Volkswagenwerk Aktiengesellschaft v. Federal Maritime Commission/Opinion of the Court

The petitioner, a German manufacturer of automobiles, is one of the largest users of the ports on the West Coast of the United States, delivering through them more than 40,000 vehicles each year, the majority transported there by vessels chartered by the petitioner rather than by common carrier. This case grows out of the petitioner's claim that charges imposed upon the unloading of its automobiles at Pacific Coast ports are in violation of the Shipping Act, 1916, as amended. 39 Stat. 728, 46 U.S.C. § 801 et seq. The dispute has a long and somewhat complicated history.

The Pacific Maritime Association (the Association) is an employer organization of some 120 principal common carriers by water, stevedoring contractors, and marine terminal operators, representing the Pacific Coast shipping industry. The primary function of the Association is to negotiate and administer collective bargaining contracts with unions representing its members' employees, of which the International Longshoremen's and Warehousemen's Union (ILWU) is one. in late 1960 the Association and ILWU reached a milestone agreement which, it was hoped, would end a long and troubled history of labor discord on the West Coast waterfront. The ILWU agreed to the introduction of labor-saving devices and the elimination of certain restrictive work practices. In return, the Association agreed to create over the period from 1961 to 1966 a 'Mechanization and Modernization Fund' of $29,000,000 (the Mech Fund) to be used to mitigate the impact upon employees of technological unemployment. The agreement specifically reserved to the Association alone the right to determine how to raise the Mech Fund from its members, at the rate of some $5,000,000 a year.

A committee of the Association investigated various possible formulas for collecting the Fund from the stevedoring contractors and terminal operators-i.e., those Association members who were employers of workers represented by the ILWU. A majority of the committee recommended that the Mech Fund assessment be based solely on tonnage handled, and this recommendation was adopted by the Association membership. Under this formula, general cargo was assessed at 27 1/2¢ per 'revenue ton.' A revenue ton is based either on weight (2,000 1bs.=one ton) or measurement (40 cu. ft.=one ton). Whether tonnage declarations on a particular item of cargo were to be by weight or by measurement was to depend, with one exception, upon how that cargo had customarily been manifested (and reported to the Association for dues purposes) in 1959. The one exception was automobiles, for which there had been no uniform manifesting custom. The Association decided that automobiles were to be declared by measurement for Mech Fund purposes, regardless of how they were or had been manifested.

Unlike shippers by common carrier, the petitioner must arrange and pay for the unloading of its own chartered vessels upon their arrival in port. For this purpose it has since 1954 contracted with Marine Terminals Corporation and Marine Terminals Corporation of Los Angeles (Terminals), which are members of the Association, for the performance of stevedoring and related services in unloading vehicles from the petitioner's chartered ships in West Coast ports, at a negotiated price. Prior to the Mech Fund assessment agreement, Terminals' charge to the petitioner for these unloading services was $10.45 per vehicle, of which about a dollar represented Terminals' profit. When the vehicles were assessed for the Mech Fund by measurement, the assessment came to $2.35 per vehicle-representing, if passed on to the petitioner, an increase in unloading costs of 22.5%. If the vehicles had been assessed by weight (0.9 tons) rather than by measurement (8.7 tons), the assessment would have been 25¢ per vehicle-an increase of about 2.4%, comparable to the average Mech Fund assessment of 2.2% for all other general cargo. Assessment by measurement rather than by weight thus resulted in an assessment rate for the petitioner's automobiles of 10 times that for other West Coast cargo-although automobiles had less to gain than other cargo from the Mech Fund agreement. The petitioner and Terminals both protested these seeming inequities to a committee of the Association set up to handle such claims, but without success.

The petitioner refused to pay any additional charge resulting from the Association's levy, and Terminals, while continuing to unload Volkswagen automobiles for the petitioner, did not pay its resulting assessment to the Association. The Association sued Terminals in a federal court in California for its failure to pay the Mech Fund assessments; Terminals admitted all the allegations of the complaint and impleaded the petitioner as a defendant. The petitioner then obtained a stay of that action to permit it to invoke the primary jurisdiction of the Federal Maritime Commission, in order to determine the following issues:

'1. Whether the assessments claimed from (the petitioner) are     being claimed pursuant to an agreement or understanding which      is required to be filed with and approved by the Federal      Maritime Commission under Section 15 of the Shipping Act,      1916, as amended, 46 U.S.C. 814 (1961), before it is lawful      to take any action thereunder, which agreement has not been      so filed and approved.

'2. Whether the assessments claimed from (the petitioner)     result in subjecting the automobile cargoes of (the      petitioner) to undue or unreasonable prejudice or      disadvantage in violation of Section 16 of the Shipping Act,      1916, as amended, 46 U.S.C. 815 (1961).

'3. Whether the assessments claimed from (the petitioner)     constitute an unjust and unreasonable practice in violation      of Section 17 of the Shipping Act, 1916, as amended, 46      U.S.C. 816 (1961).'

The petitioner then began the present proceedings by filing a complaint with the Commission raising the above issues. The petitioner alleged that the Association was dominated by common carriers which had agreed upon the assessment formula in order to shift a disproportionate share of the Mech Fund assessment onto the petitioner, which did not patronize those common carriers. The Commission, after a hearing, upheld the initial decision of its examiner and dismissed the complaint, with two dissents. The Court of Appeals for the District of Columbia Circuit affirmed, and we granted certiorari to consider important questions under the Shipping Act.

The petitioner's primary contention-supported by the United States, a party-respondent-is that implementation of the Association's formula for levying the Mech Fund assessments was unenforceable, because the agreement among Association members imposing that formula was not filed with the Commission in accord with § 15 of the Act. That section provides that there be filed with the Commission 'every agreement' among persons subject to the Act

'fixing or regulating transportation rates or fares; giving     or receiving special rates, accommodations, or other special      privileges or advantages; controlling, regulating, preventing      or destroying competition; pooling or apportioning earnings, losses, or traffic;      allotting ports or restricting or otherwise regulating the      number and character of sailing between ports; limiting or      regulating in any way the volume or character of freight or      passenger traffic to be carried; or in any manner providing      for an exclusive, preferential, or cooperative working      arrangement. * *  * '

Until submitted to and approved by the Commission, 'it shall be unlawful to carry out in whole or in part, directly or indirectly, any such agreement * *  * .' The Commission is directed to disapprove any agreement

'that it finds to be unjustly discriminatory or unfair as     between carriers, shippers, exporters, importers, or ports, or between exporters from the United States and      their foreign competitors, or to operate to the detriment of      the commerce of the United States, or to be contrary to the      public interest, or to be in violation of (the Act) *  *  * .'

An agreement filed with and approved by the Commission is immunized from challenge under the antitrust laws.

The Commission held that, although the Mech Fund assessment formula was a 'cooperative working agreement' clearly within the plain language of § 15, it nonetheless was not the kind of agreement required to be filed with the Commission under that section:

'Although the literal language of section 15 is broad enough     to encompass any 'cooperative working arrangement' entered      into by persons subject to the Act, the legislative history      is clear that the statute was intended by Congress to apply      only to those agreements involving practices which affect      that competition which in the absence of the agreement would      exist between the parties when dealing with the shipping or      traveling public or their representatives.

'It is not contested that the membership of (the Association)     entered into an agreement as to the manner of assessing its      own membership for the collection of the 'Mech' fund. Such an     agreement, however, does not fall within the confines of      section 15 as, standing by itself, it has no impact upon outsiders. What must be demonstrated before a section 15     agreement may be said to exist is that there was an      additional agreement by the (Association) membership to pass      on all or a portion of its assessments to the carriers and      shippers served by the terminal operators.' 9 F.M.C., at 82      83.

The Court of Appeals affirmed. That court felt itself confined by our decision in Consolo v. FMC, 383 U.S. 607, 86 S.Ct. 1018, 16 L.Ed.2d 131, to determining simply whether the Commission's ruling was supported by 'substantial evidence.' With 'due deference to the expertise of the Commission,' it concluded '(albeit with some hesitation) that there is substantial evidence in the record considered as a whole to support the Commission's decision.' 125 U.S.App.D.C., at 290, 371 F.2d, at 755.

The issue in this case, however, relates not to the sufficiency of evidence but to the construction of a statute. The construction put on a statute by the agency charged with administering it is entitled to deference by the courts, and ordinarily that construction will be affirmed if it has a 'reasonable basis in law.' NLRB v. Hearst Publications, 322 U.S. 111, 131, 64 S.Ct. 851, 860, 88 L.Ed. 1170; Unemployment Compensation Commission v. Aragon, 329 U.S. 143, 153-154, 67 S.Ct. 245, 250-251, 91 L.Ed. 136. But the courts are the final authorities on issues of statutory construction, FTC v. Colgate-Palmolive Co., 380 U.S. 374, 385, 85 S.Ct. 1035, 1042, 13 L.Ed.2d 904, and 'are not obliged to stand aside and rubber-stamp their affirmance of administrative decisions that they deem inconsistent with a statutory mandate or that frustrate the congressional policy underlying a statute.' NLRB v. Brown, 380 U.S. 278, 291, 85 S.Ct. 980, 988, 13 L.Ed.2d 839. 'The deference owed to an expert tribunal cannot be allowed to slip into a judicial inertia * *  * .' American Ship Building Co. v. NLRB, 380 U.S. 300, 318, 85 S.Ct. 955, 967, 13 L.Ed.2d 855. Cf. FMB v. Isbrandtsen Co., 356 U.S. 481, 499-500, 78 S.Ct. 851, 862-863, 2 L.Ed.2d 926 (where this Court overturned the Commission's construction of § 14 of the Shipping Act).

In limiting § 15 to agreements which 'affect competition' and in finding that the assessment agreement did not so 'affect competition,' the Commission in this case used that phrase in a highly artificial sense-by requiring 'an additional agreement by the (Association) membership to pass on all or a portion of its assessments * *  * .' There is no question that the assessment agreement necessarily affected the cost structures of, and the charges levied by, individual Association members. Most, though not all, of the stevedoring contractors and terminal operators did pass the assessment on. The economic realities were such that many of them had no choice-a fact of which they apprised the Association at the time the assessment arrangement was being devised. In the case of Terminals, the assessment it had to pay on Volkswagen automobiles was more than twice its profit margin.

The Commission thus took an extremely narrow view of a statute that uses expansive language. In support of that view, the Commission argued in this Court that a narrow construction of § 15 should be adopted in order to minimize the number of agreements that may receive antitrust exemption. However, antitrust exemption results, not when an agreement is submitted for filing, but only when the agreement is actually approved; and in deciding whether to approve an agreement, the Commission is required under § 15 to consider antitrust implications. FMC v. Aktiebolaget Svenska Amerika Linien, 390 U.S. 238, 88 S.Ct. 1005, 19 L.Ed.2d 1071; see also Isbrandtsen Co. v. United States, 93 U.S.App.D.C. 293, 211 F.2d 51.

The Commission itself has not heretofore limited § 15 to horizontal agreements among competitors, but has applied it to other types of agreements coming within its literal terms. See, e.g., Agreements Nos. 8225 and 8225-1, Between Greater Baton Rouge Port Commission and Cargill, Inc., 5 F.M.B. 648 (1959), affirmed, Greater Baton Rouge Port Commission v. United States, 5 Cir., 287 F.2d 86, and Agreement No. T-4: Terminal Lease Agreement at Long Beach, California, 8 F.M.C. 521 (1965), applying § 15 to lease agreements. In the latter case, decided only four months before its decision in the case before us, the Commission said:

'Section 15 describes in unambiguous language those     agreements that must be filed; it does not speak of      agreements per se violative of the Sherman Act.

Since the wording of section 15 is clear, we need not refer     to the legislative history; there is simply no ambiguity to      resolve.' 8 F.M.C., at 531.

To limit § 15 to agreements that 'affect competition,' as the Commission used that phrase in the present case, simply does not square with the structure of the statute.

The legislative history offers no support for a different view. The genesis of the Shipping Act was the 'Alexander Report' in 1914. FMB v. Isbrandtsen Co., 356 U.S. 481, 490, 78 S.Ct. 851, 857, 2 L.Ed.2d 926. While it is true that the attention of that congressional committee was focused primarily upon the practices that had cartelized much of the maritime industry, it is clear that the concerns of its inquiry were far more broadly ranging. The report summed up the testimony before the committee:

'Nearly all the steamship line representatives * *  *      expressed themselves as not opposed to government supervision      *  *  * and approval of all agreements or arrangements which      steamship lines may have entered into with other steamship      lines, with shippers, or with other carriers and      transportation agencies. On the other hand, the shippers who     appeared as witnesses *  *  * were in the great majority of      instances favorable to a comprehensive system of government      supervision *  *  * (and) the approval of contracts,      agreements, and arrangements, and the general supervision of      all conditions of water transportation which vitally affect      the interests of shippers.' Alexander Report, at 418. (Emphasis added.) The committee recommended, among other things:

'That all carriers engaged in the foreign trade of the United     States, parties to any agreements, understandings, or      conference arrangements hereinafter referred to, be required      to file for approval *  *  * a copy of all written agreements      (or a complete memorandum if the understanding or agreement      is oral) entered into (1) with any other steamship companies,      firms, or lines engaged directly or indirectly in the      American trade, or (2) with American shippers, railroads or      other transportation agencies.' Alexander Report, at 419-420.

Nothing in the legislative history suggests that Congress, in enacting § 15 of the Act, meant to do less than follow this recommendation of the Alexander Report and subject to the scrutiny of a specialized government agency the myriad of restrictive agreements in the maritime industry.

This is not to say that the Commission is without power to determine, after appropriate administrative proceedings, that some types or classes of agreements coming within the literal provisions of § 15 are of such a de minimis or routine character as not to require formal filing. Since the Commission's decision in the present case, Congress has explicitly given it such authority:

'The Federal Maritime Commission, upon application or on its     own motion, may by order or rule exempt for the future any      class of agreements between persons subject to this chapter      or any specified activity of such persons from any      requirement of this chapter, or Intercoastal Shipping Act,      1933, where it finds that such exemption will not substantially      impair effective regulation by the Federal Maritime      Commission, be unjustly discriminatory, or be detrimental to      commerce.

'The Commission may attach conditions to any such exemptions     and may, by order, revoke any such exemption.' 46 U.S.C. §      833a (1964 ed., Supp. II).

But the agreement with which we deal here-levying $29,000,000 over five years, binding all principal carriers, stevedoring contractors, and terminal operators on the Pacific Coast, and necessarily resulting in substantially increased stevedoring and terminal charges-was neither de minimis nor routine. We hold that this agreement was required to be filed under § 15 of the Act.

It is to be emphasize that the only agreement involved in this case is the one among members of the Association allocating the impact of the Mech Fund levy. We are not concerned here with the agreement creating the Association or with the collective bargaining agreement between the Association and the ILWU. No claim has been made in this case that either of those agreements was subject to the filing requirements of § 15. Those agreements, reflecting the national labor policy of free collective bargaining by representatives of the parties' own unfettered choice, fall in an area of concern to the National Labor Relations Board, and nothing we have said in this opinion is to be understood as questioning their continuing validity. But in negotiating with the ILWU, the Association insisted that its members were to have the exclusive right to determine how the Mech Fund was to be assessed, and a clause to that effect was included in the collective bargaining agreement. That assessment arrangement, affecting only relationships among Association members and their customers, is all that is before us in this case. Moreover, so far as the record shows, only the assessment on automobiles is now challenged, and there is no reason to suppose that the Commission will not consider expeditious approval of so much of the agreement as is not in dispute.

The petitioner also attacked the Association's assessment of its automobiles under § 16 and § 17 of the Shipping Act. Section 16 makes it unlawful 'to subject any particular person, locality, or description of traffic to any undue or unreasonable prejudice or disadvantage,' and s 17 forbids any 'unjust or unreasonable' regulation or practice 'relating to or connected with the receiving, handling, storing, or delivering of property.' The Commission ruled that neither of these sections had been violated, and the Court of Appeals affirmed.

If the agreement is now filed under § 15, the Commission will be called upon again to consider the effect of §§ 16 and 17, since an agreement that violates a specific provision of the Act must be disapproved. Accordingly, it is not inappropriate, without now passing upon the ultimate merits of the §§ 16 and 17 issues, to give brief consideration to the Commission's handling of those issues upon the present record.

The Commission ruled that the petitioner had failed to demonstrate any 'undue or unreasonable prejudice or disadvantage' under § 16 solely because it had not shown any unequal treatment as between its automobiles and other automobiles or cargo competitive with automobiles. In so ruling, the Commission applied the 'competitive relationship' doctrine which it has developed in cases concerning rates for carriage of goods by sea. But the Commission, in cases not involving freight rates and the particularized economics that result from a vessel's finite cargo capacity, has often found § 16 violations even in the absence of a 'competitive relationship.' See, e.g., Practices, etc., of San Francisco Bay Area Terminals, 2 U.S.M.C. 588 (1941) and 709 (1944), and Storage Practices at Longview, Washington, 6 F.M.B. 178 (1960), involving storage charges; and, New York Foreign Freight Forwarders and Brokers Ass'n v. FMC, 2 Cir., 337 F.2d 289, involving freight forwarders' fees. In a proceeding subsequent to its decision in the present case, the Commission explicitly dispensed with the competitive relationship requirement with respect to port 'free time.' Investigation of Free Time Practices Port of San Diego, 9 F.M.C. 525 (1966); cf. State of California v. United States, 320 U.S. 577, 64 S.Ct. 352, 88 L.Ed. 322. See also Investigation on Household Goods, North Atlantic Mediterranean Freight Conference, F.M.C. Docket No. 66-49 (June 30, 1967). When the agreement in the present case is filed, the Commission may consider anew whether the mere absence of a competitive relationship should foreclose further § 16 inquiry.

With respect to § 17, the Commission found that the assessment upon the petitioner's automobiles was not 'unreasonable,' because the petitioner had received 'substantial benefits' in return for the assessment, and there was no showing of a deliberate intent to impose an unfair burden upon the petitioner. This, we think, reflects far too narrow a view of § 17. It may be that a relatively small charge imposed uniformly for the benefit of an entire group can be reasonable under § 17, even though not all members of the group receive equal benefits. See Evans Cooperage Co. v. Board of Commissioners of the Port of New Orleans, 6 F.M.B. 415. But here a relatively large charge was unequally imposed. The benefits received by the petitioner may have been substantial, but other cargo received greater benefits at one-tenth the cost. Moreover, the question of reasonableness under § 17 does not depend upon unlawful or discriminatory intent. As the Commission itself has said:

'(Sections 16 and 17) proscribe and make unlawful certain     conduct, without regard to intent. The offense is committed     by the mere doing of the act, and the question of intent is      not involved.' Hellenic Lines Ltd.-Violation of Sections 16      (First) and 17, 7 F.M.C. 673, 675-676 (1964).

Cf. United States v. Illinois Central R. Co., 263 U.S. 515, 523-526, 44 S.Ct. 189, 192-194, 68 L.Ed. 417; ICC v. Chicago Great Western R. Co., 209 U.S. 108, 28 S.Ct. 493, 52 L.Ed. 705.

The question under § 17 is not whether the petitioner has received some substantial benefit as the result of the Mech Fund assessment, but whether the correlation of that benefit to the charges imposed is reasonable. The 'substantial benefits' measure of unreasonableness used by the Commission in this case is far too blunt an instrument. Nothing in the language or history of the statute supports so tortured a construction of the phrase 'just and reasonable.' The Commission has cited no similar construction of the phrase by any other regulatory agency or court. Indeed, in past decisions the Commission itself has not applied any such test. See California Stevedore & Ballast Co. v. Stockton Elevators, Inc., 8 F.M.B. 97 (1964), and Practices, etc., of San Francisco Bay Area Terminals, 2 U.S.M.C. 588 (1941), affirmed, State of California v. United States, 320 U.S. 577, 64 S.Ct. 352, 88 L.Ed. 322, where the Commission found violations of § 17 even though the benefits received were clearly substantial. The proper inquiry under § 17 is, in a word, whether the charge levied is reasonably related to the service rendered.

The judgment of the Court of Appeals is reversed and the case is remanded for further proceedings consistent with this opinion.

It is so ordered.

Judgment reversed, and case remanded for proceedings consistent with opinion.

Mr. Justice MARSHALL took no part in the consideration or decision of this case.