No. 340271

WISCONSIN AND MICHIGAN STEAMSHIP COMPANY v. GRAND TRUNK WESTERN RAILROAD COMPANY ET AL.

Decided September 18, 1964

Assailed rates on motor vehicles from Lansing and Pontiac, Mich., in railroad trilevel cars to Minneapolis, Minn., over routes via Chicago, Ill., or rail-car ferry-rail, and by motor common carrier beyond to destinations in Minnesota, Iowa, North Dakota, South Dakota, and Montana found not shown to be unjust, unreasonable, or otherwise unlawful. Complaints dismissed.

Richard J. Hardy, Frank Mullen, Walter Biene man, and Larry A. Esckilsen for complainants.

James F. Shouman, Joseph J. Nagle, D. W. Markham, William O. Turney, Richard M. Kippen, and Jack Rand for defendants.

REPORT AND ORDER OF THE COMMISSION

DIVISION 2, COMMISSIONERS FREAS, TUCKER, AND TIERNEY

TUCKER, Commissioner:

Exceptions to the examiner's recommended report and order were filed by both the complainants and the defendants, and replies thereto were filed by both parties. Our conclusions differ in part from those of the examiner. Exceptions and requested findings not specifically discussed in this report nor reflected in our findings or conclusions have been considered and found not justified.

By complaints filed March 26 and April 3, 1962, as later amended, the Wisconsin and Michigan Steamship Company and the National Automobile Transporters Association, hereinafter individually referred to as W&M and the association, respectively, or called the complainants, allege that the joint, single-factor rates on motor vehicles in trilevel rail cars from Lansing and

'This report also embraces No. 34037, National Automobile Transporters Association v. Grand Trunk Western Railroad Company et al.

Pontiac, Mich., to Minneapolis, Minn., and in motor common carrier equipment beyond to points in Minnesota, Iowa, North Dakota, South Dakota, and Montana are below a reasonable minimum level in violation of sections 1 and 216 of the Interstate Commerce Act, are unjustly discriminatory in violation of sections 2 and 216(d) thereof, and are in violation of the national transportation policy. The complaint of the association further alleges that such rates are unduly and unreasonably preferential of shippers of motor vehicles at the named origins and unduly and unreasonably prejudicial of other shippers of such vehicles in violation of sections 3 and 216(d) of the act. Substantiating evidence in support of the allegations of unjust discrimination and undue preference and prejudice was not introduced, and those allegations, therefore, will not be considered.

2

The assailed rates were published effective February 10, 1962, by the Trunk Line-Central Territory Railroad Tariff Bureau3 on behalf of the defendants, including the Grand Trunk Western Railroad Company, hereinafter called the Grand Trunk. They are published on a per-automobile basis and on two levels, one applying on vehicles weighing 3,150 pounds or less, known generally as compacts, and the other level applying on standard vehicles weighing more than 3,150 pounds. Both levels of rates include the unloading of the vehicles from rail cars at Minneapolis and delivery to dealers at destination, but the loading of the rail cars at the origins must be performed by the shippers.

Pontiac and Lansing are served by the Grand Trunk, and the rates are published to apply over alternative routes, as follows: (1) Grand Trunk to Muskegon, Mich., the car-ferry service of that carrier from that point to Milwaukee, Wis., thence via connecting rail carriers including the Chicago, Milwaukee, St. Paul and Pacific Railroad Company, hereinafter called the Milwaukee or the Milwaukee railroad, to Minneapolis, Minn., and beyond via Clark Transport Company, a motor common carrier; or (2) Grand Trunk and its connections over various all-rail routes via Chicago, Ill., to Minneapolis, and via Clark Transport Company to points beyond. The latter carrier delivers the vehicles to consignees at destination. Apparently, all ship

2 Allegations there in that the assailed tariff failed to reflect just and reasonable classifications of property in violation of sections 1(6) and 216(b) of the act, and that they provide for unlawful divisions of joint rates in violation of sections 1(4), and 216(c) of the act, were not raised in the complainants' exceptions, and will not be considered in this report.

3In tariff I.C.C. No. C-260.

ments have moved over the rail-car ferry route to Milwaukee, and from thence to Minneapolis by the Milwaukee railroad. The actual overland rail distances over the latter route of movement are shown as 493 miles from Pontiac and 486 miles from Lansing. The distances via Chicago are 679 miles from Pontiac and 605 miles from Lansing.

The facts of record are not in serious dispute. We adopt the pertinent portions of the examiner's statement thereof, as set forth in the appendix hereto, part I.

The examiner found the assailed rates not shown to be in violation of the national transportation policy and such rates over the routes via Chicago not shown to be unjust or unreasonable. We are in agreement with these findings of the examiner. He also found the assailed rates over the rail-car ferry-rail route to Minneapolis, and over the rail-car ferry-rail-truck routes to destinations beyond Minneapolis, to be unjust and unreasonable. With these findings we do not agree, for the reasons hereinafter discussed.

Both the complainants and the defendants filed specific exceptions to the examiner's recommended report and order. The majority concern his analysis of the cost data and related evidence. The examiner had restated the costs, and his treatment thereof is contained in part II of the appendix. Based on this restatement, he concluded that the assailed rates exceed the out-of-pocket costs for performing the service in all instances over routes via Chicago and to many destinations over the car-ferry routes. His resume of basic facts, issues, and conclusions are contained in part III of the appendix.

It is contended on exception that the examiner has excluded from consideration the reasonableness of the rates to destinations beyond Minneapolis. However, the reasonableness of such rates was discussed at pages 22-26 of his report. The rates in issue are single-factor rates, and the unreasonableness of such rates must be shown for the joint through rail-motor service in its entirety. Motor Vehicles from Kansas City to Ark., La., and Tex., 318 I.C.C. 301, 319.

In their argument on exception, the complainants contest reductions made by the examiner in their estimates of the defendants' costs. The reductions allegedly exceed $80 per carload, and the complainants attribute them mainly to adjustments made in the car-ferry and the car-and-rack (trilevel equipment) costs. They except to the examiner's conclusion

that the assailed rates are not shown to be unjust and unreasonable over routes via Chicago, to the narrow basis upon which he relies for his conclusion that the rates are unlawful via the car-ferry routes, and to this failure to recognize or preserve the alleged inherent advantage of the truck-boat route. The complainants also request that we correct the alleged implication in the examiner's report that the Commission is powerless to prevent the destruction of an efficient carrier wherever this results from a rate which meets, or slightly exceeds, the out-of-pocket costs of the "aggressor" carrier. The complainants except to the examiner's conclusion that they do not claim advantages in service and that the evidence shows that theirs are not the low-cost routes, from which the examiner determined that there was not basis for finding the assailed rates unduly destructive. These contentions will be considered below.

The defendants except to the examiner's finding that the assailed rates over the car-ferry route to Minneapolis and to destinations beyond that point are unjust and unreasonable. We are requested to find that the defendants may exercise their managerial discretion to route traffic over alternate routes, the examiner having found that the assailed rates are not shown to be in violation of the national transportation policy and that those over routes via Chicago are not shown to be unjust or unreasonable. The defendants were found to provide the lowcost service, and it is contended that the only premise for finding it unreasonable and unlawful for railroads to exercise their managerial discretion in applying the assailed rates over alternate routes is that the rates will have an adverse or destructive effect upon the existing rate structure. It is contended that the examiner, while restating the rail out-of-pocket costs, in many instances did not support the restatement with details showing the method of concepts used, and several applications of cost technique are said to be incorrect and unsupported by the evidence. These contentions will be hereinafter considered. Specific exceptions are taken by the complainants to the examiner's acceptance of the rail defendants' 6-month experience in the payment of loss and damage claims, to the conclusion that use of present rental paid by the Grand Trunk for trilevel equipment disregards the lower rental paid by the Milwaukee, and to his conclusion that the turnaround time over the routes via Chicago computed by the complainants was excessive and

that the defendants' data were reasonably representative. The defendants except specifically to the examiner's restatement of car inspection expenses at the 100-percent of out-of-pocket level, to the examiner's use of 320 days for active-car days, to his use of the complainants' method of assigning overhead expenses to car costs, and to the examiner's failure to consider car-ferry out-of-pocket costs on the incremental basis used by the defendants. The se exceptions involve contentions which were adequately discussed and considered by the examiner in his recommended report, and we are in agreement with the examiner's conclusions thereon. Matters which warrant further discussion

are hereinafter considered.

The complainants except specifically to the examiner's failure to include a cost for intertrain-intratrain switching at Grand Rapids, Mich. We agree with the examiner, because, to the extent that it is a factor, costing for this service was included in the restated figures for originating and terminating the trilevel traffic, and therefore it should not be separately treated.

The defendants except to the fact that the examiner's restated costs included line-haul switching for the Milwaukee on a carmile basis, while the defendants used the actual number of switching operations involved. The latter method was used by the examiner in computing such costs for the Grand Trunk. We are of the opinion that the car-mile basis used by the examiner is the more reasonable method since it recognizes the expenses for such operations as car-setoffs en route, and the evidence is not sufficiently detailed to warrant use of a figure for the actual number of switching operations.

Exceptions were taken to the examiner's conclusion that in recomputing the car-ferry costs the complainants' basic method would be used but that the out-of-pocket portion of the total expense chargeable to the trilevel equipment would be based on the 80-percent ratio used by the defendants. It is maintained by complainants that the nature of the carriage and its costs are not affected by who performs it, and that water transportation is characterized by a 90-percent variable factor. In considering these costs, the examiner restated the complainant's out-ofpocket cost figure using 80 percent of the operating expenses and 100 percent of return on the car-ferry investment, rather than the 90-percent level used by complainants. This was correct since the costs considered are treated as included in Rail Form A as railroad costs which are for the entire rail movement and