10

The proposed guidelines provided that authority to transport specifically named commodities could be expanded to the full class (es) of commodities involved. The applicable class (es) could be drawn from three different sources: (1) the Standard Transportation Commodity Code (STCC)"; (2) other classifications set out in Descriptions In Motor Carrier Certificates, 61 M.C.C. 209 (1952) and 61 M.C.C. 766 (1953); or (3) any broader class description the Commission may have accepted in the past. (These three sources are referred to collectively as the tripartite commodity policy.)

The Commission further proposed a policy whereby all commodity restrictions, except those against the transportation of household goods 12 and class A and B explosives, on "general commodities" authority would be considered unduly restrictive and removable. As to territorial limits, the Commission proposed to permit carriers holding less than countywide authority to seek expansion of their authority to the full county.

11 The STCC source contains 29 broad generic commodity classifications such as furniture and fixtures, building materials, and petroleum and petroleum products. See the full listing in the Ex Parte No. 55 (Sub-No. 43A) Policy Statement (45 F.R. at 86,807 colm. 1; App. J, 264a).

12 The household goods restriction was proposed to be retained because it appeared at the time that pending legislation would be enacted which would direct separate licensing of household goods carriers. (See discussion in Ex Parte 55 (Sub-No. 43A), 45 F.R. at 4558; App. I, 205a). Later it became evident that no legislation containing such a provision would be passed and, therefore, there was no reason routinely to impose a restriction against household goods carriage. Accordingly, the Commission did not adopt a policy to exclude household goods (45 F.R. at 86,752 colm. 3; App. H, 155a-156a).

11

The Commission ultimately adopted guidelines that were largely the same as those initially proposed for broadening commodity descriptions (the tripartite method) and for expanding territorial authorizations (from a single point in a county or city to the entire county or city). The final decision permitted carriers holding general commodity certificates, which had historically been restricted against transportation of household goods, to apply to have that restriction removed. (See footnote 12 infra).

The Commission's final decision clearly stated that these policies were in no way binding, but were indeed guidelines only, from which the Commission. would depart if the evidence pertaining to a particular application warrants. (See final Section 1137.20 at 45 F.R. 86,759 colm. 1; App. H, 127a-128a).

2. New Authority Applications

To encourage applications for more broadly based operating authorities consonant with the pro-competitive policies stressed in the 1980 Act, the Commission proposed a general policy statement, in Ex Parte 55 (Sub-No. 43A) (App. I, 193a-222a) setting forth guidelines for future applications. These guidelines were designed to advise prospective applicants of the territorial and commodity descriptions the Commission normally would regard as sufficiently broad. The Commission proposed to use counties and cities as minimum territorial descriptions, 13 but departing

18 The territorial guidelines also provided that if a carrier demonstrates a useful transportation service for the 48 contiguous states the Commission would include authorizations for Hawaii and Alaska in order to stimulate increased transportation services to those States. (45 F.R. at 45,549 colm. 1 last paragraph; App. I, 208a-209a).

12

from the tripartite commodity classification (see p. 10, supra) for restriction removals, proposed only to use the STCC categories for new authorities. (45 F.R. at 45,547; App. I, 200a-203a).

The final policy adopted was substantially similar to the original proposal. As in restriction removals, the Commission stated that because no special household goods licensing legislation was enacted, the agency would not routinely exclude household goods from new grants of authority. (45 F.R. at 86,801 colm. 3; App. J, 240a). The most significant change from the original proposal was that, instead of requiring applicants for new authority to use only the STCC categories for commodity descriptions, the Commission stated that those categories simply would be considered guidelines reflective of the Commission's overall objectives. (45 F.R. at 86,801 colm. 2, last full paragraph; App. J, 239a). This the agency made quite clear (45 F.R. at 86,799 colm. 1, 3; App. J, 229a, 231a):

The major change from our original proposal is our decision not to prescribe the exact form of commodity descriptions. Instead we shall leave to each applicant the selection of a broad description that it believes will best meet its business requirements.

*

[W]e are not prescribing limited lists of acceptable commodity or geographic descriptions. We are, instead, establishing guidelines for acceptable minima . . . . We will accept reasonably broad commodity descriptions in the future, even if they are not the group used in STCC.

The Commission explained that highly restrictive authorities inhibit the most efficient use of carrier equipment and inappropriately curb competitive ac

13

tivity. (45 F.R. at 86,798 colms. 2-3, 226a-227a; and 86,800 colms. 2-3-86,801 colm. 1, 233a-238a; App. J). The agency also indicated that excessively narrow or restrictive certificates increase unnecessarily the costs and burdens of regulation by requiring carriers repeatedly to reapply for minor (and usually unopposed) extensions of authority as their operations grow or change. (Id.) In addition, the Commission noted the close relation and the need for consistency between both its future licensing and restriction removal policies. The Commission stated (45 F.R. 86,798 colm. 3; App. J, 227a-228a):

Logic dicates that, if we take these [restrictionremoval] actions for carriers with existing authorities we must also assure that future authorities are not subject to the same defects the Congress perceived in our past practices. It is obvious that competition and efficiency on the scale envisioned by the Congress cannot be achieved if we broaden existing authorities, while continuing to grant narrow authorities. We would thereby create a class of competitively disadvantaged carriers (at least initially), which would be entirely inconsistent with the purposes of the Act.

(Also see 45 F.R. at 86,799 colm. 3; App. J, 231a).

The Commission again emphasized that it was issuing guidelines only, from which it would depart in individual cases if the evidence warranted. It clearly stated (45 F.R. at 86,800 colm. 2, 3rd full paragraph; App. J, 234a):

[W]hat we propose is not mandatory. If an applicant justifies the use of another reasonably broad description of the authority needed, we will allow that description to be used.

14

D. The October 1981 Decision

The principal arguments brought before the court of appeals were that the Commission exceeded its statutory mandate by requiring or allowing carriers to obtain overly broad operating authorities, and that the Commission's guidelines were actually binding rules, promulgated in violation of the Administrative Procedure Act (APA).

The Commission maintained that, in outlining commodity and territorial "guidelines" that would "normally" be appropriate, it simply had established rebuttable general policy presumptions. The Commission stressed that an applicant or any protestant could rebut those presumptions by presenting persuasive reasons for narrower authority. Additionally, the Commission maintained that, whether considered as policies or rules, its guidelines complied with the APA because it had utilized formal notice and comment procedures.

Notwithstanding the Commission's assurances to the contrary, the court below concluded that the guidelines were not flexible policy but binding rules. (659 F.2d 452, 464; App. A, 28a-29a). The court doubted that the Commission actually intended to apply the guidelines flexibly." The court perceived "sinews of

14 The court's conclusion that the agency routinely was forcing unwanted authority on applicants was based on a number of ICC preliminary findings in several initial Federal Register notices which expanded the scope of applications for new authority to conform to the guidelines even though each applicant had applied for more limited authority. However, in each proceeding cited by the court (Id. 471-72 n.99; App. A, 47a-48a) no final agency action had been taken. Similarly, the court cited (Id.) two cases "docketed" in the Fifth Circuit in which the Commission had granted applications to eliminate restrictions against the transportation of commodities in bulk. The agency had not yet filed its briefs in either of the cited cases.