Subcommittee of Committee on Interstate and Foreign Commerce, 85th Cong., 1st Sess., p. 11) and in part by the Department of Commerce. Id,., 200-203. They were also opposed by the Contract Carrier Conference that stated, inter alia, “Since the state of mind of the common carriers concerning their willingness is a matter peculiarly within their own knowledge, it would be absolutely impossible for a contract carrier to ever prove to the contrary. Furthermore, it would be very difficult for a contract carrier or its supporting shipper, having no intimate knowledge of the business of opposing common carriers, to prove that such carriers were unable to perform a given service.” Id., p. 303.

3 The change in the Commission’s attitude is summarized as follows in S. Rep. No. 703, 85th Cong., 1st Sess., p. 4: “. . . the Commission, upon reflection, on the objections of contract and private carriers to the bill, concluded that in some respects S. 1384 would provide too rigid a pattern. It decided that the proposed requirement in section 209 (b) that additional permits could be issued only upon a showing that existing common carriers are unwilling or unable to render the required types of service should be withdrawn.”

4 That this change was made is clear. See S. Rep. No. 703, 85th Cong., 1st Sess., pp. 2-3, 6, 7; H. Rep. No. 970, 85th Cong., 1st Sess., p. 3.

5 Sec. 203 (a) (15) as amended reads as follows:

"The term ‘contract carrier by motor vehicle’ means any person which engages in transportation by motor vehicle of passengers or property in interstate or foreign commerce, for compensation (other than transportation referred to in paragraph (14) and the exception therein), under continuing contracts with one person or a limited number of persons either (a) for the furnishing of transportation services through the assignment of motor vehicles for a continuing period of time to the exclusive use of each person served or (b) for the furnishing of transportation services designed to meet the distinct need of each individual customer.”

6 Congress in 1940 described the national transportation policy:

“It is hereby declared to be the national transportation policy of the Congress to provide for fair and impartial regulation of all modes of transportation subject to the provisions of this Act, so administered as to recognize and preserve the inherent advantages of each; to promote safe, adequate, economical, and efficient service and foster sound economic conditions in transportation and among the several carriers; to encourage the establishment and maintenance of reasonable charges for transportation services, without unjust discrimina-tions, undue preferences or advantages, or unfair or destructive competitive practices; to cooperate with the several States and the duly authorized officials thereof; and to encourage fair wages and equitable working conditions; — all to the end of developing, coordinating, and preserving a national transportation system by water, highway, and rail, as well as other means, adequate to meet the needs of the commerce of the United States, of the Postal Service, and of the national defense. All of the provisions of this Act shall be administered and enforced with a view to carrying out the above declaration of policy.” 54 Stat. 899.