the motor carriers presented forwarders, in addition to the same quantity discounts offered by the railroads on long hauls, an opportunity to profitably expand their assembling and distributing services. Whereas profitability was strictly limited to the margin between carload and less than carload rates applicable to the line haul when forwarders utilized railroads, further rate concessions were secured when truck transportation was substituted.
The additional rate concessions, which were not available from the already regulated railroads, were in the form of private agreements between the forwarders and the motor carriers. The forwarders charged the shippers a through rate from pick-up to final destination and the motor carriers concurred in this rate. The fee charged the shipper was then divided among the forwarder and the motor carriers on a basis determined from their agreements.
These revenue divisions operated until 1935 when Congress passed the Motor Carrier Act, 49 U.S.C. § 301 et seq. This Act substantially equalized motor common carriers and the already regulated rail common carriers by requiring the motor carriers to publish tariffs naming their rates and charges, forbidding them from charging more or less than their published rates and prohibiting discrimination in the rates charged different shippers.
Under the Motor Carrier Act freight forwarders would be required, as any other shipper, to pay the motor carriers' published truckload and less than truckload rates for their services, thus depriving the forwarders of the satisfactory revenue divisions previously established with the motor carriers. In order to avoid this result, the forwarders filed with the Interstate Commerce Commission their through rates from pick up, through long haul to delivery, concurred in by the motor carriers as "joint rates." In Acme Fast Freight, Inc., Common Carrier Application, 8 M.C.C. 211 (1938), 17 M.C.C. 549 (1939), the Commission held that forwarders were not common carriers by motor vehicle subject to the Motor Carrier Act, and that they could not lawfully establish joint rates with the motor carriers.
The Commission's ruling respecting "joint rates" threatened to curtail the growing motor common carriers' business generated by the freight forwarders. To compensate for this anticipated loss of revenue, certain motor carriers established "proportional rates" applicable to less than truckload shipments (a) to a point of consolidation for movement beyond as part of a carload or truckload shipment or (b) from a point of break-bulk following movement thereto as part of a carload or truckload shipment. These "proportional rates" were lower than the motor carriers' less than truckload rates applicable to local shipments not involving a subsequent or preceding truckload movement by common carrier. In practice the "proportional rates" would be available only to freight forwarders and a few other large individual shippers. In Chicago and Wisconsin Points Proportional Rates, 10 M.C.C. 556 (1938), 17 M.C.C. 573 (1939), the majority of the Interstate Commerce Commission held the proposed proportional rates discriminatory because freight forwarders "will be afforded transportation at rates lower than the rates which will be charged certain other shippers under substantially similar circumstances and conditions."
Chairman Eastman and the other dissenting members of the Commission felt that the work done by the motor carriers for freight forwarders was performed under different circumstances and conditions and therefore different rates would be justified without being discriminatory.
Following the "joint rates" and "proportional rates" cases freight forwarders were required to pay the motor common carriers' published less than truckload rates for the consolidation of and distribution of small shipments. This severely restricted the outlying areas which could be economically served by forwarders. Congressional action was ultimately required to correct the situation.
In 1942 Congress passed the Freight Forwarder Act, 49 U.S.C. § 1001 et seq., to integrate the position of freight forwarders into the overall common carrier transportation industry. The views of Chairman Eastman prevailed and were incorporated as the regulatory scheme selected to balance the interests of the shipping public, the common carriers and the freight forwarders. Chairman Eastman, while concurring in the "joint rates" decision, recognized that "there is need for the adequate public regulation of . . . forwarding companies,"
but stressed a concern for all aspects of the public transportation industry. He stated, "[Freight forwarders] perform a service useful not only to those who have small lots of merchandise or package freight to ship but also to the carriers whose services . . . [they] . . . utilize."
That Congress was concerned with and intended to secure a balancing of interests between the freight forwarders and the common carriers is clearly indicated by the remarks of Congressman Wolverton in support of the Act: "[The] committee entertained the firm conviction that the service rendered by freight forwarders has proved highly beneficial to shippers and, under proper regulation, should be equally helpful to the carriers that perform the actual transportation for the forwarders."
Congress, in adopting the Freight Forwarder Act, rejected the initial Senate proposal which allowed forwarders to enter into joint rate agreements with the carriers. The reason for this rejection was the fear that through the vehicle of "joint rates" forwarders would divert income from the carriers. "[The] tremendous bargaining power which the larger forwarders would have by reason of the great amount of traffic which they control, would inevitably enable them to divert from the carriers performing the actual transportation important amounts of revenue."
Additionally a "joint rates" solution would jeopardize the careful balancing of interests fostered by the Act. "The forwarders have favored the authorization of joint rates as a permanent matter. Upon most careful consideration, however, your committee has concluded that the likelihood of abuse is so great, and injury to the underlying carriers so probable, as to make it imperative, in the interest of the public and for the good of the transportation system of the country as a whole, that Congress should adopt the definite policy of forbidding such rates."
The key provision setting forth the intent of Congress embodied in the Freight Forwarder Act is section 408, 49 U.S.C. § 1008.
"Nothing in this Act shall be construed to make it unlawful for common carriers . . . to establish and maintain assembling rates . . . and/or distribution rates . . . applicable to freight fowarders and others who employ or utilize the instrumentalities or services of such common carriers under like conditions, which differ from other rates . . . which contemporaneously apply with respect to the employment or utilization of the same instrumentalities or services, if such difference is justified by a difference in the respective conditions under which such instrumentalities or services are employed or utilized. For the purposes of this section (1) the term 'assembling rates or charges,' means rates . . . for the transportation of less-than-carload or less-than-truckload shipments into a point for further movement beyond as part of a carload or truckload shipment, and (2) the term 'distribution rates or charges' means rates . . . for the transportation of less-than-carload or less-than-truckload shipments moving from a point into which such shipments have moved as a part of a carload or truckload shipment. The provisions of this section shall not be construed to authorize the establishment of assembling rates . . . covering the line haul transportation between the principal concentration point and the principal break-bulk point."
This action involves an interpretation of Section 408 by the Interstate Commerce Commission and arises from the following background. Montgomery Ward, Inc., employs New Dixie, a motor common carrier, to transport small shipments of textile products from a host of small textile factories in Georgia, North Carolina, South Carolina and Virginia to four assembly stations operated by Montgomery Ward. At these assembly stations the textile goods are consolidated into truckload lots for the long haul movement beyond.
In 1962 New Dixie established assembling rates pursuant to Section 408 which applied to the less than truckload shipments of textile products moving from textile factories to Montgomery Ward's assembly stations. Assembling Rates at Charlotte and Greensboro, N.C., 318 I.C.C. 429 (1962). New Dixie's 1962 tariffs provided that the assembling rates applied only when Montgomery Ward moved the consolidated textile shipments beyond the assembly stations in truckload quantities "over a common carrier by motor vehicle or over a common carrier by railroad."
However, Montgomery Ward utilizes, in addition to common carriers, its privately owned vehicles to perform the long haul truckload movement beyond the assembly stations. Thus, under the 1962 tariffs, New Dixie would charge Montgomery Ward differing rates on the transportation of less than truckload shipments of textile products into Ward's assembly stations depending on the ownership of the vehicle selected for the subsequent long haul truckload movement. If Montgomery Ward employed another common carrier to transport the consolidated textile goods in truckload quantities beyond the assembly stations, then New Dixie charged a lower assembling rate on its corresponding less than truckload transportation into the assembly stations. If Montgomery Ward used its privately owned vehicles to perform the long haul, then New Dixie charged a rate higher than the assembling rates on its corresponding less than truckload transportation into the assembly stations.
At the behest of Montgomery Ward, New Dixie proposed to amend its tariffs, effective November 25, 1963, so that the lower assembling rates would apply regardless of whether the long haul truckload movement beyond the assembly stations was in common carriers or in vehicles privately owned by Montgomery Ward. The Interstate Commerce Commission, after investigation, found the proposed amendment lawful if certain technical revisions were made respecting the definition of "truckload." Assembling Rates to Atlanta, Charlotte, Greensboro, Statesville, 323 I.C.C. 543 (1964).
The plaintiffs, in seeking to have the Commission's ruling set aside, agree that New Dixie's assembling rates may in certain circumstances be available to Montgomery Ward.
They contend, however, that it was the intent of Congress that "assembling rates" could apply only when the line haul truckload movement is performed by a common carrier.
In support of the Commission, the defendants collectively assert that the application of Section 408 does not depend upon the ownership of the vehicle employed in the line haul truckload or carload movement and that no legislative history supports a Congressional intent to authorize assembling rates only if the line haul truckload movement is performed by a common carrier. To the contrary, we find ample evidence in support of the plaintiffs' position.
As already seen, when Section 408 was enacted as the means of preserving freight forwarder service to distant pick-up and delivery points, Congress deliberately rejected a "joint rates" solution to the problem.
The concept of joint rate agreements was rejected in part because of the then prevailing view that freight forwarders were shippers vis'-a'-vis' the carriers and therefore "[joint] rates between shippers and carriers are anomalous."
Primarily, however, Congress abandoned the proposed joint rates because of the harmful result to common carriers' revenues as compared with a system of assembling and distribution rates. "[The] authorization of joint rates between forwarders and the actual carriers would inevitably result in the unjustified diversion to the forwarders of important revenues needed by the carriers to maintain a proper public service . . ."
This selection by Congress clearly indicates a concern not merely with freight forwarders, but an intent to foster the national transportation policy which necessarily includes line haul common carriers.
While the lower rates envisaged in Section 408 are available to individual shippers such as Montgomery Ward who use the services of common carriers in consolidating and distributing property in the same manner as freight forwarders would utilize a common carrier, Congress was careful to exclude such shippers from the regulatory features of the Act. To ensure the freedom of private shippers from regulation, Section 402(c)(1), 49 U.S.C. § 1002(c)(1), provides:
"The provisions of this part shall not be construed to apply to the operations of a shipper . . . in consolidating or distributing freight for [himself] . . . on a nonprofit basis, for the purpose of securing the benefits of carload, truckload, or other volume rates."