United States v. Federal Maritime Commission, Sea-Land Service, Inc., Black Sea Shipping Co., Intervenors ( 1980 )

Opinion PER CURIAM.

Concurring opinion filed by Chief Judge MARKEY, U.S. Court of Customs and Patent Appeals.

PER CURIAM.

This case involves a dispute between the Antitrust Division of the Department of Justice (“the Department” or “Justice”) and the Federal Maritime Commission (“FMC” or “Commission”) over the merits of a revenue pooling arrangement. The Department petitions under the Hobbs Act¹ for review of an order entered by the Commission approving a pooling agreement among ten lines in the westbound container trade between Italy and the United States’ north Atlantic coast. The Department argues that the Commission’s order approving the agreement is not supported by substantial evidence on the record; the Commission maintains the opposite. Two intervenors² filed in support of the Commission’s order, arguing that the Department lacks standing to challenge the FMC order and that no justiciable case or controversy exists. We conclude that the Department has standing to bring this suit and that a justiciable case or controversy exists, but that the Commission’s order was supported by substantial evidence. Therefore, we affirm the Commission’s order approving the revenue pooling agreement.

I. BACKGROUND

Section 15 of the Shipping Act, 1916, 46 U.S.C. § 814, allows the Commission to approve various types of anticompetitive agreements, including revenue pooling arrangements, if, after “notice and hearing,” the Commission concludes the agreement is neither “unjustly discriminatory or unfair” as between specified classes, “detriment[al] [to] the commerce of the United States,” in violation of some other provision of the Act, nor “contrary to the public interest.” Once approved, agreements are exempted from the provisions of the antitrust laws. 46 U.S.C. § 814; FMC v. Pacific Maritime Association, 435 U.S. 40, 45, 98 S.Ct. 927, 931, 55 L.Ed.2d 96 (1978); Volkswagenwerk v. FMC, 390 U.S. 261, 271, 88 S.Ct. 929, 935, 19 L.Ed.2d 1090 (1968).

The instant case arose out of a revenue pooling agreement filed with the FMC for approval pursuant to section 15 of the Shipping Act, 1916, 46 U.S.C. § 814, by ten members of the West Coast of Italy, Sicilian and Adriatic Ports North Atlantic Range Conference (“WINAC”). The agreement, docketed as Agreement No. 10286, assigns a specific percentage of the revenues earned by pool members to each member carrier, and provides a penalty for any carrier whose earnings exceed its maximum pool share. J.A. 587-91 (text of agreement); 661-62 (testimony of Luigi Scaffar-di, describing operation of pool agreement). Notice of the filing and an invitation to interested parties to comment was published in the Federal Register on March 8,1977, 42 Fed.Reg. 10347. Justice filed a protest with the Commission, attacking the agreement as anticompetitive. J.A. 8-9.³

A hearing on the merits of the pool arrangement was held before a FMC Administrative Law Judge (“ALJ”). The proponents of the pool argued that it was needed to alleviate the problems of “overtonnag-ing”⁴ and “malpractices”⁵ which existed on the eastbound Italy-north Atlantic route. They produced statistics which showed that in an average month, 7,500 TEU’s⁶ of container space was available on the route though only 4,250 TEU’s of cargo moved over it, resulting in an overtonnaging rate of 76 percent. They further showed that this rate was not likely to decline significantly despite the lack of profits because government controlled carriers, motivated by concerns apart from immediate profit-seeking, carried a majority of the cargo moved by the container carriers. J.A. 104— 05.⁷ The proponents also presented a witness, Mr. Scaffardi, a former director of one of the lines that had left the trade and a consultant to one of those remaining, who estimated the level of rebating at 10 to 15 percent of the gross freight. No evidence of specific instances of rebating was produced; instead, an explanation of why such information was almost impossible to obtain was provided.⁸ However, some evidence was produced that tended to show the departure of the private lines from the route was due to the extent of the rebating practiced. J.A. 120, 202, 656.

The Department presented one witness at the hearing, Dr. Dolan, an economist. This witness both attacked the need for the pool by pointing out deficiencies in the proponents’ evidence, and claimed that market mechanisms would better solve any problems that existed. Dolan attacked the proponents’ overtonnaging argument by claiming that the evidence was too incomplete to demonstrate that overtonnaging in fact existed. He argued it was possible that the excess capacity on the eastbound routes was caused by an excess of demand for westbound cargo space — -that a trade imbalance existed. If that was the case, economic efficiency demanded that the westbound shippers cover any shortfalls in revenue. J.A. 321-22. Moreover, Dolan pointed out that no evidence had been presented to demonstrate that such a short-fall existed; no one had testified that the route was in fact unprofitable. As for the proponents’ argument that widespread rebating justified the pool, he stressed that the proponents’ witness had admitted on cross-examination that he had “no proof whatsoever” of recent malpractices. J.A. 171.

Finally, Dolan testified that competitive pricing would solve these problems, if they existed, more effectively and with fewer detrimental side effects than the pooling arrangement. He argued that government sponsored carriers would react to market forces as did privately owned ones, and would reduce their excess capacity in the absence of a pool. J.A. 313-14. Rebating would be reduced along with the excess capacity; shippers and consumers would be relieved of the burden of subsidizing excess capacity through the pool. J.A. 344-A5.

The AU approved the pool arrangement with several modifications, “persuaded by the arguments of the proponents as to public interest and that based on inferences generally or, as here, on the Commission’s special familiarity with the WINAC trade in the shipping industry [the ALJ], may and does draw inferences on these points from the incomplete evidence that was available.” J.A. 523. Justice filed exceptions to this opinion; the FMC affirmed it in an order issued January 26, 1979. J.A. 543. This case is a petition for review of that order.

II. JUSTICIABILITY

Before reaching the merits of this dispute, we must address the claims of the intervenors ⁹ that we lack appellate jurisdiction to review a Maritime Commission order at the behest of the Department of Justice in its role as the enforcer of the antitrust laws. The Department argues that jurisdiction exists under the Administrative Orders Review (“Hobbs”) Act, 28 U.S.C. §§ 2341-2351. The intervenors counter this argument by contending that the Hobbs Act does not authorize this petition for review, and that, notwithstanding statutory authorization, the Department’s petition does not present an Article III “case or controversy.” Each argument will be considered separately.

A. The Hobbs Act

Section 4 of the Hobbs Act provides that “[a]ny party aggrieved by [“a final order reviewable under [the Act]”] may . .. file a petition to review the order in the court of appeals wherein venue lies.” Id. § 2344. There is no dispute but that the Commission’s approval of Agreement No. 10286 was a final order reviewable under the Act, see id. § 2342(3), and that the Department has complied with all of the Act’s procedural requirements. The only statutory question going to justiciability is whether the Act affords the Department of Justice the status of a “party aggrieved” entitled to seek review under the Act.

The Department contends that it was an “aggrieved” party in the ordinary sense of those words. It appeared in the proceeding before the Commission; the final order was adverse to the Department’s interpretation of the law. The intervenors argue that no legally cognizable injury can be traced to the Commission order because neither the United States nor the Department of Justice is injured in its proprietary character by the order. Furthermore, they argue, neither can purport to represent the public interest in this litigation, as Congress by statute delegated the function of determining that interest to the Commission; by definition, then, the “public interest” re-' quires upholding the Commission’s order.

A panel of this court decided this jurisdictional question very recently in another ease between the FMC and Justice, United States v. FMC, No. 79-1229 (D.C.Cir. December 19, 1980). In a lengthy and well-reasoned opinion, the court concluded that the Department did have standing to challenge Commission orders under the Hobbs Act. The court analyzed the. question on two levels. First, it discussed the problem in terms of traditional standing doctrine; next, it considered whether any statutory language in or legislative history of the Hobbs Act would compel a different conclusion.

Beginning with the leading cases on standing to seek judicial review of agency action, Association of Data Processing Servicing Organizations v. Camp, 397 U.S. 150, 90 S.Ct. 827, 25 L.Ed.2d 184 (1970), and Barlow v. Collins, 397 U.S. 159, 90 S.Ct. 832, 25 L.Ed.2d 192 (1970), the court found that a party is “aggrieved by agency action” if he establishes (1) “injury in fact, economic or otherwise,” and (2) and “interest arguably within the zone of interests to be protected or regulated by the statute or constitutional guarantee in question.” 397 U.S. at 152-54, 90 S.Ct. at 829-830; id. at 164-65, 90 S.Ct. at 836. The court found that the Commission order in that case created an injury in fact to the Department in that “Commission approval of Agreement 10140 directly interferes with the Department’s responsibility to enforce the antitrust laws.” United States v. FMC, supra, slip op. at 13 — 14.¹⁰ Moreover, the court held that this interest was within the zone of interests sought to be protected by the Shipping Act, 1916.¹¹ Therefore, it concluded that the Department met the traditional standing requirements in that case.

The court went on to find that nothing in the Hobbs Act’s language or history indicated that Congress meant to preclude the Department from assuming the role of a petitioner for review despite its possession of the “essential attributes of a party aggrieved.” Id. at 18. It noted that the Act neither “requires the Attorney General to defend agency orders nor precludes an independent agency defense,” id., so that no practical problems bar an interpretation entitling Justice to seek review. Id. at 19. Moreover, it pointed to debates on related bills which indicate that Congress envisioned judicial resolution of similar inter-agency disputes, id. at 22-27, as well as early cases in which such resolutions were effected. Id. at 28-31. Therefore, the court concluded that Justice had standing to compel court review of Commission actions under the Hobbs Act.

We can perceive no distinction between the instant case and that decided by the panel in United States v. FMC, supra. Once again, Justice is challenging a Commission order which interferes with Justice’s own interpretation of its responsibility to enforce the antitrust laws by insulating an anticompetitive agreement from prosecution. The interests ostensibly protected by this challenge — shippers’ and consumers’ — are identical to those protected in the former case. Therefore, for the reasons advanced in United States v. FMC, supra, we conclude that Justice had standing to bring this action.

B. Case or Controversy

The intervenors’ final argument against the Department’s authority to sue is that, notwithstanding any statutory authorization to petition for review, no Article III “case or controversy” exists because “the United States is suing itself.”- Brief for Intervenor Sea-Land Service, Inc. at 27. Like the standing issues, this issue was decided in favor of Justice by the panel in United States v. FMC, supra. The court held the controversy justiciable because it met the requirements established by the Supreme Court in United States v. Nixon, 418 U.S. 683, 94 S.Ct. 3090, 41 L.Ed.2d 1039 (1974), for the judicial resolution of inter-agency disputes: it “raises issues that courts traditionally resolve and the setting assures . . . concrete adverseness[.]” United States v. FMC, supra, slip op. at 33. Once again, we see no distinction between the cases which would cause us to reach a contrary conclusion.

III. SUBSTANTIAL EVIDENCE

A reviewing court such as this one can only reverse an agency action if it finds that action “unsupported by substantial evidence.” 5 U.S.C. § 1009(e)(5). The Supreme Court has defined “substantial evidence” as “such relevant evidence as a reasonable mind might accept as adequate to support a conclusion.” Consolidated Edison Co. v. NLRB, 305 U.S. 197, 229, 59 S.Ct. 206, 216, 83 L.Ed. 126 (1938). The Court specifically pointed out that “[t]his is something less than the weight of the evidence, and the possibility of drawing two inconsistent conclusions from the evidence does not prevent an administrative agency’s finding from being supported by substantial evidence.” Consolo v. FMC, 383 U.S. 607, 620, 86 S.Ct. 1018, 1026, 16 L.Ed.2d 131 (1966).

The Department argues that the Commission’s order is unsupported by substantial evidence with regard to each of the major issues: the existence of overtonnaging, the prevalence of malpractices, and the need for a pool. Though we find the record to be close on each of these points, and might not have decided them initially as the Commission did, we find in each instance the Commission’s decision was supported by substantial evidence.

A. Overtonnaging

The AU concluded that overtonnaging existed on the basis of Scaffardi’s testimony. This testimony established that three-quarters again as much capacity existed as was necessary for the conference’s westbound trade. Accepting the Department’s argument that no overtonnage exists if the capacity is utilized for eastbound shipments, J.A. 508 n.5 (Decision of the ALJ), the ALJ focused on Scaffardi’s statement on cross-examination that “the cargo eastbound to Italy is less than the westbound cargo” to establish the crucial proposition that the proponents’ overtonnage figures were economically meaningful, rather than the unavoidable incidence of a trade imbalance. See J.A. 508. The FMC, when reviewing the proceeding, concluded that this “finding is supported by the record and will not be overturned.” J.A. 552 (Order Adopting Initial Decision).

The Department argues that this decision was in error because both the ALJ, and inferentially the FMC, considered only evidence about the trade to and from Italy, whereas according to Scaffardi’s own testimony:

The vessel leaving the east coast of the United States is taking cargo not only to Italy but to Spain, France, Italy, Greece and North Africa, so you have to consider the whole picture, not just Italy, in this particular case, when you are talking about east bound.

J.A. 164. Were Scaffardi’s quoted statements about capacity all that was in the record, we would be tempted to reverse under the substantial evidence test.

However, Scaffardi testified later as to the volume of the entire eastbound Mediterranean trade. Though admitting that different standards of measurement were used in each instance,¹² he concluded that “[t]he-refore, in the eastbound, you will always find a lot of empty containers carried from the east coast to the Mediterranean.” J.A. 166. While this evidence is far from conclusive on the issue of whether the overton-nage existing on the westbound route is due to an imbalance of trade — -the Department argues that the excess container capacity on the eastbound route might result from the need to distribute heavier objects over greater shipping space, for example, see Reply Brief for the United States at 18-19 —in light of the lack of any contrary evidence and the surface plausibility of proponents’ evidence, we must find that the FMC’s factual decision on this point was supported by substantial evidence.¹³

B. Malpractices

The ALJ concluded that the malpractice of rebating was prevalent in the involved route, though he admitted that the proponents of the pool had not produced “direct evidence of serious malpractices existing in the WINAC trade and that there is absolutely no data in the record to show whether rebates are in fact being paid.” J.A. 515 (Decision of ALJ). The FMC upheld his decision despite the fact that it was supported only by hearsay and historical evidence of abuses. J.A. 550-51 (Order Adopting Initial Decision). The Department argues it was error to find that the substantial evidence standard was met on the basis of such weak evidence.

However, the proponents put forward a strong case for the unavailability of direct evidence of rebating, see note 8 supra, one which the Department never rebutted and the ALJ accepted, see J.A. 513-16. The Supreme Court has made clear that in such situations, the substantial evidence standard can be met by drawing inferences from indirect evidence:

Having correctly noted that positive proof on various aspects of the case was simply not available one way or the other, the Commission was fully entitled to draw inferences on these points from the incomplete evidence that was available.

FMC v. Svenska Amerika Linien, 390 U.S. 238, 249, 88 S.Ct. 1005, 1011, 19 L.Ed.2d 1071 (1968).

Moreover, the evidence put forward by the proponents was not as weak as the Department suggests. In addition to the admittedly unsubstantiated rumors of rebating, the proponents’ witnesses testified to proven past violations of the Shipping Act by WINAC carriers, and submitted evidence that the circumstances giving rise to those violations continue to exist. See J.A. 518 (Decision of ALJ). The inferences drawn from these facts tend to buttress the credibility of the proponents’ witnesses, and substantiate their unproven allegations of continuing malpractices. In sum, then, we find the PMC’s decision as to the continued existence of malpractices supported by substantial evidence.

C. Propriety of the Remedy

The Department’s final argument is that the FMC gave insufficient consideration to the possibility of using less anticompetitive means to solve the problems plaguing the WINAC route. However, the ALJ explicitly considered and rejected the Department’s argument as to the existence of less anti-competitive alternatives, see J.A. 519-23, a decision which the FMC summarily affirmed. J.A. 552. Considerable evidence disputing the efficacy of a free market solution exists on the record, see J.A. 80-83, 104-06; therefore we must again hold that the Commission’s decision is supported by substantial evidence.

The order of the Federal Maritime Commission is hereby affirmed.

1 . 28 U.S.C. § 2342(3).

2 . Two intervenor briefs were filed, one by Sea-Land Service, Inc. (“SLS”) and one by a group of ocean carriers (“intervenor carriers”).

3 . Two trade associations also filed protests, J.A. 8-9; however, these protestants did not participate in the ensuing proceedings.

4 . “Overtonnaged” is an industry term used to denote an excess of space offered by the carriers over that necessary to carry the available cargo. J.A. 646.

5 . “Malpractices” include a wide variety of disreputable or destructive practices. In this case, the term is used to refer to the practice of “rebating,” whereby freight forwarders secretly collect a percentage of a carrier’s fee as a commission for directing the shipper’s goods to it. See Brief for the United States at 4.

6 . “TEU” stands for twenty-foot-equivalent units, a standard measure of container capacity.

7 . Evidence was presented to show that three of the private firms servicing the route withdrew from it between 1976-1979, while two government lines and one private line entered it. Brief for Respondent at 33. The entry of the private line, Sea-Train, was explained as an aberration. Sea-Train had served as a marketing agent for another line; when that arrangement was suddenly terminated, the company decided to maintain its organization, utilizing its existing vessels, under its own name. Id. at 34.

8 . Scaffardi pointed out that rebating, though legal under Italian law, is subject to severe penalty under section 18(b) of the Shipping Act, 1916, 46 U.S.C. § 817(b). Therefore, any participant would be unlikely to testify to his practices for fear of prosecution. See Brief of Intervenors (Except Sea-Land Service, Inc.) at 6-7. Moreover, since rebating is a form of price competition, he pointed out that it is in the carriers’ business interest to keep information relating to their rebating practices away from their competitors. J.A 629-30.

9 . See note 2 supra.

10 . The court pointed out that the Supreme Court has long recognized “ ‘. the legitimate interest of public officials and administrative commissions, federal and state, to resist the endeavor to prevent enforcement of statutes in relation to which they have official duties.’ ” United States v. FMC, supra, slip op. at 15, quoting Coleman v. Miller, 307 U.S. 433, 441-42, 59 S.Ct. 972, 976, 83 L.Ed. 1385 (1939). The court concluded that the challenged Commission action “directly and specifically” interfered with this “legitimate interest,” id. at 14-15, because the Department is “charged with the responsibility for enforcing the antitrust laws, ... [and] but for Commission approval, would proscribe [such] agreements,” id. at 16 (footnote omitted).

11 . The court found that the statutory constraints placed on the Commission’s ability to protect anticompetitive agreements from prosecution were an attempt by Congress to protect the consumer and shipping interests. Id. at 17. It held that the Justice Department, “as public enforcer of the antitrust laws,” was entitled to represent those interests. Id.

12 . “[T]he Italian cargo is volume cargo while the eastbound cargo from the United States to Italy, as well as the Mediterranean, in the majority of cases is weight cargo.” J.A. 165-66 (testimony of Scaffardi).

13 . It must be pointed out that we are not in this case unreservedly sanctioning the FMC’s decision that “[i]f [the Department] seriously wished to advance its ‘economically meaningful overtonnaging’ argument, it should have offered the necessary facts upon which to support this position.” J.A. 552 (Order Adopting Initial Decision). Situations may arise in which the record does not even superficially refute the Department’s arguments; then it may be proper to require additional data from the companies before requiring the Department to substantiate its own argument. However, this is not such a case.