Communications Commission to allegedly poor telephone service now being rendered by The Telephone Service Company of Ohio, particularly through The Ohio Central Telephone Company at Mt. Gilead, Ohio, and contends that the quality of telegraph service now being received in the area served by The Telephone Service Company of Ohio will be adversely affected by the grant of the application.
The Telephone Service Company of Ohio in an independent telephone company, unaffiliated with the Bell System. It conducts a general telephone business in the State of Ohio through various subsidiary and affiliated corporations owning and operating telephone exchanges in various cities and towns in Ohio, including the six communities involved in the subject application. Each of the local telephone companies through which telegraph service is to be rendered under the proposed agency arrangements is in a financially sound condition. The proposed agent and its operating companies have had substantial experience in rendering telegraph service as agent of the Ohio Postal Telegraph-Cable Company in a large number of communities until the merger of the latter company with Western Union in 1943, and as agent of Western Union in a number of communities since merger.
Several references appear in the record of the proceedings before the Federal Communications Commission to allegedly unsatisfactory telephone services now being rendered by the proposed agent, particularly at Mt. Gilead, Ohio, on the basis of which plaintiff argues that the Commission's conclusion that the proposed agent is qualified to provide telegraph service 'is contrary to the evidence.' From a consideration, however, of the evidence which is pertinent to this matter and which is entirely ignored by the plaintiff, it is apparent that the causes of such unsatisfactory telephone service do not reflect upon the telephone company's qualifications or ability to act as an agency for telegraph service as proposed in the application or otherwise indicated that the quality of telegraph service under agency operation will be affected to any greater extent thereby than under present arrangements.
The Commission heard evidence that the inability of the telephone company to provide a quality of telephone service desired by the public has been due to wartime shortages of equipment and trained personnel, and that the telephone company has been making every effort to overcome these deficiencies by the construction and installation of new facilities already on order from the manufacturers. Moreover, the Commission was advised that under the agency agreement between the telephone company and Western Union, the latter will furnish, install, and maintain in all major respects the equipment to be used in the agency offices; and, that a number of teleprinter operators experienced in telegraph operations are available to the proposed agent and that others will be trained by Western Union. Other evidence was considered by the Commission in reaching its conclusion that The Telephone Service Company of Ohio was a competent agent, and the dissenting opinion of two Commissioners states that 'We do not challenge the finding of the majority that, under existing circumstances, the substitution of telephone company agencies for the Western Union offices will result in benefits to the public as well as to Western Union.'
The Court is precluded from substituting its judgment on such matters for that of the Commission.
The record contains substantial evidence supporting the Commission's findings and those findings are, consequently, conclusive. 'The judicial function is exhausted when there is found to be a rational basis for the conclusions approved by the administrative body.'
Plaintiff next contends that it was not accorded a fair hearing, in that there was considered as evidence by the Commission, matters not in the record. This contention, apparently, relates to the correspondence exchanged between the Federal Communications Commission and the Department of Justice on the question of the applicability of the anti-trust laws. It appears, however, that the correspondence in question resulted from plaintiff's suggestion in its 'Brief and Argument' filed with the Commission that the contract between Western Union and The Telephone Service Company of Ohio be referred by the Commission to the Department of Justice for investigation and prosecution under the anti-trust laws. In its proposed Report the Commission quoted the following excerpt from the Department of Justice letter of October 24, 1947: 'We see no merit in the contention that a designation of telephone companies to operate 13 telegraph offices as agents of the Western Union Company would constitute a merger of the telephone and telegraph companies. We believe that the inclusion of the clause which you suggest in your letter would be adequate protection to the Government from the standpoint of the anti-trust laws in the event the Commission decides to approve the application for closure of Western Union's offices at designated points and the substitution of telephone agency offices.'
It does not appear, however, that the Commission considered the above letter as evidence or that it based any findings of fact upon this correspondence either in its Proposed Report or in its Final Report. In its Final Report the Commission stated that in view of the plaintiff's objection to consideration of the correspondence it had given no consideration to the correspondence in arriving at its final decision.
The Court concludes that the record affords no basis for support of this contention of the plaintiff.
Plaintiff next charges that no proposed report as to certain material evidence and issues was prepared and served upon the plaintiff by the Commission, as provided in the Administrative Procedure Act. In paragraph 'Thirteenth' of its Complaint, plaintiff charges that the Commission 'did not pass upon the evidence as to the violations of the anti-trust laws, but asserted merely that its order would not be a protection or defense against a charge of violation of said laws'. The same paragraph of the Complaint states that: 'It was only upon the insistence of plaintiff, in its exceptions and upon oral argument, that the Commission had considered the effect of the anti-trust laws, and has made findings of fact thereon, but no proposed findings on the anti-trust issues or facts were ever submitted to plaintiff, despite plaintiff's insistence at the oral argument and in exceptions, all a part of the record before the Commission, that such procedure was necessary in order to comply with the Administrative Procedure Act.'
While plaintiff does not identify the specific section of the Administrative Procedure Act which it contends has been violated, the Court assumes from the record before it that reference is made to 5 U.S.C.A. § 1007.
Section (a) requires the issuance of tentative decisions in certain cases. The Federal Communications Commission designated a presiding officer to take evidence in this proceeding. The Commission issued a 'Proposed Report' on the application of Western Union Telegraph Company which report meets the 'tentative decision' requirement of Sec. 8(a) of the Administrative Procedure Act. The Commission's Proposed Report was issued in lieu of a recommended decision by the presiding officer who conducted the hearing. Prior to the issuance of the Proposed Report, plaintiff was afforded an opportunity to file proposed findings of fact and conclusions of law, but instead plaintiff filed a 'Brief and Argument' which contended that the Western Union application for approval of the agency contract should be denied because it constituted an 'unlawful merger' of the telegraph and telephone companies, in violation of the anti-trust laws. Plaintiff's argument in this regard was considered and rejected by the Commission.
Plaintiff thereafter filed a statement of exceptions to the Proposed Report, as provided in Sec. 8(b) of the Administrative Procedure Act, these exceptions reiterating plaintiff's contention that the agency arrangement violated the anti-trust laws. Plaintiff's exceptions included a request for oral argument before the Commission en banc, which hearing was granted pursuant to the provisions of Sec. 409(a) of the Communications Act.
At the hearing held by the Commission, plaintiff took virtually the same position contending that the Commission should withdraw its Proposed Report and issue findings on the question of whether the anti-trust laws had been violated. The Commission thereafter issued its Final Report in which it devoted several pages to the consideration of the 'applicability of Federal Anti-Trust Laws.'
The Commission, while holding that it had 'no duty as to enforcement of the Federal Anti-Trust laws' (Italics supplied.), nevertheless stated that 'the effect on competition of a grant of the application before us is a material consideration in applying the standard of 'public convenience and necessity' in Section 214 of the Communications Act.' Thereafter the Commission enumerated the factual considerations on this point which the evidence had brought forth and which the Commission held were such as to justify it in concluding that there appeared to be no reason to deny to the public 'at this time the improved and additional services of value which the subject conversions to agency operation will provide.'
Thus it appears that the Commission carefully considered the plaintiff's contention concerning the anti-trust laws, after affording plaintiff its statutory right to file and argue is exceptions to the Proposed Report. That the Commission did not adopt plaintiff's contention nor accede to its argument does not constitute a violation of the Administrative Procedure Act on the part of the Commission. The purpose of the cited provisions of the Administrative Procedure Act, supra, is to insure procedures by which parties may be fully informed of the issues and proposed grounds of decision and be afforded full opportunity to be heard upon these issues and grounds. Plaintiff was afforded all opportunities required by the Administrative Procedure Act.
Plaintiff further contends that the Commission disregarded its own findings in order to achieve a result violative of law. This contention set out at length but without clarity is the subject of paragraphs numbered 'Eighth', 'Ninth' and 'Tenth', pages 3 to 6 of the Original Complaint. In essence, plaintiff charges that the findings of the Commission as to the applicability of the anti-trust laws were in direct conflict with certain enumerated sections of the testimony offered during the Commission's hearings. Plaintiff challenges the Commission's Report in which the Commission concedes a diminution of competition as reaching a result 'directly in conflict with the basic laws of the country promoting competition and prohibiting monopolies.' Plaintiff further argues on this point that the Commission's findings are in complete abrogation of the Commission's previous position.
Plaintiff further charges the Commission's Report is contrary to evidence relating to Western Union Telegraph Company's proper supervision of the proposed (agency) operations.
The Court's findings upon these points are adverse to the plaintiff because the testimony cited by plaintiff is not the only or predominant testimony upon the several points specified, and as set forth, supra, the Court finds that there is reasonable evidence to support the Commission's findings.
The sixth basis for plaintiff's action charges that 'The Order and Authorization are contrary to the public interest and do not meet the requirements of Sec. 214 of the Communications Act of 1934 as amended (supra).' This section provides that: '(a) No carrier shall undertake the construction of a new line or of an extension of any line, or shall acquire or operate any line, or extension thereof, or shall engage in transmission over or by means of such additional or extended line, unless and until there shall first have been obtained from the Commission a certificate that the present or future public convenience and necessity require or will require the construction, or operation, or construction and operation, of such additional or extended line: Provided, That no such certificate shall be required under this section for the construction, acquisition, or operation of (1) a line within a single State unless such line constitutes part of an interstate line, (2) local, branch, or terminal lines not exceeding ten miles in length, or (3) any line acquired under section 221 or 222 of this title: Provided further, That the Commission may, upon appropriate request being made, authorize temporary or emergency service, or the supplementing of existing facilities, without regard to the provisions of this section. No carrier shall discontinue, reduce, or impair service to a community, or part of a community, unless and until there shall first have been obtained from the Commission a certificate that neither the present nor future public convenience and necessity will be adversely affected thereby; except that the Commission may, upon appropriate request being made, authorize temporary or emergency discontinuance, reduction, or impairment of service, or partial discontinuance, reduction, or impairment of service, without regard to the provisions of this section. As used in this section the term 'line' means any channel of communication established by the use of appropriate equipment, other than a channel of communication established by the interconnection of two or more existing channels: '
Thus the standard required by the statute to be applied by the Commission is that of 'public convenience and necessity' with a finding that 'neither the present nor future public convenience will be adversely affected' by the proposed action. The standard of 'public convenience and necessity' is to be so construed as to secure for the public the broad aims of the Communications Act.
The purpose of the Act as set forth in Sec. 1 thereof is 'to make available, so far as possible, to all the people of the United States a rapid, efficient, Nation-wide, and world-wide wire and radio communication service with adequate facilities at reasonable charges'. 47 U.S.C.A. § 151. The Commission's Report sets forth in detail the effects of the proposed agency agreement upon telegraph service and facilities in the six communities involved; it considered the probable financial effects of the proposal upon the earnings of the companies involved; reviewed the probable costs of the telegraph services to the communities in question; set forth the improved facilities which will result from the merger and, as set forth heretofore, considered as a factor in applying the standard of 'public convenience and necessity' the effect on competition of the grant of the application of Western Union Telegraph Company for the authority for the agency arrangement.
The Court must, in view of these considerations, reject plaintiff's contention on this point.
The final ground for plaintiff's action is that the Order of the Commission May 27, 1948 is 'an abuse of the Commission's discretion and is arbitrary and improper'. The Order of May 27, 1948 denies plaintiff's motion that the record of the Commission be reopened for the purpose of receiving in evidence the current bargaining agreement between Western Union Telegraph Company and the plaintiff. Plaintiff's motion was filed on May 26, 1948. The basis for the Commission's rejection thereof is as follows:
'It Appearing, That, pursuant to the terms of the Commission's Order of April 10, 1947, the Union intervened and participated fully in the proceedings herein; that hearings were held on May 14 and 15, 1947, and a Proposed Report was issued on February 13, 1948; that exceptions to said Proposed Report have been filed by the Union, and pursuant to the request of said Union, oral argument was held before the Commission en banc on March 22, 1948;
'It Further Appearing, That the motion of the Union to reopen the record herein is not timely inasmuch as the existence of the particular contract provisions mentioned above was known by the Union throughout the proceedings herein, and the Union had ample opportunity to offer such provisions for the record.'
The pertinent portion of the contract, which plaintiff believes material and relevant to this proceeding is Article 52(R)(3): 'The Company agrees it will not contract out any work which will result in loss of employment for employees covered by this agreement'. The plaintiff, pointing out that the Federal Communications Commission is familiar with the contract between plaintiff and Western Union Telegraph Company, since this contract was involved in lengthy hearings before the Commission, contends that the Commission having 'over-all control of the Western Union System' should have considered as a part of its action in the present case, the effect of the Commission's action upon the Western Union Telegraph Company's contractual obligations. The record before the Court discloses that the Western Union Telegraph Company filed its application with the Federal Communications Commission on December 27, 1946, amending the application on May 28, 1947. The plaintiff entered its appearance at the hearing held on May 14 and 15, 1947, and was a party to the proceedings, as set out heretofore, at all times thereafter. Under the circumstances the plaintiff had ample and adequate time; to-wit, a full year, in which to file the contract in question. Plaintiff was fully advised as to the advancing state of the proceedings, had filed exceptions to the Proposed Report, and had argued its exceptions to the Proposed Report on March 22, 1948. Filing of the motion to reopen on May 26, 1948 was not timely and the action of the Commission in not reopening the record was not an abuse of the Commission's discretion.
Reverting now to the core of the dispute, the central question is whether the Commission has power to approve an agreement between a telegraph company and a telephone company, if the effect of the agreement is to lessen competition between the companies in a given locality. The Commission says that the effect of the agreement in the present case will be a lessening of competition. We are quite mindful of the plain implications in the opinion in McLean Trucking Co. v. United States, 321 U.S. 67, 64 S. Ct. 370, 88 L. Ed. 544, that, absent a specific congressional permission, an administrative agency cannot validate an agreement between competitors which is otherwise invalid under the anti-trust laws. But not every agreement between competitors is illegal. The question before us is whether the facts in this record reflect a lessening of competition of such substance as to be illegal under the Columbia Steel and similar cases. It is true that the telegraph equipment in these communities is to be in the hands of the telephone company and the initial telegraph service to the customer is to be by a telephone employee. And therein is a lessening of the competition. But the telegraph service to the public remains just as it was, both in character and in extent. It remains telegraph service, over telegraph equipment. And the companies are to retain their respective advertising efforts. The consideration which induce a person to send a telegram instead of making a telephone call, and vice versa, will remain exactly as they are. And the facilities for each service will be made exactly as available to the customer as they are now.
It seems to us, as it did to the Commission and to the Department of Justice, that the lessening of competition reflected by these particular facts is more theoretical than real. We do not have before us a major plan to adopt generally this same sort of agency substitution. If we did, we would have a different problem. But we think that we cannot magnify the miniature factual lessening of competition shown in this instance into a test case for the decision of a major question of law.
As a result of the Court's findings, the defendant's Motion for Summary Judgment is granted. Since the Court has considered this case upon its substantive merits, it is unnecessary to pass upon the motion of the Western Union Telegraph Company for the dismissal of the Complaint.