No. 36186 ASSOCIATION OF HOME APPLIANCE MANUFACTURERS, INC. v. AAA COOPER TRANSPORTATION (AAA MOTOR LINES DIV.), ET AL. Decided August 22, 1977 Commodity-column rating on household electric food mixers and peelers, minimum 30,000 pounds, found unjust and unreasonable to the extent that it results in charges higher than those applicable under the classification basis. Defendants ordered to cancel unlawful tariff provisions. John F. Bohman for complainant. Robert E. Born and J. Michael May for defendants. REPORT AND ORDER OF the CommiSSION ON RECONSIDERATION DIVISION 2, Acting as an Appellate Division, COMMISSIONERS BY APPELLAte Division 2: The modified procedure was followed. Defendants' and intervener on behalf of defendants2 filed a petition for reconsideration of the report and order of Review Board Number 4, modifying the initial decision of the Administrative Law Judge. Complainant filed a reply. The facts were adequately stated in the initial decision of the Administrative Law Judge and are adopted as our own. The facts are restated and expanded here only insofar as is necessary for a proper understanding and resolution of the issues on reconsideration. By complaint filed July 7, 1975, complainant alleges that the commodity-column 45 rating, minimum 30,000 pounds, applied by defendant motor carriers on household electric food mixers and peelers for transportation within the southern States, and between points in the southern States on the one hand, and points in eastern and middlewestern States on the other, are unjust, unreasonable, 'The defendant carriers are common carriers of property by motor vehicle in interstate commerce and collectively serve all points and areas embraced by Southern Motor Carriers Rate Conference territory. 'Southern Motor Carriers Rate Conference, Inc. unjustly discriminatory, unduly preferential, and unduly advantageous in violation of sections 216(b) and 216(d) of the Interstate Commerce Act. Complainant submits that the defendants' commodity-column 45 rating, minimum 30,000 pounds is unlawful insofar as it results in charges on shipments in excess of those based on the class 45 rating, minimum 24,000 pounds, provided on these articles in the National Motor Freight Classification (NMFC). Complainant seeks an order requiring defendants to establish minimum weights not higher than the level of minimum weights of the NMFC. Complainant argues that exceptions ratings higher than the classification ratings are, in the absence of special circumstances, prima facie unreasonable. In this proceeding, although the ratings are the same, the corresponding minimum weights are different. Insofar as the tariffs in question are concerned with higher minimum weights than the NMFC minimum weight, exceptions ratings higher than the classification rating are present. Intervener submitted cost data purportedly indicating revenues under the classification ratings are inadequate to cover defendants' costs. It is argued that the classification basis represents the highest rate that the traffic will bear and that the class rate should, therefore, normally more than cover fully allocated costs. Therefore, it is submitted that the presumption of unreasonableness has been rebutted. Complainant, however, argues that the cost data, offered to rebut the prima facie case, is not relevant here, submitting that even if charges determined on the basis of the NMFC are shown to be inadequate defendants should correct the deficiency by changing the governing classification, not by publishing exceptions thereto. The Administrative Law Judge, relying on the presumption that an exceptions rating higher than the classification basis establishes a prima facie showing of unreasonableness, found for complainant. He concluded that defendants' cost data had no relevancy in a classification proceeding of this nature, stating that while costs of transportation to the carrier providing the service is recognized to be an element of ratemaking, it is a factor not to be considered in determining the appropriate classification rating of commodities. The Administrative Law Judge ordered the defendants to cancel their participation in the tariff provisions therein found shown to be unlawful. On exceptions, the defendants and intervener in support of defendants, in essence, reiterated their argument that the cost data rebutted the presumption of unreasonableness. In reply, complainant supported the Administrative Law Judge, agreeing that the issue was the appropriate classification rating and, thus, that the cost evidence was irrelevant. Review Board No. 4 agreed with the Administrative Law Judge that the cost evidence submitted by defendants was not relevant in the present proceeding Review Board No. 4 ordered the defendants to cancel the tariff provisions and, in addition, ordered the defendants to refrain and abstain from the publication of a minimum weight in excess of the classification basis. on Defendants and intervener on behalf of defendants reconsideration basically argue two points. First, it is argued that the review board was in error in rejecting the cost evidence as a proper basis for rebutting the so-called presumption of unreasonableness. Secondly, it is submitted that the board's order that defendants refrain and abstain from the publication of a minimum weight in excess of the classification basis was too broad. In reply, complainant reiterated its belief that the cost evidence was irrelevant. DISCUSSION AND CONCLUSIONS The complainant relies on the presumption of unreasonableness of rates based on exceptions ratings higher than those based on the classification ratings. The Commission has held that an exceptions rating higher than the classification, in the absence of extraordinary circumstances showing that (1) the transportation characteristics of the excepted articles differ substantially from the common and general features of similar articles, or (2) special circumstances peculiar to a specific area warrant special treatment, is an anomaly and presumptively unreasonable. See Great American Industries, Inc., v. Brooks Transp. Co., Inc., 302 I.C.C. 259, 262 (1957); Exceptions Ratings on Magnesium Metals, 305 I.C.C. 318, 319-20 (1958); and Classification of Foodstuffs, Chips, 62 M.C.C. 679, 687 (1954). The Commission, however, has accepted cost evidence for the purpose of awarding reparations in connection with rates which would have been noncompensatory and possibly confiscatory. See United States of America v. Mercury Motor Express, Inc., 355 I.C.C. 460 (1976); United States v. Western Gillette, Inc., 341 I.C.C. 889, 893-894 (1972); United States v. Western Gillette, Inc., 343 I.C.C. 29, 32 (1972); and United States of America v. Consol. Frtways. Corp., 350 I.C.C. 1, 6 (1974). Admittedly, in the present proceeding complainant requests no reparations, but rather seeks an order requiring defendants to establish minimum weights not higher than the level of minimum weights of the NMFC. In Rules Governing Publication of Exception Ratings, 351 I.C.C. 716 (1976) (hereinafter referred to as the Exceptions case), the Commission found that exceptions ratings are not the proper vehicle to remedy classification ratings which became too low because of universal transportation characteristics of a certain article, and that higher exceptions ratings are not justified simply because classification ratings, when applied to the class rates, are noncompensatory. The Commission adopted rules requiring advance justification by motor common carriers for any tariff provision which would result in a higher charge than otherwise would result from application of the classification class or rating and rules to the class rates. Admittedly, the Exceptions case concerned classification matters for future application, and would be distinguishable on that basis from cases involving reparations relating to past shipments. Although the present proceeding deals with past shipments, it concerns classification matters for future application, in the sense that complainant seeks an order requiring defendants to establish minimum weights not higher than the level of minimum weights of the NMFC. In accordance with the Exceptions case, we believe that cost evidence, indicating that the class rates are noncompensatory, cannot, by itself, justify an exceptions rating higher than the classification basis. The key issue, then, is whether cost evidence is relevant in a proceeding of this nature. Defendants submitted cost evidence, but as previously indicated, the Administrative Law Judge and Review Board No. 4 concluded that this is a classification proceeding and thus such cost evidence was not relevant herein. In Investigation and Suspension Docket No. M-24488, Classification Rating on Passenger Automobiles, Nationwide, decided March 5, 1973 (not printed), the protestant was attempted to show that the classification ratings there in issue paid their share of the transportation burden and, therefore, that the proposed increased ratings were not justified. Cost data was accepted into evidence but it was held that cost considerations was merely one of the factors to be considered. On appeal to the United States District Court for the District of Columbia in United States v. United States, Interstate Commerce Commission, et al., civil action No. 75-213, decided July 14, 1976, the court remanded the proceeding back to the Commission for further development and consideration of cost evidence relating to the classification increase in issue. The court stated: Plaintiff's [protestant] cost evidence, of course was not entitled to controlling weight in the classification proceeding. Cost and revenue data is one of the factors to receive rational, albeit only proportional, consideration among the various classification factors. In classification proceedings, the rule is simply that cost and revenue data cannot be denied proportionate consideration when a substantial issue of cost and revenue is raised. Accordingly, in view of the above, due consideration must be given to defendants' cost evidence of record. Intervener prepared an analysis of the cost of providing transportation service on 24,000-pound shipments of portable electrical applicances moving in four territories: South, East-South, South-Middlewest, and South-Southwest. The basic cost data was extracted from the following Commission Bureau of Accounts cost publications entitled Cost of Transporting Freight by Class I and Class II Motor Common Carriers of General Commodities: Intervener compared for each of the four territories the revenue with the July 1, 1975, level of variable costs, fully allocated costs, and costs at the revenue need level. Variable and fully allocated costs are appropriate for measuring the profitability of class rated traffic. However, we believe revenue need is not relevant. We, therefore, have disregarded the revenue need level of costs in analyzing the relative profitability of the affected traffic. The comparisons were shown for six rate basis numbers per territory. However, it was assumed that the average lengths of haul for all traffic in these territories were approximately 400 miles for the South, 600-800 miles for the East-South, and 800-1,000 miles for the other two territories. Intervener attempted to justify its selection of representative distances on the basis of the average haul |