MR. JUSTICE BLACK delivered the opinion of the Court.
The North Carolina State Utilities Commission brought suit to enjoin enforcement of an order of the Interstate
This clash between state and federal agencies came about because the State Commission and the Interstate Commerce Commission each claimed the paramount power to fix railroad rates in North Carolina. The North Carolina Commission ordered railroads doing business in the state to charge no more than 1.65 cents per mile for carrying intrastate coach passengers from one point in the state to another. Despite this State Commission order, the Interstate Commerce Commission authorized the same railroads to charge 2.2 cents per mile for the same type of carriage.
The Interstate Commerce Commission asserted its power to prescribe these purely intrastate rates under § 13 (4) of the Interstate Commerce Act. 49 U.S.C. § 13 (4). That section, which is set forth below,
Section 13 (4) does not relate to the Commission's power to regulate interstate transportation as such. As to interstate regulation, the Commission is granted the broadest powers to prescribe rates and other transportation details. See United States v. Pennsylvania R. Co., 323 U.S. 612. No such breadth of authority is granted to the Commission over purely intrastate rates. Neither § 13
Intrastate transportation is primarily the concern of the state. The power of the Interstate Commerce Commission with reference to such intrastate rates is dominant only so far as necessary to alter rates which injuriously affect interstate transportation. American Express Co. v. South Dakota, 244 U.S. 617, 625. A scrupulous regard for maintaining the power of the state in this field has caused this Court to require that Interstate Commerce Commission orders giving precedence to federal rates must meet "a high standard of certainty." Illinois Central R. Co. v. Public Utilities Commission, 245 U.S. 493, 510. Before the Commission can nullify a state rate, justification for the "exercise of the federal power must clearly appear." Florida v. United States, 282 U.S. 194, 211-212. See also Yonkers v. United States, 320 U.S. 685. And the intention to interfere with the state's rate-making function is not to be presumed, Arkansas Commission v. Chicago, R.I. & P.R. Co., 274 U.S. 597, 603; nor must its intention in this respect be left in serious doubt. Illinois Commerce Comm'n v. Thomson, 318 U.S. 675, 684-685. The foregoing cases also stand for the principle that the Interstate Commerce Commission is without authority to supplant a state-prescribed intrastate rate unless there are clear findings, supported by evidence, of each element essential to the exercise of that power by the Commission. We shall now take up the two grounds upon which the Commission set aside the state order.
In effect, the Commission's holding was, and its argument is here, that § 13 (4) automatically requires complete uniformity in intrastate and interstate rates. That argument is in short that under our national transportation system interstate travelers and intrastate travelers use the same trains; for a state to fix a lower intrastate rate than the interstate rate is therefore an undue advantage to the intrastate passengers and an unfair discrimination against the interstate passengers. If Congress intended to permit such an oversimplified form of proof to establish "unjust discrimination," then its requirement of a "full hearing" was mere surplusage. In fact, it need have provided for no hearing at all since it could have easily stated in its legislation that intrastate rates shall never be lower than interstate rates. The argument of the Commission in this regard runs counter to the language of § 13 (4), and would call for a declaration by us that Congress intended by this section to reverse the entire transportation history of the nation. The clause about "persons" and "localities" is, as the legislative history shows, a practical enactment into law of a decision of this Court in the
In Railroad Commission v. Chicago, B. & Q.R. Co., 257 U.S. 563, 579, 580, this Court refused to sustain a Commission order nullifying all state passenger rates because of a discrimination against interstate travelers and against localities. The Commission had found there as here that state and interstate passengers rode on the same trains in the same car and perhaps in the same seats. It had found there, as it did here, that this constituted an undue discrimination against interstate passengers, and it issued a general sweeping order against all intrastate
Discrimination Against Interstate Commerce. One ground of the Commission's order was that the intrastate rates discriminated against interstate commerce as such. The findings of the Commission on which this conclusion rested were that the 2.2 cents interstate rate was just and reasonable; the same trains in general carried both interstate and intrastate passengers; the North Carolina railroads to which the intrastate rates were applied, would have received $525,000 more annual income from the passengers they carried had the 2.2 cents interstate rate been applied; from this the conclusion was reached that intrastate traffic was "not contributing its fair share of the revenue required to enable respondents to render adequate and efficient transportation service."
This conclusion of the Commission, if based on findings supported by evidence, would justify its order. For in Florida v. United States, 292 U.S. 1, 5, we said that § 13 (4) authorized the Commission "to raise intrastate rates so that the intrastate traffic may produce its fair share of the earnings required to meet maintenance and operating costs and to yield a fair return on the value of property devoted to the transportation service, both interstate and intrastate." We sustained the Commission's order there because it was based on findings supported by evidence that the intrastate rate "was abnormally low and less than reasonably compensatory . . . `insufficient under all the circumstances and conditions to cover the full cost of the
The whole argument that it had done so rests primarily on an order made in 1936. At that time, the Commission made a comprehensive investigation of rates throughout the nation, and after elaborate discussion made findings
Furthermore, even assuming that the Commission had previously made a valid 2.2 cents per mile general order broadly applicable to all railroads in the Southern territory or throughout the nation, it does not follow that such a general order must permanently stand as to each and every separate railroad or railroad system. The very nature of such a broad general order requires that it contain a saving clause for future modification and adjustment of particular rates. This Court declared that such a saving clause was essential even at the time that all surplus railroad profits were pooled for the common good of the national system. Railroad Commission v. Chicago, B. & Q.R. Co., 257 U.S. 563, 579; Georgia Commission v. United States, 283 U.S. 765, 772; United States v. Louisiana, 290 U.S. 70, 76, 77, 79.
Such a saving clause left to the state its power to bring about particular changes in the internal intrastate rate structure necessary to keep intrastate revenues as a class in harmony with interstate needs. Railroad Commission v. Chicago, B. & Q.R. Co., 257 U.S. 563, 580. For the Interstate Commerce Commission was "without jurisdiction over intrastate rates except to protect and make effective some regulation of interstate commerce." Illinois Commerce Comm'n v. Thomson, 318 U.S. 675, 684. Consequently, no one but the state had power to readjust its internal intrastate rate structure. This it undertook to do by a hearing focussed upon the state railroads individually and collectively. Four railroads were denied the increase,
In the proceedings before the Interstate Commerce Commission, the state and the Price Administrator presented these issues which the State Commission had considered. Both the railroads and their adversaries offered evidence on the points. There was evidence that the four railroads were carrying more passengers and more freight, and were more prosperous than they had ever been in their history. This evidence showed that they were in the highest excess profit tax brackets, and that somewhere between 80 and 90% of all their profits were subject to be paid for federal taxes.
There was evidence offered by the railroads, which indicated that their 1942 per mile net cost of carrying coach passengers was under or about 1 cent. The Commission had found facts in the 1936 report, 214 I.C.C. at pp. 216, 266, which indicated a mileage coach passenger cost of 3.25 cents. Evidence of the four railroads also showed their average revenue increase since 1936 had been approximately 250%. This great revenue increase transformed a 1936 $16,426.00 deficit of six North Carolina roads, including the four here involved, into a 1942 $26,699,988.00 profit. Most of this increased profit was shown to have been derived from passenger revenues.
All of this evidence and much more to which we might advert was sufficient to show that the Commission might have found, had it made any findings on the subject at all,
Because the order of the Commission was not based on adequate findings, supported by evidence, the District Court should have declined to enforce its order. The judgment of the District Court is
MR. JUSTICE REED, dissenting.
The Court has set aside an order of the Interstate Commerce Commission which was entered May 8, 1944, on a Commission report of the preceding March 25th. 258 I.C.C. 133. The order covered investigations instituted
Without summarizing the entire report we call attention to a finding which it contains that traffic moving under these lower intrastate fares is not contributing its fair share of the revenues required to enable appellees (the interstate carriers) to render adequate and efficient transportation service and that this "unlawfulness should be removed by increasing" the intrastate fares to the level of the interstate fares. 258 I.C.C. 154, 155, Findings 5 and 6. This finding, if supported by evidence, is in our opinion sufficient to justify the applicable order of May 8th which is under review in this appeal. That order required the carriers to maintain and apply intrastate fares on bases no lower than those applied by the carriers in interstate transportation to, from and through the four states.
The Interstate Commerce Commission has the power to make this order on a valid finding of such discrimination against interstate commerce. 49 U.S.C. § 13 (4). It has long been established that this section delegates a valid power of regulation of intrastate rates to the Commission. Railroad Commission v. Chicago, B. & Q.R. Co., 257 U.S. 563. Cf. Minnesota Rate Cases, 230 U.S. 352,
The petitions were filed by the carriers, the investigation was made and the order under dispute here was entered to coordinate the intrastate passenger fares in these four states with the passenger fare structure of the entire country. 258 I.C.C. 133. There had been a number of recent proceedings involving the national structure. The evidence, which will be referred to later, presented in those proceedings is, we think, properly to be considered in this investigation and the power of the Commission to require intrastate fares to conform to interstate fares in the four states is to be appraised in the light of a purpose to establish a national passenger rate structure. The Court apparently accepts as a premise the contention of the states that the present proceeding is an isolated investigation by the Commission into an application by the respective carriers in the four states to have their intrastate fares raised to the level of their interstate fares because the intrastate earnings were below a fair proportion of the carriers' total required income.
Basic Interstate Fares. The basic passenger fares were first investigated on a national scale by the Commission in Passenger Fares and Surcharges, No. 26550, decided February 28, 1936. In this proceeding carrier coach and pullman fares respectively were fixed at not to exceed 2 and 3 cents per passenger mile. 214 I.C.C. 174, 256.
After the ten per cent increase, the railroads of southern passenger association territory filed, on July 14, 1942, a petition in Passenger Fares and Surcharges, No. 26550, seeking a modification of paragraph 3 of the conclusions, 214 I.C.C. at 257, to enable them to file tariffs increasing their coach fare to 2.2 cents (2 cents plus 10 per cent). The Commission ruled that its former decision in No. 26550, 214 I.C.C. at 256, permitted all railroads, respondents therein, which included applicants, to charge a basic fare of 2 cents and that a general increase of 10 per cent on these rates had been authorized in Ex parte No. 148, and that therefore the Commission could and it did authorize the application of the 2.2 cent basic rate to interstate rates in southern territory. The Commission by order of August 1, 1942, directed that the petition in No. 26550 be denied, evidently because the order in that number had been superseded by the "Increased Rates" proceedings, Ex parte No. 148, and that its order in Ex parte No. 148 be modified to effectuate this increase and that it be left otherwise unchanged.
The foregoing references make plain that beginning with the comprehensive investigation of passenger fares, which was instituted by Commission order of June 4, 1934, and resulted in the order of February 28, 1936, 214 I.C.C. 174, the state regulatory authorities have not only been advised of the rate proceedings but have participated in
The southern railroad passenger rate problem was stated in the terms of "what reasonable fare basis will meet with the greatest revenue response from the public?" 214 I.C.C. at 201. The conclusion of the Commission is thus summarized at page 255, finding of fact No. 11:
"Giving appropriate consideration to all of the evident circumstances and conditions which are likely to affect the ultimate revenue result to respondents, a maximum-fare basis, one way and round trip, for general application, of 2 cents per mile in coaches and 3 cents per mile in pullmans would be most likely to lessen the transportation burden of respondents and to harmonize with present-day economic conditions, with consequent fuller assurance to the respondents of realizing a fair return upon their property investment. There is doubt whether at least in the southern district a coach fare of 1.5 cents per mile is not producing better revenue results for those respondents than would any higher fare, and it may also be that round-trip fares on both coach and pullman traffic at a lower rate per mile than the one-way fares herein prescribed
This resulted in the following provision by the Commission, at page 257:
"3. The present experimental fares in the southern and western districts and on the Norfolk & Western are not unreasonable or otherwise unlawful."
Obviously this provision was to make clear that the current lower rates of the southern carriers were not disapproved. It cannot properly be read, even though entirely isolated from its context, as a requirement that the southern carriers should continue to apply this lower basis to their passenger fares. The preceding provision limited the regular passenger fare structure of all railroads, including of course the southern carriers now appellees, to a maximum of 2 cents per passenger mile in coaches, without prejudice to lower fares. Lower fares were "discretionary" with the company. The accompanying order limited maximum interstate fares generally to 2 cents and contained no reference to the lower experimental fares. Thus a national interstate basis schedule, universally applicable,
The interstate basis had been fixed at 2.2 cents a few months before. Carriers and states alike had acquiesced. The carriers now wished to exercise the discretion to raise
The preceding paragraphs under "Basic Interstate Fares" demonstrate, we think, that no further hearings or findings by the Commission were necessary to enable the Commission to authorize the application of the national basis of 2.2 cents to their interstate fares by the appellee carriers, instead of the 1.65 cents in effect prior to the order of August 1, 1942.
Discrimination Against Interstate Commerce. The Court holds, however, that even if it is assumed that the order permitting the interstate basic fare of 2.2 cents is valid, it does not follow that the intrastate passenger traffic earnings on the 1.65 cent rate are not contributing a fair proportion of the required total earnings of the road. The Court points to evidence from which the Commission might have found that the 1.65 cent basis, or a lower basis than 2.2 cents, would produce sufficient to meet the intrastate contribution. Evidence is set out in the Court's opinion showing greatly increased passenger earnings. The Court concludes that as such evidence is presented in this record, the Commission must make finding that no lower fare will produce intrastate traffic's proportion of revenue before requiring the application of the interstate 2.2 cent rate to intrastate fares.
This argument, we think, flows from another phase of the same misconception to which we earlier referred as
In this present proceeding the validity of the interstate rate of these carrier appellees was re-examined.
The figures used were aggregate figures for past passenger receipts and expenses. Audits for representative periods showed the estimated amount of additional
The determination of the necessary basic interstate rate in all these proceedings was made on the supposition of intrastate rates of equal level. When general basic rates, fares or charges are fixed by the Commission, the Commission necessarily gives consideration "to the need of revenues sufficient to enable the carriers, under honest, economical, and efficient management to provide" railway transportation at the lowest cost. § 15a. Therefore when interstate rates are fixed with the supposition of an equal level for intrastate rates, for substantially similar service, it requires a contribution on that basis from intrastate rates to avoid intrastate discrimination against interstate traffic. If it appears that interstate fares have been fixed with the supposition of an equal level for intrastate
In the proceeding in which these southern interstate carriers were permitted to apply the general basic interstate coach rate of 2.2 cents, the order therein of August 1, 1942, by adopting the order of January 21, 1942, in Ex parte No. 148, 248 I.C.C. 545, required the appellee carriers to make application to the state authorities for similar intrastate increases. See note 5, supra. The required applications led directly to this litigation.
Both in Passenger Fares and Surcharges, 214 I.C.C. 174, 257, par. 5, and Increased Railway Rates, Ex parte No. 148, 248 I.C.C. 545, 565-66, which are the two investigations which brought interstate coach fares to a maximum of 2.2 cents per passenger mile, the Commission itself ordered the numerous intrastate fares which were under its direction because regulated by the Commission through previous § 13 proceedings, modified in accordance with the interstate fares. As pointed out in the preceding paragraph the order in Ex parte No. 148 required application to state rate regulatory bodies for authority to increase the intrastate passenger rates to the same level. Specific consideration was given to various objections raised by state commissions to the proposed new fares and rates, all with an eye to securing future compliance by the states with the interstate rates to be set by the Commission. See 248 I.C.C. at 560, 565, 574, 580, 582. In the Passenger Fares investigation, the figures on passenger traffic reflect the aggregate use of trains without consideration of a division of the traffic between inter- and intrastate. 214
"At the time the 1920 increase was authorized many of the States prohibited passenger fares above certain amounts per mile, most of them 2 cents or 2.5 cents, and section 13 orders by us became necessary in order to bring the intrastate fares in those States up to the interstate basis."
The tables of passenger statistics in the appendices do not separate the traffic. Revenue from all passenger traffic was the dominant motive. See "Fact Findings," page 253. Evidence in Ex parte No. 148 likewise related to aggregate revenue. So did the expected increases.
"On the basis of traffic, both interstate and intrastate, moved during 1941 and moving when the petition was filed, allowing for readjustments required by commercial and traffic conditions, petitioners estimate that the proposals will yield increased revenue for all class I railroads of about $356,956,000 per year." 248 I.C.C. 552.
The interstate increase of Ex parte No. 148 "became effective on intrastate traffic in all of the States" by state order. 258 I.C.C. at 136. The general considerations on the decline in railroad passenger traffic which motivated the Commission in establishing the new interstate rate applied to both intrastate and interstate traffic. 214 I.C.C. at 176; 248 I.C.C. at 551. As a matter of fact, separation of interstate and intrastate income is not required by the Commission in its annual reports. 49 C.F.R. § 120.11 et seq. These proceedings convince us that the Commission reached its conclusion as to the proper interstate rate with the understanding that the interstate rate would be applied to intrastate traffic and that such revenue as might result from that application was needed by the carriers involved to furnish adequate service.
Under § 13 (4) of the Interstate Commerce Act in proceedings as to unjust discrimination against interstate commerce, the issue is not the earnings from intrastate
The language of 15a has been modified from its original form in the Transportation Act of 1920 so that it no longer specifically empowers the Commission to deal with fares and rates of carriers as a whole for the nation or as a whole in designated territories or rate groups. We think, however, that the present statute, "In the exercise of its power to prescribe just and reasonable rates," the Commission shall give consideration to various named factors, is adequate to permit general rate regulation under 15a and § 1 (5). This power has been unquestioned. See Passenger Fares and Surcharges, 214 I.C.C. 174, and Class Rate Investigation No. 28300 and Consolidated Freight Classification No. 28310. It is the only practicable approach to the problem. See discussion in New England Divisions Case, 261 U.S. 184, 196. We cannot treat the present proceeding as disassociated from the general investigation into passenger fares. United States v. Louisiana, 290 U.S. 70, 76-79. We think it is adequately shown that the orders in the general investigation were predicated upon the assumption that intrastate passenger traffic would have an equal basis with interstate traffic for fares.
"The foregoing findings are without prejudice to the right of the authorities of the affected States, or of any interested party, to apply for modification thereof as to any specific intrastate fare on the ground that such fare is not related to interstate fares in such a way as to contravene the provisions of the Interstate Commerce Act." 258 I.C.C. at p. 155.
The remedy for a readjustment of the basic interstate fare or for a separation of the levels of interstate and intrastate fares is by application to the Commission for reopening of Passenger Fares and Surcharges, 214 I.C.C. 174.
We do not consider the other points which are raised by the appeal.
The CHIEF JUSTICE, MR. JUSTICE ROBERTS and MR. JUSTICE FRANKFURTER join in this dissent.
"(1) When used in this section, the term `rates' means rates, fares, and charges, and all classifications, regulations, and practices relating thereto.
"(2) In the exercise of its power to prescribe just and reasonable rates the Commission shall give due consideration, among other factors, to the effect of rates on the movement of traffic by the carrier or carriers for which the rates are prescribed; to the need, in the public interest, of adequate and efficient railway transportation service at the lowest cost consistent with the furnishing of such service; and to the need of revenues sufficient to enable the carriers, under honest, economical, and efficient management to provide such service."
"But the question posed by the Commission's conclusion was whether the particular North Carolina railroads were obtaining from North Carolina's intrastate passenger rates their fair part of such funds as were required to enable these particular railroads to render adequate and efficient service. The Commission made no findings as to what contribution from intrastate traffic would constitute a fair proportion of the railroad's total income. It made no finding as to what amount of revenue was required to enable these railroads to operate efficiently. Instead, it relied on the mere existence of a disparity between what it said was a reasonable interstate rate and the intrastate rate fixed by North Carolina. It thought this action was justified by this Court's opinion in Illinois Commerce Comm'n v. United States, 292 U.S. 474, 485."
Approximate uniformity before 1936 was maintained by the Commission's use of 13 (4) orders to bring intrastate fares into line with interstate fares. The Commission found it more convenient later to secure state adoption of its rates by cooperation through agreement. See Sharfman, The Interstate Commerce Commission II, pp. 287-344.
"It appearing . . . that the proper authorities of all States have been notified of this proceeding, and similar application has been or will be made to the regulatory authority of the respective States for permission to increase similarly petitioners' intrastate rates, fares, and charges;
"It is ordered, That the increased passenger fares as proposed by the said petitioners be, and they are hereby, approved . . ."
"Respondents' revenues under the lower intrastate fares are less by at least $725,000 per annum in Alabama, $500,000 in Kentucky, $525,000 in North Carolina, and $525,000 in Tennessee than they would be if those fares were increased to the level of the corresponding interstate fares, and traffic moving under these lower intrastate fares is not contributing its fair share of the revenues required to enable respondents to render adequate and efficient transportation service."