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December 23, 1970

The National Small Shipments Traffic Conference, Inc., Drug and Toilet Preparation Traffic Conference; Eastern Industrial Traffic League, Inc.; National Retail Merchants Association, Inc.; West Chemical Products, Inc.; and The Halsey W. Taylor Co., and Eastern Manufacturing Confectioners Traffic Association, The National Industrial Traffic League, and The Small Business Administration, Plaintiff,
United States of America and Interstate Commerce Commission, and Eastern Central Motor Carriers Association, Inc., Defendant.

The opinion of the court was delivered by: FRIENDLY


The National Small Shipments Traffic Conference, Inc., and five other plaintiffs, joined by the Eastern Manufacturing Confectioners Traffic Association and the National Industrial Traffic League as intervenors, here ask us to invalidate an order of the Interstate Commerce Commission served on October 28, 1969, predicated on the Commission's report in Small Shipment Rate Revision -- Eastern Central Territory. 335 I.C.C. 547. The United States, nominally a defendant, also attacks the report and order because of alleged adverse effects on small businesses, as does the Small Business Administration which was permitted to intervene. The report and order are supported by the Commission and by Eastern Central Motor Carriers Association, Inc., (ECMCA) which filed the tariff here at issue. We shall refer to the two latter as the defendants and to the other parties as the plaintiffs.


 The report and order constitute the latest efforts to deal with what has become known as the small shipments problem. Its general nature was analyzed by the Commission almost 20 years ago in language which we quote in the margin. *fn1" As a result of the conditions there noted, the railroads almost abandoned the haulage of less-than-carload traffic. The motor carriers have been understandably unenthusiastic about the small shipments thereby thrust upon them, and the Commission has had to combat tariff restrictions designed to fend these off. See Restrictions on Service by Motor Common Carriers, 111 M.C.C. 151, 154-55 (1970). On the other hand, the Commission has been sympathetic to efforts by the motor carriers to make small shipments, characterized as those of 500 pounds and under, pay their way -- properly so since any failure on that score would impose on larger shipments an unfair burden of higher -rate which would handicap the motor carriers in competing for such traffic against rival forms of transport.

 In establishing tariffs, the motor carriers, acting through their tariff associations, have long published elaborate classifications of commodities in an attempt to differentiate those commodities with average, favorable, and unfavorable transportation characteristics. Each commodity is thus assigned a classification, some 100, some below, some above. Broadly speaking the shipping rate was determined by multiplying the rate for carrying 100 pounds of class 100 traffic over an approximation of the distance (the "rate basis") by a percentage equal to the classification number. The charge would then be determined by applying this rate to the weight of the shipment.

 One well-established and apparently generally accepted approach to recovering an appropriate share of the cost of handling small shipments involves the imposition of a minimum per shipment charge. This reflects the fact that any shipment, however small or easy to transport, entails an irreducible minimum of costs for platform handling, billing, and the like. Despite several increases in the minimum charge, ECMCA found this inadequate to deal with the small shipments problem, and in 1961 proposed, inter alia, a new scheme of charges for shipments less than 300 pounds. *fn2" These consisted of flat or "constant" charges, regardless of classification, for each of six 50-pound weight brackets, with per pound charges at a given rate basis decreasing as the weight bracket increased. *fn3" After suspending the proposed schedule of charges and rates and conducting an extensive investigation, the Commission allowed it to become effective on an experimental basis. General Increases-Eastern Central Territory, 316 I.C.C. 467 (1962). The experiment was abandoned first by a few of the larger carriers and then by all, before there was opportunity to evaluate its economic consequences or to test its legality.

 The Eastern Central carriers returned to the Commission with a proposed restructuring of their rates and charges for the transportation of less-than-truckload and any-quantity shipments weighing less than 5,000 pounds; this would also have produced a 4% general revenue increase. The agency, however, disapproved the proposal. LTL COR Rates -- Between East and Territories West, 326 I.C.C. 174 (1966). In June 1968 the carriers tried again, publishing a scale of flat charges up to 200 pounds, with a rate increase on shipments up to 1,000 pounds. When the Commission suspended the rates, the carriers withdrew the proposal and filed new schedules providing for a general percentage increase. However, they continued their studies of the cost of handling shipments in various weight brackets with a view to making new proposals that might be acceptable.

 The tariff at issue, ECMCA Tariff 500 I.C.C. No. MF-A-333 (generally referred to as Tariff 500), filed to become effective February 15, 1969, constituted an effort by the Eastern Central carriers to present the issue of tariff structure independently of revenue need. They assert -- and this is not contested -- that Tariff 500 would not significantly increase aggregate revenue. Its effect would be to leave substantially unchanged for shipments of 100 pounds and under the minimum per shipment charge previously in effect, to impose an increased set of charges and rates (as hereafter described) on shipments between 101 and 499 pounds, to leave unchanged the rates on shipments from 500 to 999 pounds, and to decrease the rates on shipments over 1000 pounds. *fn4" The professed desire of the carriers was the laudable one of establishing a schedule of charges and rates under which each category of traffic would bear its proper share of the transportation burden, so that hereafter any needed changes in revenue derived from this traffic could generally be obtained by percentage increases *fn5" or, if that happy day should ever come, decreases.

 The scheme of Tariff 500 was as follows: *fn6" On shipments of 100 pounds or less, the minimum charge formerly applicable to all weight brackets is to continue with some minor modifications for the shorter hauls. Shipments between 101 and 200 pounds are divided into four brackets of 25 pounds each, and new flat charges are imposed with respect to each. These charges operate in the same manner as a minimum charge since they apply, as do the charges in the 1-100 pound bracket, without regard to classification unless the class-determined rate would produce a higher charge, something that would happen only on articles rated higher than Class 100. In terms of per shipment charges, the result was a substantial increase in the 101-200 pound bracket. Between 201 and 499 pounds the structure is somewhat more complicated since in contrast to the rates and charges imposed on shipments weighing 200 pounds or less, some effect is given to favorable classification characteristics. Any shipment in this bracket, regardless of its class rating, is subject to the flat charge for the 176-200 pound category for the relevant "rate basis," as a minimum. A calculation on the basis of classification is then made to determine whether a higher rate should apply. Rates for Class 100 and higher remain as they were previously. But for classes lower than 100, new class rate scales were constructed as follows: The Class 100 rate (stated in cents per cwt.) for the particular rate basis was divided into two parts. So much of that rate as was determined not to be related to density *fn7" remained constant, the classification ratio was applied to the balance, the two figures were then added, and the result was a new rate for the particular classification. *fn8" Thus, for a distance of 781-800 miles, the new Class 50 rate per 100 pounds for a shipment under 500 pounds would be $4.03 as compared with the Class 100 rate of $5.76, *fn9" though due to the minimum shipment charge of $11.55 for the 176-200 pound bracket the Class 50 Rate would not become effective until the shipment approached a weight of 300 pounds. The effect of this was to increase the rates for the 201-499 bracket as a whole and also, as shown by the example, to raise the percentage relationship of low rated articles to commodities in class 100 and above, although less drastically than in the 101-200 pound bracket where classification under Class 100 was abolished. In the 500-999 pound bracket nothing was changed. For shipments of 1000 pounds and over, classification continued to prevail but the basic rates were reduced, see fn. 4.

 A table annexed as Appendix A to the Commission's report, 335 I.C.C. 579-81, which compares charges per shipment under the old and new schedules, enables one further to assess the effect of Tariff 500 on small shipments in general and on low rated articles in particular. We cite two examples: For the "rate basis" number 800, governing the New York-Chicago haul, the charge for shipments in the 151-175 pound bracket, which averaged 165 pounds, rose from $9.50 (calculated on the basis of the class rate, i.e., $5.76 per cwt. x 165) to $10.70 (the new minimum charge for the 151-175 pound bracket) for Class 100 and from $8.14 to $10.70 for Class 70, an increase of 12.63% for the former and of 31.45% for the latter. For shipments in the 201-499 pound bracket, averaging 324 pounds, the rate on Class 100 remained unchanged but on Class 70 increased from $13.41 to $15.23, an increase of 13.57%, and on Class 50 from $9.82 to $13.06, an increase of 32.99%. This has the effect of changing the percentage relationship which average per shipment charges on articles in the latter classes bear to articles rated Class 100 from 71.86% to 81.62% and from 52.63% to 69.99%, respectively.

 Tariff 500 raised a storm of protests. Acting under § 216(g) of the Interstate Commerce Act, Division 2 suspended the tariff until September 14, 1969, the limit permitted by the statute. Later the carriers voluntarily postponed the effective date until November 16. Extensive hearings were held. In addition to wide opposition from many originators of "small shipments" and their trade organizations, the tariff was challenged by the National Industrial Traffic League, whose members include shippers of all kinds, and by the Small Business Administration in pursuance of its responsibilities under § 8(b)(12) of the Small Business Act, 15 U.S.C. § 637(b)(12), to urge upon the Commission the mandate in § 2(a) of that Act, 15 U.S.C. § 631(a). The complaints fell into two broad categories: Too great a burden was being placed on shipments in the 101-499 pound range, and classification principles were being ignored or greatly impaired.

 In its report and order of October 28, 1969, Division 2 found "that the proposed new rates and charges, on LTL and any-quantity shipments, to apply generally between points in New England and Middle Atlantic territories, on the one hand, and, on the other, points in Central, Northwest, Middle West and Southwestern territories are just and reasonable and otherwise lawful," and ordered that the proceeding be discontinued. A petition for reconsideration by the full Commission was denied on February 3, 1970, and this action was commenced on March 20, 1970. Two days later, Tariff 500 became effective.


 Although none of the parties has challenged our jurisdiction under 28 U.S.C. § 1336, we must nevertheless ...

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