FMC v. SVENSKA AMERIKA LINIEN
Legal provision: 46 U.S.C. 814
Argument of Irwin A. Seibel
Chief Justice Earl Warren: No. 257, Federal Maritime Commission, et. al., petitioner versus Svenska Amerika Linien and 258, The American Society of Travel Agents versus Svenska Amerika Linien.
Mr. Seibel or Seibel rather.
I beg your pardon.
Mr. Irwin A. Seibel: Mr. Chief Justice, may it please the Court.
These consolidated cases are here on writ of certiorari to the Court of Appeals for the District of Columbia Circuit to review the judgment of that Court which reversed in Order of the Federal Maritime Commission issued under Section 15 of Shipping Act.
The Order required two closely interrelated Trans-Atlantic steamship passenger conferences to modify certain provisions of their conference agreements.
The proceedings in which the Commission’s Order was entered were triggered by a complaint filed by the American Society of Travel Agents, the other petitioner in this case, complaining about certain practices of the conferences and requesting the Commission to undertake an investigation of the interrelationship between the travel agents and the conferences.
This was the first comprehensive investigation undertaken by the Commission of this relationship since the enactment of the Shipping Act in 1916.
The two conferences here involved are informed distinct legal entities though they are closely coordinated and they determine the uniform practices and policies for their member lines including the fixing of transportation fares, the fixing of commissions paid to their travel agents and also the selection, supervision and control of the agents they appoint.
One of the conferences is responsible for fixing the fares and the commissions for the travel agents and the other is responsible generally for picking the travel agents and seeing to it that they stay in line; that they observe the proper conference rules.
Membership in each conference is identical or almost identical, each consisting of the same 25 lines with one unimportant exception.
Seven of the lines do not serve the ports of the United States or at least very minimally.
The conference lines carry 99%, 99% of all the Trans-Atlantic passengers going by ship.
They obtain most of this traffic through the travel agents they appoint.
Typically, these agents account for about 75% to 80% of all the tickets sold in the United States for Trans-Atlantic steamship passage.
These agents almost always also serve as agents for airlines.
After a full evidentiary hearing, the Commission’s examiner recommended disapproval of certain provisions and of certain practices of the conference.
Among those disapproved was the so-called “tying-rule”.
This is a rule which forbids the travel agents under penalty of disqualification from serving any competing non-conference steamship line.
In other words, it ties the agents to the conference members.
The other rule, the “unanimity rule”, so-called is one the examiner did not recommend be disapproved.
This is a rule which requires the agreement of all the member lines, all 25 member lines before any change can be made in the level of commissions payable to the travel agents.
Justice William J. Brennan: These conference/agreements, I suppose, are very old and were filed under Sectiion15 long ago?
Mr. Irwin A. Seibel: That’s right.
Justice William J. Brennan: Is that correct?
Mr. Irwin A. Seibel: Indeed.
Justice William J. Brennan: And did they from the -- have they always contain these two provisions?
Mr. Irwin A. Seibel: Almost always.
I think the provisions have probably been in the conference agreement ever since the inception of the conferences and perhaps.
Justice William J. Brennan: So up until now, they’ve been approved as part of the agreements that were filed under Section 15?
Mr. Irwin A. Seibel: Exactly!
Justice William J. Brennan: And here, they were attacked by your client?
Mr. Irwin A. Seibel: This had been approved in the course of the non-adversary proceeding.
Justice William J. Brennan: In non-adversary proceeding?
Mr. Irwin A. Seibel: Yes.
Justice William J. Brennan: And that it was your client who --
Mr. Irwin A. Seibel: No, no.
I’m representing the Maritime Commission of the United States.
Justice William J. Brennan: Surely.
Mr. Irwin A. Seibel: If Mr. (Inaudible) that way.
Justice William J. Brennan: But the travel agents attacked the --
Mr. Irwin A. Seibel: Yes, Your Honor.
The travel agents filed a petition and in response to that petition, the Commission undertook its own investigation.
Justice William J. Brennan: Right.
Mr. Irwin A. Seibel: Now the travel agent, instead of recommending the disapproval of this so-called “unanimity rule” recommended only that the seven conference lines who do not serve the United States ports and therefore, derived little of any business from travel agents from the United States not be permitted to vote on the rates of commission payable to the travel agents.
The Commission with two Commissioners dissenting upheld the examiner’s disapproval of the tying-rule, rule which ties the agents to the member lines.
The Commission, however, disagreed with the examiner’s qualified acceptance of the unanimity rule.
It held that the unanimity rule had prevented a majority of the conference lines from increasing the commission rates and as a consequence, put the conference lines at a disadvantage in competing with the airlines for the promotional assistance of the travel agents.
Justice Abe Fortas: Would you mind stating again, what was the qualification of the examiner?
Mr. Irwin A. Seibel: The examiner did not recommend disapproval of the unanimity rule.
He recommended disapproval of the tying rule but not the unanimity rule.
He said that he recommended that the seven lines, seven member lines who do not serve the United States ports not be permitted to vote.
The Commission on the other hand disapproved both rules but did permit the seven lines to vote, indicating it had no objection to their having some voice in the voting.
It ordered the elimination of the rule indicating that once the veto power of the lines not serving the United States was eliminated, they could have some voice in the voting.
On review, the first time came before the Court of Appeals, the Court set aside the Order and remanded the matter to the Commission for reconsideration.
With respect to the tying rule, the Court held that the Commission had failed expressly to find that that rule offended one of the four criteria set forth on the statute, namely that, it was not on a fir or unjustly discriminatory as between carriers, detrimental of the commerce in the United States’ contrary of public interest or otherwise in violation of the Act.
And, the Court also noted that the Commission had apparently rested it’s disapproval on the ground exclusively on antitrust principles and pointed out to the Commission that it must measure its disapproval against one of the four criteria set forth in the statute.
With respect to the unanimity rule, the Court held that the Commission had not made a sufficient showing that it was the rule which contributed to the disadvantage of the conference members in competing with the airlines for the promotional assistance of the travel agents.
It also said that a mere showing that the wishes of the majority of the conference members had temporarily blocked or even permanently blocked the conference from acting, was not sufficient under the statute in its view to invalidate the rule.
The Court then directed the Commission to either make adequately -- supported ultimate findings to justify disapproval or to approve the rule and no certiorari was sought from that position.
The Commission then considered the matter on remand.
And on remand, the Commission reanalyzed the evidence and made extensive findings.
It fully set forth the rationale underlying its application of Section 15 of the Act to these agreements.
It recognized that the Section 15 was intended to condone some anticompetitive agreements, obviously, it granted an exemption once the agreements have been approved.
But in the Commission’s view, the statute did not represent a total abandonment of the antitrust concepts.
In its view, anticompetitive arrangements, which are more restrictive than necessary to serve some legitimate shipping act purpose; should not be approved.
It then turned to a consideration of both of the rules and again, disapproved both expressly finding that both are detrimental to the commerce of the United States and contrary to the public interest.
Justice Abe Fortas: Was further evidence taken on remand?
Mr. Irwin A. Seibel: No, Your Honor, the Court had not suggested that further evidence be taken and nobody before the commission expressed their willingness to -- the parties submitted additional briefs and re-argued the issues before the Commission.
Justice Abe Fortas: Well, on the next go around, the Court did criticize the Commission for not taking --
Mr. Irwin A. Seibel: Yes, Your Honor.
Justice Abe Fortas: -- additional evidence.
Mr. Irwin A. Seibel: All of us were surprised that finding that criticism but.
Justice Abe Fortas: That frequently happens to lawyers.
Mr. Irwin A. Seibel: The Commission found that the tying rule, the rule that ties the agents to the conference lines and forbids them from selling to competing non-conference lines, was seriously more anticompetitive than was necessary to served any legitimate Shipping Act function.
It was more than necessary to secure any public benefit or a transportation need.
It said that the tying rule imposed harsh restraints on three distinct interests entitled to protection.
The independent non-conference freighters who accounted for the remaining one percent of the trade, Trans-Atlantic passenger trade, were denied access to the 4,000 travel agents appointed by the conference who accounted for some 80% of all the Trans-Atlantic passenger business.
The traveling public was denied the access to the valuable service of the conference travel agents if they wish to go on non-conference vessel and the travel agents themselves, appointed by the conference, were denied the opportunity of serving a client who wished to go on a conference.
The Court then examined the various justifications which were advanced by the conferences and found them unsatisfactory and then disapproved the rule.
With respect to the unanimity rule --
Justice Hugo L. Black: Did it remand the case to the Commissions or the agents there --
Mr. Irwin A. Seibel: Yes.
Justice Hugo L. Black: -- have any further hearings or did it just reverse it out of --
Mr. Irwin A. Seibel: The Court of Appeals on it’s first opinion, remanded it to the Commission.
Justice Hugo L. Black: How about the second opinion?
Mr. Irwin A. Seibel: The second opinion, it reversed and did not remand.
Instead, it entered a simple judgment of reversal.
Justice Hugo L. Black: Are you challenging that part of the Order because they did not -- because they decided for themselves instead of sending it back to the Commission?
Mr. Irwin A. Seibel: We have not challenged it because we thought it would be destruction.
We think what they’ve done is so clearly mistaken.
Justice Hugo L. Black: But suppose –
Mr. Irwin A. Seibel: This case --
Justice Hugo L. Black: -- they hold it’s not.
Are you agreeing that the Court has a right to have the case dismissed without having any further hearings or any decision as on the merits of the controversy?
Mr. Irwin A. Seibel: Well, we think this case -- I’m not agreeing with that, Your Honor.
However, this case has been -- was started almost ten years ago and I think the parties exhausted themselves, exhausted all the material but make a win so that I’m not sure that it would avail anything to --
Justice Hugo L. Black: All I want to find out is if the government has agreed that the Court has a right to end the case.
Mr. Irwin A. Seibel: I don’t think the Court has a right to end the case, Your Honor.
I think it should have sent it back to the Commission.
Justice Hugo L. Black: Well, that’s the result of its action, isn’t it?
Mr. Irwin A. Seibel: Yes, it is but the result of its action is to end the case, however.
It said it would not remand to the Commission.
With respect to the unanimity rule, the Commission found that the one used by the conference existed in its most stultifying form, it could not be changed except the unanimity rule itself relating to the commissions payable for the agents could not be changed except by the unanimous consent of all the members.
In addition, it did not have a definite time limit at the expiration of which, the rates would have to be reset so that if -- and the members would not be free to disagree.
In other words, the previously made rates remain frozen and could not be changed except by the unanimous consent of all the members.
In examining the rule in actual operation, the Commission noted the difficulties in assessing the effects of the rule because of the conference’s failure to keep complete minutes of its meetings as required.
It observed that the abbreviated minutes kept by the conference, failed to disclose the agenda, the votes of the members, the discussion of the members or any proposal which was not adopted by the conference.
Nevertheless, on the basis of such evidence as was available, such as the records of an individual conference line or the testimony of officials of individual members of the line, the Commission found that but for the unanimity rule, a majority of the conference members, would have raised the commissions and that their failure to do so had put the conferences at a competitive disadvantage with the airlines in competing for the promotional assistance of the travel agents.
The point the Commission made was that, had the majority wished to increase the commissions to their travel agents, this might have offset the tendency of the travel agents to push airline bookings.
Since the conferences are --
Justice William J. Brennan: What are the present commissions paid to travel agents?
Mr. Irwin A. Seibel: The present commissions are 7% on point to point bookings and 10% on tourist package.
Justice William J. Brennan: And how about -- what do airlines pay?
Mr. Irwin A. Seibel: The airlines pay the same amount now, Your Honor.
However, during the period which the Commission examined a strong majority of the conference lines back in 1950, wanted to raise the commissions to an amount which would have been above the level paid by the travel agents.
I beg your pardon.
They wanted to go to 7 ½%, from 6% to 7 ½% covering all seasons, both the slack season and the summer season and the Commission found that it took them -- because of this rule, it took the conferences at least six years to go to increase the level of the commissions to 7%.
And at the end of 13 years, when the proceeding had closed, the conferences had still not raised the commission rates to the level which a majority had favored back in 1950.
Justice Potter Stewart: Do these two provisions involve only travel agents in the United States of America?
Mr. Irwin A. Seibel: Yes, Your Honor, travel agents.
Chief Justice Earl Warren: Was there any --
Mr. Irwin A. Seibel: In Canada as well, Your Honor.
Chief Justice Earl Warren: -- finding as to the amount of work that it takes an agent to negotiate one of these tickets?
Mr. Irwin A. Seibel: Yes, Your Honor.
Chief Justice Earl Warren: Same on the Act?
Mr. Irwin A. Seibel: The Commission was aware that it took a lot more time of the travel agents to book steamship passage than airlines and therefore pointed out even though the rates of commission ultimately -- the rates of commission pay travel agents for the steamship lines ultimately was on the same level as the airlines, the effective level of the commission because of the extra time was lower.
And even though the agents may have felt a degree of loyalty to the steamship lines whom they’ve served for many, many years, there was a tendency nevertheless to push airline travel and the Commission felt had a majority wish to increase this beyond the one they should be allowed the opportunity.
In addition, the commission did point out that another ground that a rule which ties up a major industry and prevents it from responding readily to changes in market conditions is contrary to the public interest and it shouldn’t be permitted to continue.
The Commission did not simply order the elimination of this rule without requiring them to, without saying they had to have by simple majority or even requiring them to have a unanimity rule which existed in a less rigid form, for example, a rule that might last for only two years once they set the travel agents commission.
At the end of that period, they are free to -- I must agree again on a different level.
And if they’re unable to agree, perhaps, each one may be free to set its own rates.
But note that that was not involved in this case.
In this case, we have a rule in its most rigid form.
Justice Potter Stewart: And all the Commission did, if I understood you correctly, was to disapprove and cancel this rule.
It didn’t --
Mr. Irwin A. Seibel: That’s right.
Justice Potter Stewart: Although it does have power to modify?
Mr. Irwin A. Seibel: Yes, Your Honor.
Justice Potter Stewart: Is it not?
Mr. Irwin A. Seibel: That’s right.
Justice Potter Stewart: It did not exercise that.
Mr. Irwin A. Seibel: It did not exercise that power, it ordered them to eliminate this particular rule.
Justice Potter Stewart: Without implying that no similar rule could --
Mr. Irwin A. Seibel: That’s right.
Chief Justice Earl Warren: I understand you to say that the majority of the members of the conference were in favor of the government’s position?
Mr. Irwin A. Seibel: Yes, Your Honor.
Such evidence as was available or evidence was rather sketchy, as the Commission pointed out, and it was difficult for it to assess the effects of the rule in actual operation but there was evidence -- some of it obtained from the files of the individual members of the line, which showed that in 1950, for example, where the majority was in favor of increasing it; a strong majority.
Another record shows that a change in the rates was prevented because unanimity could not be achieved.
The records of one member line further showed that in early 1956, only one line was responsible for resisting a change to a different level in the commission rate.
And it was on the basis of these bits of evidence, taking into consideration the difficulty of obtaining evidence because of the sketchiness of the conference’ minutes that the Commission felt that it was justified in ruling as it did in ordering the elimination of the rule.
However, the other ground for eliminating the rule was that, this rule existed in its most unabated form, that is that it didn’t have a definite time period in contrast to a rule in the airline industry, which had a definite period of time when the members of the industry had to reset their rates and if they couldn’t agree unanimously why each was free to set his own rate.
Justice Potter Stewart: How many of these conference members have --
Mr. Irwin A. Seibel: There are 22 foreign lines in one and 23 foreign lines in the other.
In other words, three and two, three American Lines and one and two in the other.
I should like to turn to a point raised by Mr. Justice Stewart earlier regarding the integrity of these rules.
As one argument advanced by the conference is that these rules have been in conference agreements ever since the inception of the conference system back at the last quarter of the 19th century, even before the enactment of the Shipping Act and that the Commission had approved these rules many years ago and, therefore, it shouldn’t have disapproved the rules.
Now, in this proceeding, I think the -- really the short answer is that the statutory language is clear.
And if I may call Your Honors’ attention to it, it appears on page 3 of the government’s brief or the relevant language to which I am referring.
In the first full paragraph at page 3 is a portion of Section 15, and I will skip the irrelevant portion as I read; the section that directs the Commission to disapprove any agreement and I skip to the fourth line, and read, “Whether or not previously approved by it”.
So the statute makes an amply clear that the Commission has the authority and indeed it must disapprove an agreement whether or not previously disapprove that it finds offense of one of the four statutory criteria and of course, the Commission did that here.
I should like now to deal --
Justice Potter Stewart: The technical grammar, I suppose is that gives the commission power to disapprove or cancel or modify any agreement or any modification/cancellation thereof but not a component provision of an agreement.
It’s just the whole agreement.
And the agreement, I suppose the conference agreement, isn’t it?
Mr. Irwin A. Seibel: The agreement is the conference agreement but I’m sure --
Justice Potter Stewart: These are just two separate provisions of the agreement. You don’t have any difficulty to that.
Mr. Irwin A. Seibel: No, I don’t have any difficulty, that’s always been accepted.
I’m sure the conference would prefer to have the provision disapprove rather than the entire agreement because they can still fix.
The fixing of rates, of course, the transportation fares is not at all in question here.
I should like to say a word about the tying rule was.
And what the rule comes down to is that, it’s an agreement among the conference lines that the agent, any agent of any member may not serve a competing non-conference line on penalty of being disqualified from serving all conference lines.
In other words, the rule is in effect an agreement to boycott any agent who doesn’t deal exclusively with the conference members.
Now, the Commission found that since the conferences account for 99% of all business in this trade and these agents whom they’ve tied up this way sell about 80% of all the tickets, the restrictions inflicted injury on the three interests I had mentioned earlier, the independent non-conference trader, who, like the conference members, everybody agrees is highly dependent upon travel agents for business is denied access to these agents and generally, are the best established and most successful agents in the business.
And, of course, demand the public in the hinder land who wants to go by with his family while on a non-conference vessel is likewise denied the services of a travel agent.
The travel agents were tied at the conference lines and, as I mentioned earlier, travel agents themselves.
Those appointed by the conference members can’t sell tickets for clients who may want to go that way.
The commission -- what the conference says, well this is all conjecture; there was no evidence to show that this actually happened.
No conference carrier came up to complain.
No member of the public was up as a witness and there really has not been any showing of a measurable loss by the travel agents of any business.
But first, the short answer to this is that these injuries are just bound to occur given the fact that 80% of the business is run by the travel agents appointed by the conference members.
And surely, the Commission wasn’t obliged to showing that this restriction was devastatingly effective and that no one could ever find a way of traveling by non-conference vessel.
As a matter of fact, the record does show, if that were necessary, that agents have, the conference agents have had to turn away prospective customers for non-conference traders.
As a matter of fact, the chairman of the conference himself testified at pages 144 and 145 of the record that -- I’m paraphrasing that he’d been asked whether he’d been approached by a travel agent to sell or to allow the travel agent to sell tickets for a family who wanted to go on non-conference vessel.
He said in substance, well, I am little hazy, I vaguely recall something like that but I’m sure if he had come to me, I would have said to him while I tell all the agents that nowhere.
We can’t make any exceptions.
Justice Potter Stewart: How does one go about booking on non- conference line?
Mr. Irwin A. Seibel: Well, if you can go directly to the non-conference -- the company owing the non-conference vessel or if you can find a non-conference agent, there are some travel agents who are not.
While the record doesn’t show the percentage -- what percentage the travel agents appointed by the conference represents of all the travel agents, in the oral argument before the Commission, the attorney for the conference lines accepted an estimate that no more than the 10% of all agents who are not appointed by the conference lines.
In other words, that the conference agent represents 90% of all the travel agents in the United States.
Justice Abe Fortas: So I don’t want to disrupt your plan or order of argument but I would like to hear your views as to what I consider in a way to be the determinative factors in the Court’s opinions and I don’t gather that there is any extensive quarrel about facts of the merits of this thing but it seems to me that what the Court says is, number 1, Maritime Commission applied the wrong standard.
That’s in the first opinion that it gave excessive weight to what it considered to be empty competitive factors; and no. 2, that the Board’s technique here was insupportable.
That’s in the both the first and the second opinion, that is to say that the Board failed to set out findings based upon evidence, which fit in with the standard of the Act.
Now, those, as I look at the Commission’s opinions, both it’s first opinion and its opinion on remand -- those positions taken by the Court of Appeals are certainly arguable and they don’t have to go back into the whole question of the practices of the industry to assess them as -- you had your -- they were different panels, weren’t the only Judge Danaher said on both of the cases in the Court of appeals?
Mr. Irwin A. Seibel: Yes, Your Honor.
Justice Abe Fortas: So you had five different judges of the Court of Appeals who arrived at the same conclusion and that conclusion, whatever the detailed reasons being, there were really as I read this to the effect that the Commission just didn’t do its job in terms of writing and in terms of setting code, the findings required by the Act in terms of the analytical and craftsmanship for part of the responsibility of an administrative agency where upon which our administrative jurisprudence is based and what do you say to that?
Mr. Irwin A. Seibel: I’d say to that, first let me say, Your Honor, I’m imposing upon my co-counsel’s time, I would like to answer the first part of your question and I’m sure he --
Justice Abe Fortas: I don’t want to burden you and just so that --
Mr. Irwin A. Seibel: Well, let me --
Justice Abe Fortas: I would you appreciate somebody talking about that.
Mr. Irwin A. Seibel: Let me take the first part and I will leave to Mr. Sisk the balance of your question.
It’s clear, I think, on a reading of the Commission’s opinion, the opinion on remand particularly, that the Commission did not contrarily -- the suggestion of the Court in the first opinion, Court’s second opinion, of course, is very brief and really doesn’t discuss the substance of the case.
The Court was charging the Commission with relying exclusively it on antitrust principles and said that’s not the standard you applied.
Under the Shipping Act, the standards are the ones set forth on the statute; you’ve got, to contrary of the public interest, you got to show it’s detrimental of the commerce and so on.
Now, it’s clear the Commission did not rely exclusively on antitrust grounds.
Had it done so in the case of the tying rule, here you had what was in effect a boycott, something illegal per se under the antitrust laws--
Justice Abe Fortas: And you are not conceding, are you that if the Commission concluded that this was anticompetitive and there were no off setting virtue, you don’t concede that in those circumstances, it would not have power to outlaw the rule under public interest standard of the statute, are you?
Mr. Irwin A. Seibel: I am not --
Justice Abe Fortas: Have I made myself clear?
The Commission finds that a particular rule is anticompetitive.
The Commission finds that there are no off setting advantages.
Is it or is it not the government’s position that the Commission could then make a finding that the rule is contrary to the public interest and therefore, violative of the standards of the Act?
Mr. Irwin A. Seibel: Yes, sir.
That is our position but we need not go that far in this case, in this particular case.
Justice Abe Fortas: Well, we have to look at theory as you know.
Mr. Irwin A. Seibel: Yes, Your Honor, this is our position.
In other words, the antitrust concepts are very important part of the notion of the public interest and this is the standard the statute sets forth and what the Commission did was do balancing.
Of course had it not been required to do the balancing, it could have said this is illegal per se under the antitrust laws and we are through.
That’s the end of the case.
Instead of that, it looked at the market conditions, here they have 99%; the travel agents have 80%.
What is your justification if examined each of the justifications offered by the conferences found them unsatisfactory -- I have no time to deal with them here and then concluded that therefore, this particular arrangement, this particular anticompetitive arrangement, is much harsher than is necessary to serve a legitimate Shipping Act functions.
Justice Abe Fortas: Well, that’s right, that’s right.
Then on the second part of the case, and I take it that the counsel will deal with that, I suppose you would agree that it’s not the Court’s function the right findings.
Mr. Irwin A. Seibel: That’s right, Your Honor.
Justice Abe Fortas: It’s the administrative agency’s function to write findings.
Mr. Irwin A. Seibel: We think --
Justice Abe Fortas: -- the Court, these two panels made quite a point what they considered to be of a Commission’s failure to make findings which may be nothing more than a failure of craftsmanship but there may be a small desist but favor.
Mr. Irwin A. Seibel: Your Honor, I think as Mr. Sisk will point out the Commission did make the findings and I’m sure he will explain that they were supported.
Chief Justice Earl Warren: Mr. Sisk?
Argument of Robert J. Sisk
Mr. Robert J. Sisk: Mr. Chief Justice, May it please the Court.
The petitioner in No. 258, the American Society of Travel Agents concurs in the views expressed by the United States government and at this time, we would like to add some additional points and answer some of the questions which Your Honors have raised.
In the light of the prospective we have acquired after a living with this case for more than ten years.
First, let me identify as to the American Society of Travel Agents, it is the principle of the Trade Association of Independent Travel Agents in the United States and for anyone who has been unfortunate enough not to have the opportunity to avail themselves of the services of agents but we say that there are people who sell and promote travel of all kinds, Ocean, rail, air and bus, they create and sell tours; they get no payment generally by the public but rely for their livelihood on commissions paid by the carriers and by hotels.
According to the survey made by the government in this case, in Exhibit “40”, they are generally small businessman.
They are individual entrepreneurs.
They are not employees although the lines, the respondents here, regard them as their principal sales force.
They are nevertheless forbidden by the National Labor laws to combine to act collectively.
They are also forbidden by the antitrust laws to act collectively.
We did bring this complaint as Mr. Seibel has stated.
In 1958, very reluctantly before the Federal Maritime Board -- reluctantly because the agents have long had great loyalty to these lines -- they were agents for these lines long before the Wright Brothers began to experiment with air flight.
Nevertheless, after having heard for many years the old story that they have rules which dated back to 1879 and rules which prevented any change in their formed Act because they couldn’t unanimity, and after making every effort to persuade the lines, to change their rules and having failed and in post war period when the competition of airlines began to prove, that these carriers were heading for disaster and were too inflexible to change to adopt to the changing economic conditions asked about its complaint before the then Federal Maritime Board, which led to this investigation in 1959.
And as Mr. Seibel stated, it was the first investigation of how these respondents collectively treat travel agents and it was comprehensive.
It led to a three-week hearing in New York City in 1961 to a report by the examiner in 1963 to a first Commission Order in 1964, a first Court of Appeals remand in 1965, a second Commission Order where we again had to a brief and argue the entire case and this time before a new member of the Commission and convince him to join with the majority and, finally, to the reversal by the Court of Appeals in 1967.
Now, the principal argument advanced by the respondents here in their brief is that there just isn’t enough evidence to sustain what the Commission did and this is getting to the point which Mr. Justice Fortas has raised.
Well as noted in our Reply Brief, respondents are seeking to apply here a very rigid evidentiary standard, one which may be applicable to a situation in which an agency acts in a quasi-judicial function but which has no application to an agency in its regulatory function.
In addition to the American Airline C.A.B. case, in the Court below which we cite in our Reply Brief and in which the distinction between the forms of agency action is very clearly spelled out, we note that this Court has spelled out its views on the subject of regulatory action by agencies.
In the case of the Federal Communications Commission against Pottsville Broadcasting at 309 U.S. 134 in which it was held that it was improper for an appellate court to apply trial court standards to agency regulatory action.
And again in McClean Trucking cited in our Brief at page 25, this Court has held that it was proper for an agency to speculate as to future consequences and effects that it should make its judgment based on available present facts and on its past experience.
Well, the available present fact here were we submit sufficient despite a deliberate policy by respondents as found by everybody who has issued findings with respect to this case, a deliberate policy on their part to avoid governmental review, adapted and adopted out of fear of the American antitrust laws.
That was an uncontested finding.
Now, Mr. Justice Harlan asked a question earlier to Mr. Seibel with respect to the taking of additional evidence; and this also bears on the question raised by Mr. Justice Fortas.
We believe that no additional evidence was needed and nobody ever asked for it because primarily there is no dispute in the agency even between the examiner and the Commission as to the underlying evidentiary facts.
The examiner found that unanimity rule had blocked changes in commissions and he found that there had been detriment to the lines.
Where he different from the Commission was solely with respect to the remedy.
He thought the remedy for this diversion by the agents was to pass a rule prohibiting diversion. We could call this a prohibition law and it would probably have had about as much a success as our national prohibition law.
Justice Abe Fortas: I wish you would take -- as far as it me as I got opinions of Courts here, sir, and they say that there were no findings that could support this regulation or this determination under the Act and I wish you would please tell me what the findings were and then let me know how you feel contrary to the Court of Appeals that they do satisfy the standards of the Act, as to my mind, that’s the issue.
It’s true that your adversary argues that there wasn’t substantial evidence but primarily where we first have to look at.
That is what the Court said on why they were wrong if they were?
Mr. Robert J. Sisk: Well, the Court was wrong, Your Honor, in our view because it was applying a standard of review which this Court has subsequently held to be inconsistent with the Administrative Procedure Act.
Justice Abe Fortas: You mean that the Court was wrong in insisting on findings by the administrative agency?
Mr. Robert J. Sisk: No, the Court substituted its judgment for that of the agency with respect to the remedy.
The Court said, we find the reasoning of the examiner more persuasive with respect to the remedy, the examiner having suggested that the remedy to be applied was to pass a rule.
But this was one of the Court’s principal objections to the Commission’s Report and I point out to Your Honors, that the opinion written by the Court below was written by Judge George Washington, who wrote the opinion of the court below in Consolo against the Federal Maritime Commission which this Court reversed for applying an incorrect standard of review.
Consolo was reversed by this Court one year after the first Court of Appeals decision in this case.
So that when the Court of Appeals in this case dealt with the issues before it, it was applying the wrong administrative standard of review.
Now, with respect to Your Honors’ question as to what findings there were, all of the people who have heard the evidence in this case, the examiner and the Commission found that the unanimity rule have blocked changes in commissions, found that agents were diverting travelers to the airlines.
The sole issue was what to do about it.
The examiner thought you prohibited.
The Commission thought the best way to deal with this is to let the lines be free to exercise their business judgment, unfettered by the veto power of the unanimity rule.
In addition, the examiner had another remedy.
He thought that you could disqualify the seven lines who do not serve United States ports from voting, disenfranchise them completely.
The Commission’s remedy was to let them have a vote but do away with their veto power.
The Court of Appeals didn’t really quarrel with the evidence.
It said, “We find the reasoning of the examiner as to the remedy more persuasive.
This was a substitution of the Court’s judgment for that of a Commission.
And we make this point historically because when it finally went from the Court of Appeals back to Commission, who wrote a very extensive and very learned opinion, the second time around, detailing all of the points on which it relied and it came back to the Court of appeals and I might say that respondents elected to bring the case even though they are located in New York and even though the case was tried in New York before hearing examined there under the Administrative Procedure Act, they had their choice of Courts.
They elected to bring it before the Court of Appeals presumably because it was applying a pre-Consolo standard of review and they thought they had their best chance to success there and one can’t quarrel with an advocate for doing that but it was the wrong standard of review.
As I said, the Court below incorporated in its brief opinion, in the case which is before Your Honors today.
Its earlier opinion saying that the doubts and problems they’ve pointed out in their earlier opinion prevent them from affirming the Court below.
But as I’ve indicated, since that opinion was based on a pre Consolo test, it was error.
And, moreover, it was error for the Court to reject the application of antitrust principles.
The proposition that antitrust principle should not be considered in a case of this nature, lies in the face of a line of cases in this Court beginning with McClean Trucking and running down through Silver against the New York Stock Exchange to as recently as Denver and Real Gram Western Railroad.
The tenor of those cases is that regulatory agencies must evaluate collective action and must weigh anticompetitive considerations and try to reconcile the competing statutory schemes.
And Silver against the New York Stock Exchange at page 364, this Court held that the exchange would be violating the antitrust laws “unless justified” by reference to the Securities and Exchange laws.
So the principle to call upon a proponent of an anticompetitive rule for justification has been accepted by this Court.
Now we submit that the Maritime Commission applied no per se rule or test.
We agree with the government that respondent simply failed to produce any evidence of need or any other justification whatsoever.
We need not, I believe, belabor the importance of this principle to the regulation by government agencies generally in dealing with antitrust exemptions.
In our view, there can be no practical way to administer the Shipping Act or any other regulatory act if the agency cannot require the proponent of the rule, of the anticompetitive rule to demonstrate at least some justification, at least some need for it.
The Court of Appeals --
Justice Abe Fortas: Do you think the burden is on the shipping companies here?
Mr. Robert J. Sisk: That is our position and that was the position taken by the Commission.
Justice Abe Fortas: I see.
Mr. Robert J. Sisk: As this Court noted in the Carnation -- Pacific West Bound Conference case, the Congress, which enacted the Shipping Act, was not hostile to antitrust regulation.
That Congress concluded that the conference system had produced substantial evils and it should not be permitted to continue without governmental supervision.
The House Committee on Merchant Marine matters the seller report, enjoined upon the Maritime Commission the duty to apply strict administrative surveillance.
The Court of Appeals’ decision, if not reversed, can have no other effect than to prevent governmental supervision.
For all of the reasons set forth in our Brief and the Brief of the government, and for all of the reasons advanced by government counsel here today as well as those we have put forward, we urge that the decision of the Maritime Commission be reinstated and re-affirmed.
Chief Justice Earl Warren: Mr. Neaher?
Argument of Edward R. Neaher
Mr. Edward R. Neaher: Mr. Chief Justice and May it please the Court.
Mr. Chief Justice, you put a question to Mr. Seibel, asking whether a majority of the lines supported the government’s position in this case.
I think Mr. Seibel interpreted that question to mean. was there a majority of lines way back 10 or 15 years ago in favor of an increase in commissions?
I think he answered the question “yes” in that light but I’m not sure that there may not be some confusion here as to where the conference lines stand on the matters before the Court.
I am the spokesman here for all the lines who unanimously agreed that the Commission was wrong and the Court below was right.
In other words, we believe, our clients believe, that the two rules which have been struck down by the Commission here after some 40 years of approval strike at the foundation of the conferences themselves.
We agree that over 40 years these conferences developed barnacles in connection with the supervision and control of agents and that there were great many improvements which the Commission ordered, as a result of this investigation, many of which the conference itself had recognized and it began to do something about it.
And the Commission agrees here that all of this was done and that only matters litigated below, which were the focus of this entire inquiry was whether this unanimity rule and this conference tying rule were good or bad.
The Commission condemned them as bad and we say it condemned them essentially on antitrust principles, not on the basis of substantial evidence.
And we say that on the first opinion below, the Court pointed that out.
As Mr. Justice Fortas had said, he told the agency, you have applied the incorrect standard of review.
And when it came back to the Court the second time, it came back upon the same record and we believe the Court below reversed the second time, to answer Mr. Justice Black’s question, because the Court treated the Commissions re-written report on remand as the tacit admission that on this record, the Commission could come up with nothing better and --
Justice Hugo L. Black: Well, do you think they have authority to do that?
Mr. Edward R. Neaher: Did I think the Court had authority to do that?
Justice Hugo L. Black: The Court had authority.
Mr. Edward R. Neaher: I believe it did and I believe this Court very recently in a case exercised that authority itself.
I think it was the ConSolo case where they pointed out that the case has been around for eight years and while we could send that back to the Commission to do something, we think we are just as competent to tell from the record here what was right and dispose off it finally.
I believe Mr. Justice White will remember that case since he wrote the opinion.
Justice Hugo L. Black: But you are challenging the findings --
Mr. Edward R. Neaher: Am I?
Justice Hugo L. Black: You’re challenging the court’s findings -- who has the ultimate right to make those findings, the Commission or the reviewing Court?
Mr. Edward R. Neaher: I must answer that the Commission alone is charged with the duty of making the factual findings.
What I am saying is, that I believe the Court below reversed because it interpreted the Commission’s action in coming back simply with a revised argument as to why antitrust principles were sufficient here to condemn these rules as an admission that the only question that had to be decided really was whether as a matter of law, that was sufficient.
Justice Byron R. White: Well, you don’t say any antitrust principles are relevant.
Mr. Edward R. Neaher: I certainly do not, Mr. Justice White.
I couldn’t possibly take that position.
Justice Byron R. White: But would you -- do you say that the Commission, as a starting point in this case anyway, in starting to analyze the total public interest, which I suppose it must do.
Mr. Edward R. Neaher: Right.
Justice Byron R. White: That’s certainly your position, doesn’t it?
Mr. Edward R. Neaher: Certainly is, yes.
Justice Byron R. White: Would you say the Commission may not, when it meets face to face with an agreement like this say on the exclusive dealing part of it?
Mr. Edward R. Neaher: Yes.
Justice Byron R. White: And that the Commission may not on its face, say this is anticompetitive?
Mr. Edward R. Neaher: It may say it is but I think something more is required.
Justice Byron R. White: Well, I think we have to stop there for a minute.
Do you think it has to have some evidence in the record that it is anticompetitive?
Mr. Edward R. Neaher: That is my position that it may --
Justice Byron R. White: It may not treat this is a per se rule at all?
Mr. Edward R. Neaher: That’s right, Your Honor.
That’s our position (Voice overlap).
Justice Byron R. White: Because even if it could, I would suppose it must go on and listen to what you have to say anyway about yes, it’s anticompetitive but there are other factors which outway it.
Mr. Edward R. Neaher: That’s right and I would like to point out --
Justice Byron R. White: If you could say that they may now even start with the idea that it’s anticompetitive without having somebody get on the stand, as some expert to say, “Well the normal consequence of this is that anticompetitive consequences” or what kind of evidence would you want?
Mr. Edward R. Neaher: I would say there would have to be evidence of the working of the rule in practice, in accordance with the evil label attached to it.
That is to say -- well, let me try to explain it this way.
Aren’t we all agreed here that every conference agreement is an anticompetitive agreement, is it not?
It’s concert of action on matters of competition which are under our domestic antitrust policy would be unlawful were it not for the exception granted by the Shipping Act.
I’m sorry if I’m not -- I’m trying --
Justice Byron R. White: That’s why that just seems to be irrelevant but I just asked you --
Mr. Edward R. Neaher: Then I must have misunderstood.
I do agree, no. 1, that the Commission should not --
Justice Byron R. White: I would think that what you just said would say, you would yes that every agreement has got some anticompetitive consequences.
Is that what you mean?
Mr. Edward R. Neaher: That every agreement is a matter of competitive consequence, yes.
Justice Byron R. White: And the conference agreement is not a competitive by its very nature?
Mr. Edward R. Neaher: Yes, it is.
And I’m saying --
Justice Byron R. White: You don’t need any evidence to prove it?
Mr. Edward R. Neaher: Well, we’re talking about an agreement that’s presented to the Commission for the first time and the Commission has asked to approve the XYZ conference and on the face of the agreement is written, we agree that we won’t do a number of competitive things and the Commission can see right from the face of that agreement that of course, it would be antitrust violation for these lines to agree to that.
Justice Byron R. White: Well, let’s forget about what is an antitrust violation.
Let’s just ask whether it’s anticompetitive (Voice overlap).
Mr. Edward R. Neaher: Well, anticompetitive – that it is an anticompetitive agreement.
Now, what does the Shipping Act contemplate?
That the commission should say that’s an anticompetitive agreement; it is bad therefore, we will disapprove it.
Now, if that is so, why do we have a Shipping Act with an antitrust exemption in it?
Isn’t the purpose to weigh what advantages or the relative advantages and disadvantages of that agreement and decide that even though it is anticompetitive, we will approve it.
And this is what I think the Commission is thus practically everyday.
Justice Byron R. White: I’m not sure there’s any argument about that with anybody in this case.
Mr. Edward R. Neaher: Well now I think – but I think the --
Justice Byron R. White: I would have thought that the Commission isn’t going to -- the Commission, I suppose could say this is an anticompetitive agreement but there’s plenty of reason in the record to have an anticompetitive arrangement and the reasons are these based on some evidence I supposed.
Mr. Edward R. Neaher: That’s right.
Justice Byron R. White: And so, they approved the agreement in the exemption on the antitrust laws is achieved.
Mr. Edward R. Neaher: Right!
Justice Byron R. White: But the Commission says this is an anticompetitive agreement and nothing that the other side or that the conference has presented justifies that the public interest suffering as anticompetitive impact, I would suppose that under the same Act, they are authorized to disapprove it.
Mr. Edward R. Neaher: Right!
Justice Byron R. White: Because the Act says they shall disapprove an agreement, unless it’s shown that the public interest is served by this.
Mr. Edward R. Neaher: Well, I have a slight disagreement with you on that, Your Honor, because a public interest --
Justice Byron R. White: And that is --
Mr. Edward R. Neaher: Well, I believe it is in this respect that the public interest, as now inserted in Section 15 of the Shipping Act, and that standard was inserted when Congress passed the dual rate law in 1961.
And contrary to the public interest, as it appears in the Shipping Act, must be read in the context of the purposes of the Shipping Act.
I think this Court in numerous cases has pointed out that the public interest in the regulatory statute, takes it’s meaning from the context of the statue.
It isn’t an amorphous concept meaning, that because the effect of the rule, as they say, is to restrain travel agents in some way that that is bad per se and must inevitably be condemned.
What I’m trying to point out and I hope I am answering Your Honors’ question is, that here was a rule approved for 40 years.
One would have thought that in 40 years of operation, it would have been a relatively simple matter to produce evidence that this rule had the “harsh restraints” – to use counsel’s expression here this morning -– that they charge it with heavy and that it had no redeeming feature whatsoever.
And we are saying, as the two dissenting Commissioner’s pointed out, this whole question of the competitive necessity or the competitive advantage versus disadvantage of this rule was not explored in this proceeding.
This was not, as they say, an adversary proceeding.
We were not acquainted with every jar and kettle of what the Commission said it was going to do to us when it ended up with this decision.
We did the best we could to put in evidence, to counter matters and issues as they came up during the course of it but the --
Justice Byron R. White: Did you request to present more evidence in this second go around --
Mr. Edward R. Neaher: No, we did not.
We assumed when the Commission read --
Justice Byron R. White: You assumed that the Commission had the burden of proving that this agreement was contrary to public interest?
Mr. Edward R. Neaher: We had that -- no, Your Honor, I can’t say that.
We assumed that the Commission had the duty to do whatever the Court directed it to do and to reopen the proceeding in any manner that was appropriate to accomplish that?
Justice Byron R. White: But what if the Commission had said to you, “We think this agreement on its face is kind of agreement that normally and almost imperatively produces anticompetitive consequences and that we’re not going to disapprove it if you can explain to us why this is in the public interest or why it does not have burden in the commerce of the United States?
Now, we are perfectly clear to put on evidence in this respect and to argue evidence and try to convince us that this is in the public interest in spite of its anticompetitive impact”.
Mr. Edward R. Neaher: But the Commission didn’t do that.
Justice Byron R. White: It didn’t?
Mr. Edward R. Neaher: It did not.
The Commission simply said, “We’ll hold an oral argument and we want each party to point out first --
Justice Byron R. White: Well, you weren’t precluded from putting on in the evidence, were you?
Mr. Edward R. Neaher: Well, the form of the proceeding was simply we would comment.
It’s in the record.
We were directed to --
Justice Byron R. White: You didn’t ask --
Mr. Edward R. Neaher: No, we did not ask, Your Honor.
We were directed to file Briefs and to appear for oral argument and to specify in those Briefs, by reference, the specific facts relied on and that’s what was done.
Chief Justice Earl Warren: Did you have the opportunity in the original proceeding to do the things that Mr. Justice White suggested you might have done?
Mr. Edward R. Neaher: When you say did we have the opportunity, we certainly tried through conference witnesses and through such documents as Winan to justify, if you can put up that way, our position which was that on all the matters in issue and most of the matters related to the matters which are not in issue here, very little attention was paid to this tying rule.
Most of the attention was paid to the unanimity rule in the proceeding below because Aster was the vigorous proponent having started this whole thing on with an ultimatum to the conference.
We can no longer abide the unanimity rule and they were out to prove that that unanimity rule prevented the travel agents from getting increased commissions.
Justice Hugo L. Black: What did the Commission find on that disputed question --
Mr. Edward R. Neaher: The examiner found that those arguments or the evidence offered in support of their arguments that had blocked the Commission, consideration and the result that in the travel agents not pushing any translation were not supported by substantial evidence and the --
Justice Hugo L. Black: What did the Commission find?
Mr. Edward R. Neaher: And the Commission disagreed with that.
The Commission disagreed with the examiner.
But we say what the Commission failed to establish was, that there was any evidence that there would have been an increase in Commissions, that there was any evidence that that increase --
Justice Hugo L. Black: Well, are you saying that they failed to establish; it was their burden to establish?
Mr. Edward R. Neaher: It was their burden to establish and I think, yes that when they attacked the rule, which has already been approved that it is their burden to show by evidence that it is doing what they say it is doing.
And that is why, to get back to this per se application of antitrust principles, I’m saying that after 40 years of operation under a rule, if it was as bad as they say it was, that they ought would have been able to prove that.
Justice Hugo L. Black: Well, the 40 years of age didn’t have anything to do with it, did it?
They had the right to change it to something?
Mr. Edward R. Neaher: I don’t question they had the right to change it but I say that surely, it shouldn’t be changed on an arbitrary basis.
I say the application of the --
Justice Hugo L. Black: It gets back to the question, you would say they had the burden of proof and didn’t mean it.
Mr. Edward R. Neaher: I’d say that -- here’s what I’m saying, Your Honor, --
Justice Hugo L. Black: Well, I assert you to say that.
Mr. Edward R. Neaher: Alright, I’m trying to say this, they had the burden of reaching a decision upon a substantial evidence.
That’s all I am saying here.
Justice Hugo L. Black: But what was your burden?
Mr. Edward R. Neaher: To produce whatever evidence we had?
Justice Hugo L. Black: To do what?
What was your burden of proof put on here?
Mr. Edward R. Neaher: The burden of proof put on us to show -- you might say to show that the rule wasn’t bad despite it’s per se lingual to show that the rule wasn’t bad.
Justice Hugo L. Black: Your claim is you did that, did you not?
Mr. Edward R. Neaher: We claim we did whatever we could to demonstrate it.
Justice Hugo L. Black: Well, do you claim that you have met the burden of proof so that it was attributed to the trial witness.
Mr. Edward R. Neaher: We say we did what we were required to do- -
Justice Hugo L. Black: I understood you to say you would have thought, you had to carry the burden of proof.
Mr. Edward R. Neaher: Yes, but I’m saying --
Justice Hugo L. Black: And you claim that you did.
Mr. Edward R. Neaher: I’m saying --
Justice Hugo L. Black: And you found you did not, isn’t it?
Mr. Edward R. Neaher: No, they did not find that, Your Honor.
They said -- well, let me put it this way.
They said we showed no justification.
Justice Hugo L. Black: Well, isn’t that the issue?
Mr. Edward R. Neaher: But wouldn’t the issue be that --
Justice Hugo L. Black: But isn’t that the main issue.
You used it yourself a moment ago that you are justifying your position and they found you did not.
Mr. Edward R. Neaher: Well, I think that perhaps I’m getting put into a position here that is not my position.
My position is this and it simply this, that the Commission must base its order on substantial evidence and cannot base its order on antitrust principles alone.
That’s my key position.
Justice Hugo L. Black: But if is your burden to prove the other thing, couldn’t you?
Mr. Edward R. Neaher: Well, we don’t believe it is our burden to establish the substantial evidence by which the Commission had to condemn and/or prove the rule.
Justice Hugo L. Black: You mean you don’t believe it’s your burden to justify that –
Mr. Edward R. Neaher: That’s right.
We don’t believe it’s our burden to justify.
We believe that the justification occurred when the Shipping Act itself was enacted; that Congress found the justification for conferences and their agreements by enacting the Act and the Act set up the standards the Commission was to apply in judging whether an agreement was entitled to or not entitled to antitrust exemption under the Act.
That’s our position in essence.
Justice Hugo L. Black: And it was your burden to show that?
Mr. Edward R. Neaher: It has nothing to do with burden.
Justice Hugo L. Black: But whose burden do you think it was?
Mr. Edward R. Neaher: I think it was the Commission’s burden to see to it that there was substantial evidence to support its order and that if it’s order is not substantially supported, it must be set aside.
It isn’t a question of burden of proof.
They say this isn’t a trial.
We don’t have a burden proof unless we are defending as we would do in the trial.
Justice Byron R. White: Let’s assume there’s only one thing that is put in this record that the Commission says that here is a agreement which amounts to boycott and these kinds of agreements are normally anticompetitive, very anticompetitive and they ask you, “Would you please justify this because we’d like to approve it.
It is necessary in the public interest”.
You say, “Sorry, you were coming forward with nothing.
It’s your burden to show that it’s contrary to public interest”.
The Commission says, “We think it is contrary on its face because it normally would have anticompetitive consequences and unless there’s some justification for suffering these anticompetitive consequences, we’re going to disapprove the agreement”.
And, you remain silent; it goes to the Court of Appeals and you claim lack of substantial evidence, which is precisely what you are claiming here and you say you must win in that case.
Mr. Edward R. Neaher: I think so based on the legislative history.
Justice Byron R. White: You would lose in that case, would you lose here?
Mr. Edward R. Neaher: If we lost in that case, we would be lose here.
Well, I am afraid -- I don’t know what would happen here, Your Honor, and like crystal ball is not that clear.
Justice Byron R. White: Yes, thank you.
Mr. Edward R. Neaher: I’m sorry.
I want to say that if the legislative history of the Shipping is examined originally as adopted by Congress in 1916 and as it’s intentions and purposes were affirmed when the dual rate law amended that Act in 1961, it is very clear that when Congress itself devised the standards by which competitive agreements are to be judged, this Court, in the Carnation case, itself pointed out that the language of that provision, referring to Section 16, must have been selected as a matter of deliberate choice in order to indicate the extent to which the industry’s rate-making activities remain subject to the antitrust laws as well as to the extent to which those activities are exempted from antitrust regulation.
And, I’m saying, for the Commission to come in and say “you have an anticompetitive agreement here” is not the end of the inquiry; it’s the beginning of it.
It is the beginning of an investigation to determine whether that anticompetitive agreement on its face is as bad as it might be deemed to be if we were applying domestic antitrust concepts to this area of international commerce.
This area of international commerce, as Congress has clearly pointed out, is not one in which our domestic antitrust concepts, traditional concepts can be fully applied.
The Atlantic Ocean is an area of free trade for all nations of the world.
It is true that when the Shipping Conferences or vessels – which represent those nations, there’s some 15 nations represented in this conference.
When they get together and form a conference and ask for exemption from our antitrust laws, we don’t say that they are not to be subjected to some antitrust regulation but we say that Congress carefully marked out what the limits of the antitrust application was to be and the antitrust application was phrased in terms of, do you, the Commission, find this agreement detrimental to the commerce of the United States if you do disapprove it but if you don’t, it is not left to your discretion?
“Whether to approve or disapprove, you shall approve all other agreements”, says Congress.
Secondly, do you find this agreement contrary to the public interest?
If you do, disapprove it but if you don’t find it so, you must approve it.
The same goes, whether it’s discriminatory, unjustly discriminatory as between carriers or whether it violates some other provisions of the Act such as Section 14.
Justice Abe Fortas: But suppose the carriers -- follow my Brother White’s questioning, suppose the carriers got together and they adopted the rule to the effect that none of the carriers will transport steel unless it was made by United States Steel, a single carrier.
Mr. Edward R. Neaher: I should think that would be -- are you saying the terms of the agreement or that the agreement that --
Justice Abe Fortas: Suppose you adopted such a rule and then the Commission started a proceeding, the Commission challenged that rule, and started a proceeding in which a staff challenged that rule on the grounds that, it was contrary to the public interest, is it your position that they would have to come forward with proof that that is contrary to the public interest or with the burden of going forward and the burden of proof as a substantive matter in those circumstances be on the carriers?
Mr. Edward R. Neaher: I think that if the agreement stopped with that, that they would only carry the steel of United States Steel, that would run squarely a foul of that Section which says you can’t approve an agreement which is unjustly discriminatory to import as or export as in that sort of thing.
You have to worry about public interest thing.
Justice Abe Fortas: Well, alright but similarly, if change of facts and the carriers come forward with some other rule that on conventional theories of competition, it appears to be anticompetitive and perhaps therefore in the lexicon or folklore anyway, perhaps of our jurisprudence and therefore contrary to public interest.
Isn’t the burden of going forward on the carriers?
Mr. Edward R. Neaher: Well, the only answer I can again is this; I think that Congress has said, “If the Commission finds that an agreement operates contrary to one or more of the statutory standards, then it shall disapprove the agreement.
I don’t think the question is really one a burden of proof.
I think it is one of whether when the Commission makes the finding, the finding is supported by substantial evidence, if that is so.
Justice Abe Fortas: No, but quite your substantial evidence turns and pried upon who has a burden of going forward.
I mean that that’s no answer to it and I respectfully suggest because the question is; who has the burden of going forward and producing evidence at each point as --
Mr. Edward R. Neaher: Well --
Justice Abe Fortas: You start off with the rule and then as evidence is submitted at each point as evidence is submitted, the question of burden is relevant and may be critical on the question of substantial -- on the issue of substantial evidence.
Mr. Edward R. Neaher: I think I have to respectfully differ with that because I believe that what Your Honor is saying here is that ordinary rules of burden of proof as applicable in a court of law and adversary proceedings shall apply to the Commission’s determinations when it is exercising the responsibility placed on it by the Shipping Act.
And I’m saying that when the Act was amended to insert the contrary to the public interest standard in Section 15, the Commission itself told the Congress that it did not want that standard expressed in a way which required the Commission to affirmatively find that an agreement was in the public interest before it could approve it.
Now, that was the way the House had originally passed its Bill to amend Section 15 and we cite the legislative history which shows that the Commission said there are many times when conferences come forward with agreements which we couldn’t find to serve any public interest purpose but we don’t want to be -- but these agreements do not violate one of the standards of the Act.
We don’t want to be in the position of having to affirmatively find that these agreements are in the public interest.
We wanted phrased in the conventional terms that these agreements shall be approved unless we find them contrary to the public interest.
The Senate, the House itself then amended its original Bill to incorporate the language in that form.
The Senate made a slight change so that it appears as it now does you must -- you shall disapprove agreements which would operate to the depth of commerce and which are contrary to public interest operate unjustly or discriminate unjustly, etcetera.
Justice Abe Fortas: Is there any in the industry in this nation that has such a franchise?
Mr. Edward R. Neaher: I think, I’ll have to say I know of no other but I know of no other industry that doesn’t also happen to be fully within the control of a United States regulatory agency.
That is to say the Shipping Act is a recognition by Congress that the Atlantic Ocean is not our lake; that it happens to be an ocean, which is as much -- has as much commercial interest for other nations of the world as it has for the United States.
That is to say our foreign commerce can also be the foreign commerce of another nation.
And, Congress, in enacting the Act, recognized that the only in which destructive competition which experience had taught was the kind of competition that resulted when there wasn’t a voluntary self-regulation; that that kind of competition was bad for the public interest; that it resulted in cut throat practices, under handed agreements, deprive the public of regularity and dependability of service and stability of rates and Congress said the only way we cannot accomplish this is to get these carriers to agree to enter conferences, which will be subjected to the supervision of a regulatory agency that we set up under reasonable standards of regulation.
And, I’m saying, Your Honor, that when an antitrust concept per se illegality is applied to a conference agreement or rule as the case may be, we are applying our traditional antitrust concepts in their full vigor contrary to what Congress said should be done in this particularly industry.
Now, therefore, I say --
Justice Abe Fortas: When you get around the reading this Court’s central opinion, I think you’ll find some statements on that subject that is to say that -- to the effect that where there is an exemption from the antitrust, from our usual antitrust philosophy that there is a necessity of looking at the practice and why it is accepted that in that context in any event, private agreements are not to be accepted without any inquiry.
Mr. Edward R. Neaher: I am well aware of that ordinary rule.
To me, that is an ordinary antitrust rule domestically namely; that he who seeks the benefit of an exemption from the --
Justice Abe Fortas: Railroads aren’t subject to the ordinary antitrust rules --
Mr. Edward R. Neaher: But it’s a domestic operation, Your Honor.
It is not an international shipping operation.
The railroads are fully subject to the control of our regulatory agents.
As a matter of fact, the ICC has much broader powers.
In fact, the ICC is entitled to disregard the anticompetitive effects at it did in the recent case, I think the Denvery O’Grand case where a merger was approved which would have been in violation of the antitrust laws because it served the public interest from --
Justice Byron R. White: What case is that?
Mr. Edward R. Neaher: The Denvery O’Grand case.
I believe this --
Justice Byron R. White: I don’t think that case said that they are entitled to disregard the anticompetitive --
Mr. Edward R. Neaher: I didn’t mean it in that (Voice overlap)
Justice Byron R. White: They are entitled to override them.
Mr. Edward R. Neaher: Override them --
Justice Byron R. White: Or based on some evidence?
Mr. Edward R. Neaher: Based on some evidence.
Justice Byron R. White: And some reason?
Mr. Edward R. Neaher: Right, and I am saying --
Justice Byron R. White: And that of some reasons (Voice Overlap)
Mr. Edward R. Neaher: That is right.
And I am saying that what the Commission refers to here as a per se group boycott could be overwritten by -- that is to say there could be evidence and there could be reason and we say there was neither reason or evidence here other than the fact that it was per se illegal and that as the dissenting Commissioners pointed out, that subject was not even explored.
Justice Byron R. White: Well, I think it comes down to -- there is substantial evidence to support this agreement where the only evidence there is in the case, let’s just assume the case that is an agreement which normally on its face is quite anticompetitive and there is no other evidence, no other reasons given as to why the public interest should suffer these anticompetitive consequences.
And that if an order of the Commission is like that just based on the contract, isn’t supported by substantial evidence, then you’ve got a strong case.
But there must be some other reasons given or some evidence to override the contrary, the Anticompetitive Act, then you reached the question, or who is supposed to come up for these reasons.
Mr. Edward R. Neaher: May I -- right.
And, Your Honor has stated exactly our position that the question here is basically -- was the Court below correct in its view of this, in its appraisal of this record that there was not substantial evidence to support what was done.
But I would like to add, so long as we are talking about reasons, why this tying ruleserves a reasonable purpose.
Justice Byron R. White: Very well.
Mr. Edward R. Neaher: Two-fold standpoint, The tying ruleis a rule where by certain selected agents, travel agents, traditionally serving the steamship trade, have been appointed by the lines as their agents sort of exclusive dealing arrangement.
They are not just any agent.
They were carefully selected agents.
And in the early days of shipping here, many of these selections grew out of the fact that since so many nations of the world come here, they are selected on a nationality basis, for example.
And why are they selected?
Because of their nationality and other ties; they control traffic.
They control the passengers.
Just as in the dual rate system, the conference gives a lower rate to get the exclusive patronage of the shippers who are going to commit the transportation of their goods to the conference carriers for the benefit they received.
These agents do receive benefits as to say it’s not enough.
We think otherwise.
But the point is, --
Justice Byron R. White: And the Commission agreed with Aster.
Mr. Edward R. Neaher: No, no (Voice overlap)
Justice Byron R. White: They exercised their judgment and said that there are no reasons which really justify this.
Mr. Edward R. Neaher: The Commission didn’t agree with Aster to this extent.
Aster had said to the Commission, the 7% commission rate that these lines are paying us is an unlawful, non-compensatory rate.
The Commission said on this record, we cannot make that finding.
We cannot find it’s unreasonably low.
We cannot find agents are losing money.
As a matter of fact, evidence we’ve cited in our Brief shows they are holding their own even vis-à-vis airlines; that more and more agents are applying for conference appointment obviously not terribly concerned about group boycotts.
And as a matter of fact, findings were made with respect to the tying ruleby the examiner uncontested.
No agent ever lost his appointment because of the tying rule.
Justice Potter Stewart: But you do disagree whether the estimation did conclude that there were no factors in this record which indicated that public interest requires the approval of this agreement.
Mr. Edward R. Neaher: Well, I’m saying -- I was about to give you some reasons.
Justice Potter Stewart: I know but I’m just saying that you gave the reasons to the Commission, as I take it, but the Commission disagreed with you.
Mr. Edward R. Neaher: Right.
And here’s what --
Justice Potter Stewart: And you want us to disagree with the Commission (Voice overlap)
Mr. Edward R. Neaher: I don’t want you to disagree with the Commission at all.
I very much like you to agree with the Court below and I suppose you have to undertake now a de novo --
Justice Potter Stewart: You want us to approve the Courts below disagreeing with the Commission?
Mr. Edward R. Neaher: That is right, on the basis of no substantial evidence.
But what I was about to say was, that the commission brushed aside the tying rule by saying to us, “You don’t have one in the Caribbean Cruise Trade.
Well, the answer to that is, we don’t have a conference in the Caribbean Cruise trade and the reason we don’t have a conference in the Caribbean Cruise Trade is that it differs essentially in character from the Trans-Atlantic Passenger Trade.
It wasn’t investigated but it’s common knowledge that steamships come and go in the cruise trade.
They commit themselves to no regularity and frequency of service.
They frequently cancel sailings.
They go where they make money.
The conference is necessary because in it, a group of carriers agree that all year long, good season, bad season, they will maintain a regular service across the Atlantic.
That means that while they can fill their ships in the summer months when it’s pleasant to travel, eight or nine months of the year, they must go over with more crew than they have passengers.
So, it is essential to them to try to assure, just as the cargo vessels must assure, the loyalty of the merchants, if you can call them at upon -- on their patronage depends.
So the tying rule and it’s set forth that it’s not absolute.
It says you can’t do it without permission but they say the record shows it’s enforced.
The tying rule ties these selected travel agents to the patronage of these lines all year long so the lines can try to fill their ships with these many passengers in four season as they can to be able to maintain the financial stability they need in order to provide the regularity of service, and frequency of service, and dependability which is in the public interest.
That’s point one.
The other point is this; if you say a travel agent is no longer tied to the conference, what happens to the conference?
Why should a line remain in a conference if it can get these agents without having to belong to the conference?
And therefore, we get down into some fundamental philosophy.
We say that Congress recognized that conferences were justifiable, that they were desirable though they had abuses and needed regulation and that the only way they could effectively exist was to give them reasons why they should be.
Justice Abe Fortas: Are you saying that without these travel agent rules these conferences would go out of existence?
Mr. Edward R. Neaher: I’m not saying they would.
I’m saying a strong inducement for keeping the lines in the conference would be lost.
Justice Abe Fortas: You mean the travel agent rule is unimportant to the conference?
Mr. Edward R. Neaher: We maintain it is.
We maintain it is a fundamental rule of a passenger conference.
Your Honor will remember that the dual rate decision of this Court, 1958, created a tremendous furor in the shipping industry because it was pointed out that most of the trade conferences depend upon the dual rate contract system as (Voice overlap)
Justice Abe Fortas: You mean whatever --
Mr. Edward R. Neaher: -- based on their trade that’s why they aren’t.
Justice Abe Fortas: But if it’s a violation of law I suppose you would agree it’s a violation of --
Mr. Edward R. Neaher: If it’s a violation of law -- let me put it this way.
If it’s a violation of the Shipping Act -- that’s what we’re saying.
Justice Abe Fortas: If it’s a violation of Shipping Act, it’s a violation of the shipping trade?
Mr. Edward R. Neaher: Right, and even if it shown to be such by substantial evidence, our goose is cooked.
That’s really what we say.
If the Court concludes that the agency found that these two rules should be condemned as violative (Voice overlap).
Justice Abe Fortas: Then the conference will go out of existence, are you making that representation?
Mr. Edward R. Neaher: I’m not prepared to say that conference -- I’m not prepared to represent that to the Court.
I’m simply saying that in a passenger conference --
Justice Abe Fortas: And then the Conference also regulates rates?
Mr. Edward R. Neaher: The conference also regulates rates.
Justice Abe Fortas: What you’re saying to us is that if we don’t, that if we don’t validate the order of the Court below despite the other powers and functions of the conference, the conference will go out of existence?
Mr. Edward R. Neaher: I’m only telling, Your Honor, that the Alexander Report, which we cite in our brief, pointed out that the control of agency forces was a principal object of a passenger conference.
Remember, a freight conference’s principal reason for being is the control of freight rates.
Justice Abe Fortas: But that didn’t include of a passenger conference.
Mr. Edward R. Neaher: Uniformity of passenger fares is --
Justice Abe Fortas: Well, that’s control --
Mr. Edward R. Neaher: Well, it is in a way --
Justice Abe Fortas: -- passenger fares.
Mr. Edward R. Neaher: It is in a way.
I have to agree to that.
And, I’m not saying that there wouldn’t be other reasons but I’m saying this; that a strong inducement for remaining in the conference is the existence of the tying rule and also of this unanimity rule.
And I didn’t have time and I do want to point out that there are reasons also why the unanimity rule should not have been condemned out of hand in this way and that is this.
Congress, in the 1961 legislative debate over the dual rate law, pointed out that in most conferences the American flag lines represent a small minority.
In these conferences, there are two American lines in one, three in the other.
Now if you say or as the Commission does, that such matters is the rate of commission which is after all a financial matter that enters into the general financial picture of each line may be fixed by a dominant group majority.
You are up to leave the small minority American flag lines right out in the cold because the whole purpose of the unanimity rule on a matter of this sort is to see to it that each line has an effective participation in determining the area of competition on which it is willing to agree.
It means, in other words, that if you say that rate of commission may be fixed by a so-called “majority” that smaller lines with less resources could be driven out of the trade because they could not meet the higher rate of commission that a more financially affluent line could afford to pay.
And the whole idea of the conference, repugnant as it may sound to some, is to try to stabilize that rate of commission which all are willing to live with.
Justice Potter Stewart: Yup, I understand that your argument as a general proposition.
But as I understood here, a good deal of the commission’s basis for its holding with respect to unanimity rule was that of the 25 members of this conference, 7 of them had at behest a peripheral connection with the United States of America and therefore, no real interest in what United States and Canadian travel agents should be paid.
Mr. Edward R. Neaher: My answer to that is two-fold.
No. 1, factually, based on the record, it is inaccurate to this extent.
The record shows there were but four lines in this conference which call that Canadian ports, rather than United States ports on their travels from Europe, tour from Europe.
On the four lines, one of them is a major competitor of the American Lines -- that is Canadian Pacific Station, which sells substantial thousands of bookings here in the U.S. because -- while it is in the record, it’s a common knowledge -- a person living in the middle West of the United States can fly as easily to Montreal and get a ship to Europe as he can to New York.
And, historically, and this is something the examiners seem to have overlooked, although it is well documented in the Alexander Report, there has never been a separate trade between Canada and Europe and between the United States and Europe because first of all the ports of Canada, the seaports of Canada which are used for passenger trade are geographically contiguous to those of the Atlantic, North Atlantic ports --
Justice Potter Stewart: I’m asking for information.
Mr. Edward R. Neaher: Yes.
Justice Potter Stewart: Out of these 25 members, are there any that have very little connection at all with either the Canada or the United States?
Mr. Edward R. Neaher: I think there are three lines, there were three lines at that time that had -- that did not call at U.S. ports --
Justice Potter Stewart: Or Canadian ports?
Mr. Edward R. Neaher: Or they call it Canadian ports.
Justice Potter Stewart: Well, no.(Voice overlap)
Mr. Edward R. Neaher: Oh, I’m sorry, I misunderstood.
All lines call a Canadian port or that another line, all conference members call either at Canadian ports or United States ports.
Justice Potter Stewart: And regularly call?
Mr. Edward R. Neaher: And regularly, that’s right.
As a matter of fact, there are times when Canadian Lines do the weather in Canada must use U.S. ports.
And now that the seaway was open, you have many lines going through into the Great Lakes; some of these Canadian Lines now do that.
The point is that the jurisdiction of the conference agreement, the only trade, the Atlantic passenger trade viewed North America as the terminus on the western end and that included the Canada and the U.S.
The American Society of Travel Agent itself reflects that because it includes the agents of both countries in its organization.
It elects even once in a while a Canadian as president of its organization and has directives from there.
But the point is, that there is no separate trade.
The conference covers the trade as a historical unity growing out of geographical and economic factors.
So there is no rational basis, really for excluding even this minimum number as having no interest in the trade as distinguished from interest in what might be termed “exclusively U.S. foreign commerce”.
Justice Potter Stewart: The ultimate sanction that the Maritime Commission or indeed our Courts have over these foreign trade lines?
Mr. Edward R. Neaher: The ultimate sanction, I would say, is the adoption of regulations that the foreign lines are voluntarily willing to accept.
Now, that may seem extreme but I mean reasonable regulations that they are prepared and when I say “they”, with the acquiescence of their government.
As a matter of fact, when the dual rate law was proposed, the Congress, the House had put some provisions in that Bill which our Department of State said represented an intrusion, an attempt to intrude the jurisdiction of our government into matters which will beyond his jurisdiction, namely saying to anyone before you may belong to a conference and obtain the benefit of our antitrust law, you must agree in advance to subject yourself to the jurisdiction of our Courts.
Now many foreign governments found this extremely repugnant because they didn’t believe, as I say, that the only commerce on the Atlantic Ocean was that of the United States.
Maritime nations of long standing like Great Britain and the Germany and other countries were very much opposed to that.
Justice Abe Fortas: No, but if you look at this in terms of conventional, anti-trust law or conventional law with reference to statutory scheme, and look at it as, from my point of view, cartel law and certainly, the United States has jurisdiction to fly it’s laws, a) to its own citizens; b) to foreign persons doing business here.
Mr. Edward R. Neaher: Right.
Justice Abe Fortas: It’s power would extend to exercising that jurisdiction over cartel aspects of it and you are not arguing, are you, that because of the foreign participation in this conference, the United States does not have jurisdiction to regulate or to abolish a cartel agreement with respect to the fees to be paid, restricting fees to be paid to travel agents here.
Mr. Edward R. Neaher: All I’m saying here is that Congress has made clear that our traditional antitrust concepts cannot be fully applied to this area of commerce.
I am saying, in other words, that decisions in this area must be tempered by a recognition that we are not dealing with the domestic antitrust scene.
Justice Abe Fortas: I agree.
That’s perfectly clear, perfectly clean but on the other hand, this industry is governed like any other industry in the United States by the Constitution and the statutes and the law of the United States.
Mr. Edward R. Neaher: This agreement is --
Justice Abe Fortas: It has no general, this industry, it has no general exemption from the United States laws except as expressly set forth in the statute.
Mr. Edward R. Neaher: Well, I’m not at all to get assured that the Board of Trade of London would agree that this industry is governed by Constitution the United States or the laws of the United States.
Justice Abe Fortas: This in its --
Mr. Edward R. Neaher: That’s what Congress was pointing out.
Justice Abe Fortas: Well, obviously, sir.
You know that I’m talking about this industry and so far as it’s actions in the United States are concerned.
That’s what we’re dealing right here.
Mr. Edward R. Neaher: Alright, I’m not --
Justice Abe Fortas: That’s what we’re dealing right here and (Voice overlap)
Mr. Edward R. Neaher: I’m not disagreeing with that.
Justice Abe Fortas: -- and you don’t get around it by talking about foreign participation and (Voice overlap).
Mr. Edward R. Neaher: No, I’m not trying to do that (Voice overlap)
Justice Abe Fortas: What we are talking about here is what would otherwise, apart from what is permitted by the statute constitute a cartel arrangement with respect to the activities of travel agents from the United States of America?
Mr. Edward R. Neaher: Well, cartel as I know of that often evokes impressions of something evil and to be -- shall we say driven out of existence.
I can only say that I believe it was the intention of Congress not to make any exception in the even handed administration of the Shipping Act because simply because some of the travel agents that served the conference happen to be located in the United States.
I certainly do agree that if the Commission were to find by substantial evidence that travel agents here were suffering something that they shouldn’t be obliged to suffer because of what this conference agreement was doing to them or permitting to be done to them.
I certainly agree 100% with the idea that the Commission has the power to strike it down and should strike it down.
What I am saying is, that in this record, you will find that I believe as the Court, as far judges as you pointed out yourself below did not find it.
It was raised on the basis that it was per se illegal despite, as I say, 40 years of operation in which one would have thought --
Justice Abe Fortas: I follow your argument on this, I don’t follow your argument that seems to indicate some special immunity here but I misunderstood you.
Mr. Edward R. Neaher: I’m not --
Justice Abe Fortas: Other than what is specified in the statute with respect to this domestic U.S.A. activity.
Mr. Edward R. Neaher: I really regret that there seems to be this misunderstanding because certainly it is not my intention to advance theories or positions here which in anyway militate against the power of an agency of this government to do what it is called upon to do to protect our citizens, our commercial interest.
That’s not what I’m saying.
I’m simply saying that I believe the spirit or the purpose or the limits that have been imposed upon this industry were imposed by Congress in the Shipping Act and that the legislative history is fairly clear that Congress recognized that there was a unique area of international trade involved here in which a certain accommodation had to be made, as this Court itself referred to it in the Carnation case -- that it was an accommodation of conflicting interest between foreign maritime nations and our desire, the demands of our domestic antitrust policy, which of course favors free competition which strikes down anything that imposes unnecessary, unreasonable restraints on people.
Justice Hugo L. Black: May I ask you.
Suppose there were no exemptions here from the antitrust law, in your judgment, would this agreement violate the antitrust law?
Mr. Edward R. Neaher: I would have to say it would.
I mean, if we’re talking about the idea that what is it? It’s a concert of action by competitors in effect to fix the price, if you call it, that the price they will pay for a service.
Justice Hugo L. Black: That’s -- I want to ask you that question because I have understood by your argument that -- what has to be proved?
Why is it not over for the Commission on an agreement which would violate the antitrust laws, but for the exemptions to say we will await, prove by the Shipping Lines that authorizes taking this out?
Mr. Edward R. Neaher: Because I think that applying that notion of requiring someone who claims an exemption from antitrust laws to come forward and show he is entitled to it, is not the way Congress has said the Shipping Act shall be administered.
The Shipping Act doesn’t say the Commission may approve an agreement.
It says it must approve it unless it finds one, two, three, four.
Justice Hugo L. Black: But it wouldn’t have decided to put on efforts itself -- that’s what bothers me and it seems to me like you stand up with (Voice overlap).
Mr. Edward R. Neaher: I’m sorry.
Justice Hugo L. Black: -- the violation of the law but for the exemption --
Mr. Edward R. Neaher: I can only say --
Justice Hugo L. Black: -- and that somebody has to prove that it’s --
Mr. Edward R. Neaher: I can only say that substantial evidence must be the basis for its action.
Thank you, Your Honor.
Chief Justice Earl Warren: We will recess.
Mr. Edward R. Neaher: It is perfectly clear, I believe that the antitrust evasion is seeking to reargue here a battle it lost before Congress in 1961 when it was trying to convince Congress that antitrust provision should be incorporated in the amendments to the Shipping Act which were then adopted.
Now, why weren’t they. Senator Claire Angel, who was the manager of this legislation on the part of the House of the Senate.
Justice Byron R. White: (Inaudible)
Mr. Edward R. Neaher: I’m sorry, Your Honor.
I’m quoting now from the Senate document No.100, which is the index of the legislative history of the steamship conference dual rate law.
It’s a convenient abiding which contains everything including the reports referred to in our Brief.
But what I want to say is this; Congress was concerned with two things.
No. 1, if it was going to authorize or confirm that steamship conferences and the activities there under were to be lawful.
Those conferences must be able to be affected. They must have as it was put effective tying arrangements.
Secondly, if they were to be in the interest of the United States, there must be protection for the American flag minority which Congress pointed out with a high cost operators who couldn’t compete on a dollar for dollar basis with lower courts Europeans.
And Senator Angel said, the reason that these antitrust amendments or proposals advanced by the Department of Justice were not adopted.
He put it in rather colorful language.
He said, “We found it wholly impossible” - this is page 462 of the Book I just mentioned – “to authorize what amounted to a quasi monopoly or a semi-monopoly and then turn around and de-authorize it.
There was simply no way to go.
In other words, to march up the hill and say they were lawful, and then march down again and adopt things that would make them unlawful.
And as I say, the tying rule of this passenger conference is precisely the effective kind of tying arrangement that is of importance in keeping this conference together as a conference and eliminating competition for travel agents on the wrong basis, namely; We will get your services because we pay you a much higher rate of commission not because we’re serving the public interest by better ships, better accommodations but because we’re willing to pay you more money”.
Secondly, another concern as I mentioned was the question of protection of American flag minority, the unanimity rule is designed precisely to accomplish that and the proof of the putting there is this; the present Secretary of Transportation, when he was the chairman of the civil aeronautics board, pointed out that the unanimity rule currently in effect in IAAC, the International Association of Air Carriers, was insisted upon by the United States to protect the right of each individual carriers.
Thank you, Your Honors.
Chief Justice Earl Warren: Mr. Sisk?
Rebuttal of Robert J. Sisk
Mr. Robert J. Sisk: Mr. Chief Justice, May it please the Court.
In answer to question posed by Chief Justice, whether the respondents have an opportunity to come forward and justify their rules in the hearings below, let me state unequivocally, there was no surprise.
They were put on notice at the outset of what the issues were, they were well aware of the decision of the DC Circuit Court in -- his Branson case cited at Page 9 of our Brief in which the DC Circuit 1954 had said that, “Actions which invade the provisions of the antitrust laws more than our necessary should not be approved under the Shipping Act.
They were aware of it because hearing counsel had adopted a standard early in the case that called for justification.
They attempted to prove, need or justification that put in evidence in an effort to support each of the arguments which Mr. Neaher has made here to Your Honors, this morning.
They tried and they failed to convince the Maritime Commission, the body whose expertise it is -- in whose expertise Congress has assigned the task of making the judgment.
Justice Abe Fortas: But didn’t the Commission on the Remand Proceedings limit those proceedings to the filing of Briefs in oral argument --
Mr. Robert J. Sisk: As one of, Your Honor (Voice overlap)?
Justice Abe Fortas: -- judgment 533 (a) of the record.
Mr. Robert J. Sisk: The Commission was willing to take evidence, if any of the parties wished to take evidence.
Justice Abe Fortas: Where does that appear?
As I read the bottom of 533 (h) and the Commission said, “We ordered reopening of the proceeding on the remanded issues and the reopening was limited to the filing of Briefs and oral argument by other parties.
Mr. Robert J. Sisk: Well, these respondents are very knowledgeable, Your Honor.
And all --
Justice Abe Fortas: The Commission never said anything contrary to -- (Voice overlap)
Mr. Robert J. Sisk: Commission never said anything contrary to that but the Commission certainly gave opportunity to the parties to make an application to take more evidence if the parties wanted it.
Nobody made such an application.
Chief Justice Earl Warren: Have they ever suggested it?
Mr. Robert J. Sisk: No one has suggested it, Your Honor, because it really isn’t necessary.
There is sufficient evidence in the record.
Even the examiners, I pointed out, is not in disagreement with the Commission.
Chief Justice Earl Warren: Well, assuming it is not, have they ever suggested to ask?
Mr. Robert J. Sisk: Respondents have never asked.
Chief Justice Earl Warren: More effort to put on -- .
Mr. Robert J. Sisk: They have never asked.
Indeed, they put in their evidence that put in everything they had and when they failed with the Maritime Commission for the first time, when they went to the Court of Appeals they suggested they had no burden, no need to put in evidence on this.
That was a switch in their position.
It’s an extraordinary concept.
If it is accepted by the Courts, it will make regulation by the Maritime Commission absolutely impossible in our view.
Now, we do want to point out that not all the anticompetitive acts of respondents have been prohibited by the Commission.
The Commission was very selective indeed.
It picked the extreme anticompetitive measures.
In the case of the unanimity rule, it’s a rule which goes far beyond just an ordinary price fixing but requires price fixing by 100% of the 25 members so that the price freeze stays in effect forever until they can get a 100% to change it.
What the Commission did was to prohibit that, not to prohibit collective action.
They can still take a collective action so that there will be no rate war, commission war among the lines.
They just are required to take that collective action by a somewhat more flexible voting rule.
Mr. Neaher’s statutory construction is not borne out by the status itself which reads, “Before approval, all agreements shall be unlawful”.
It’s only after they were approved that they obtain an antitrust exemption and there was nothing unusual about the standards applied by the Maritime Commission in this case.
The legislative history here refers to has to do with the dual rate legislation which was totally different from what’s involved here.
As we read that legislation, and it did require affirmative legislation, we might point out in order to obtain such approval.
That legislation never impaired the concepts which this Court laid down in the original Federal Maritime Board’s Branson case, which came before this Court.
It merely imposed a right to have dual rate contracts under very limited safeguards.
The international argument has been dealt with in our Reply Brief, the appeal to chauvinism, the arguments that we would be interfering with international comity, these lines are being affected only insofar as their actions apply to agents in the United States.
Justice Potter Stewart: May I ask you a question.
What bearing if any, do you think the Universal Camera case is (Inaudible)?
Mr. Robert J. Sisk: The universal?
Justice Potter Stewart: The Court of Appeals has revealed this record and Universal Camera case was supposed to make that necessary to those Court (Inaudible).
Mr. Robert J. Sisk: We believe that this Court does not have to re-evaluate the record.
This is not a question of evidence in this case but is a question of choice of remedies.
That what the Court of Appeals did was to elect the remedy and substitute its judgment for that of the Commission and rather than apply the doctrine of that Universal Camera case, we suggest the doctrine of this Court in ConSolo against the Federal Maritime Commission as the controlling standard.
However, if this Court is interested in the evidence, it is summarized in our Brief at great length at pages 37 to 49 where we detailed the evidence which supports the findings of the Commission.
We do point out, for example, that the examiner in his opinion at page 421 of the record said that unanimity rule had blocked action by the sub-committee.
That the sub-committee of the Atlantic Conference was the committee that initiated the action and that he did find that the record in this proceeding at page 431 establishes the fact that water carrier bookings have been retarded to a degree and air carrier bookings increase because agents have diverted traffic.
And even the dissents at page 572 of the record says, “there was no doubt in my mind” -- this is the Commission dissent of Commissioner Paterson – “there was no doubt in my mind”, he says at the bottom of 572, “that the unanimity and tying rules have prevented changes and have prevented certain ticket selling services.
In answer to the question of substantial evidence, we refer Your Honors, in addition to those pages to our Brief at page 14 through 16 where we cite the new findings of the Commission.
And, finally, we respectfully call the Court’s attention to the words that Mr. Justice Black in the first Chenery case at 318 U.S. 99 where he said, “A judicial requirement of circumstantially detailed findings as the price of Court approval can bog the administrative power in a quagmire of minutiae” Hyper critical exactions as to findings can provide a handy but an almost invisible glide way, enabling Courts to pass from a narrow confines of law into a more spacious domain of policy.
We submit that that is what happened to the court of Appeals in this case that it chose to make policy instead of leaving back to the Federal Maritime Commission, the body entrusted with that task by Congress.
Chief Justice Earl Warren: Very well.