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02/28/67 Persian Gulf Outward v. Federal Maritime

February 28, 1967




Edgerton, Senior Circuit Judge, Tamm and Robinson, Circuit Judges.




This case comes before this court on petition to review a final order of the Federal Maritime Commission issued and served on July 22, 1966, pursuant to the Shipping Act of 1916, c. 451, 39 Stat. 728, as amended, 46 U.S.C. § 801 et seq. *fn1 The present controversy arises as an outgrowth of activities which were previously considered by this court in Persian Gulf Outward Freight Conference v. Federal Maritime Commission, 124 U.S.App.D.C. 63, 361 F.2d 80 (1966). In that case we affirmed the Commission's order of approval of rate making agreement No. 8900, establishing a second rate making conference in the same trade in which the present petitioner competes. Prior to the establishment of the "8900" conference, the only conference in that trade was composed of both American flag and foreign flag ships engaged in trade between Atlantic and Gulf ports of the United States and ports in the Persian Gulf and waters adjacent thereto. Its authority to set rates derived from Agreement No. 7700, approved May 28, 1946. However, in 1959, the foreign flag carriers withdrew from the conference and sought approval for their own rate making agreement (No. 8900). The defection of the foreign flag carriers came about because:

"an independent entered the same area and transported large quantities of automobiles at rates below those then charged by the carriers in the petitioner Conference. Since petitioner would not reduce its rates to meet this competition the carriers now in Agreement No. 8900 withdrew. After a severe rate war, and in the effort to gain rate stability, they formed this new Conference with the independent carrier." Id. at 81. I.

In an effort to meet the competitive threat posed by the new conference, the petitioner conference filed with the Commission a revision of its tariff providing two rates on some 500 items, one rate to apply if the cargo were carried on American flag vessels, and a second, lower rate if the cargo were carried on foreign flag vessels. The two American steamship lines which make up the 7700 conference have chartered some foreign flag vessels to carry at the foreign flag rate and have also, in one case, transferred owned foreign flag vessels from other trades to the Persian Gulf trade. As noted, petitioner filed its dual rate proposal as a revision of its tariff and not as an agreement or modification of an agreement subject to Commission approval pursuant to the requirements of Section 15 of the Shipping Act. *fn2

Subsequent to the filing of the tariff revisions, an order to show cause issued from the Commission to petitioner, directing it to show why the tariff "revisions" should not be declared unlawful and ordered stricken from the tariff. In the order to show cause the Commission stated that "this proceeding shall be limited to the submission of memoranda of law [and] oral argument."

The petitioner conference submitted a memorandum of law but protested that the Commission was not authorized to take action in this matter until it had held a full evidentiary hearing under Sections 15, 22 and 23 of the Shipping Act, as amended, 46 U.S.C. §§ 814, 821, and 822; Sections 5 and 7 of the Administrative Procedure Act, 5 U.S.C. §§ 1004, 1006; and the Commission's own Rules of Practice and Procedure, 46 C.F.R. § 502.142. Additionally, the conference pointed out that it had filed its rates pursuant to its approved Section 15 Agreement (No. 7700), which stated in Article 1:

"This agreement covers the establishment and maintenance of agreed rates, charges and practices for or in connection with transportation of cargo by members of this Conference."

It further pointed out that a full evidentiary hearing would show that the rates set by the tariff revision were nothing new, having been used in this trade and an adjacent one as well as in the North Atlantic trade before the war. Counsel for the Commission filed a memorandum of law in opposition to that of petitioner, and an oral argument was held before the full Commission.

By a report and order of July 22, 1966, the Commission found that the rates contained in the conference's challenged tariff were not authorized by the conference agreement, ordered the conference to cease and desist from carrying cargo at such rates prior to approval of the rate structure under Section 15, and further ordered that the rates in question should be stricken from the conference's tariff. II.

Petitioner attacks the decision of the Maritime Commission on several bases: It challenges the power of the Commission to issue a cease and desist order without granting the petitioner a full evidentiary hearing on the factual issues it has raised and alleges that the Commission has violated the provisions of the Shipping Act, the Administrative Procedure Act, and its own rules by failing to accord petitioner such an evidentiary hearing. Petitioner argues that Section 15 specifically states that it is inapplicable to tariff rates agreed upon by approved conferences, and contends that the Commission's decision is in error that the rates set by the conference here were in violation of Section 15.

Counsel for the Commission contends that petitioner received an evidentiary hearing by virtue of its filing a memorandum of law and it oral argument before the Commission and that such hearing satisfied all of petitioner's statutory and constitutional rights to a hearing, since there were no disputed issues of fact and the question before the Commission was one of law. Since the Commission's finding that petitioner's dual-level rate agreement was not covered by any Commission approved rate making agreement was a final determination, counsel argues such determination may be enforced through a cease and desist order. Finally, counsel argues that the Commission's determination that the rate structure did not fall within petitioner's basic conference agreement is supported by law and that the Commission properly concluded that petitioner's rate system was an unfiled and unapproved rate agreement which violated Section 15 of the Act. III.

Commission power to issue cease and desist orders : Petitioner urges that the Commission has arrogated to itself power which Congress has repeatedly denied to it. Specifically, it notes that the Commission has asked the Congress in the years 1961, 1962, 1963 and 1965 for the power to issue cease and desist orders before full evidentiary hearings (see, e.g., H.R.Rep.No.498, 87th Cong., 1st Sess., p. 22 (1961); Annual Reports of the Federal Maritime Commission, 1962, 1963; Hearings before the Sub-Committee on Federal Procurement and Regulation of the Joint Economic Committee, 89th Cong., 1st Sess., pp. 384-85 (1965)), and that Congress has just as often refused to grant respondent this power. The case of Trans-Pacific Freight Conference of Japan, et al. v. ...

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