and unreasonable to the extent they exceeded charges at the classification bases sought by complainant. To support this finding, the Administrative Law Judge concluded that a presumption of unreasonableness attaches to any basis of rates which exceed the classification basis. Since the latter normally reflects the maximum reasonable level, to rebut this presumption the defendant must show special circumstances which justify the maintenance of the abnormality (see Western Gillette, Inc. v. United States, et al., civil action No. 73-19-CC, U.S.D.C. C.D. Calif. (1974) and Exceptions Ratings on Magnesium Metals, 305 I.C.C. 318 (1958); this the defendant failed to do. Regarding the building shipments, defendant's argument that excessive deadheading of equipment from Florida to Georgia and South Carolina justifies the issue exceptions ratings was rejected since the exceptions basis has much broader territorial application. The Administrative Law Judge also noted that the exceptions basis applies only on truckload shipments and that a possibility thus exists for the carrier to discriminate against shippers by the manner of handling and loading shipments to produce LTL shipments. Regarding the automobile shipments, it was concluded that defendant's and intervener's evidence of unusual handling characteristics attaches to the establishment of a classification basis and that if the classification basis is wrong, then the classification should be changed. According to the Administrative Law Judge, the absurdity of the exceptions basis in relation to defendant's and intervener's evidence of handling equipment is apparent. For example, since the exception basis has a 6,000-pound minimum, a shipper of two 3,000-pound automobiles would be charged the same as the shipper of a 3,000-pound automobile, yet, according to defendant's and intervener's cost evidence, the cost to ship the two automobiles is twice that to ship one automobile. Again, it was concluded that the exception basis is discriminatory since it prefers shippers of 6,000-pound shipments over shippers of less than 6,000-pound shipments. Defendant's and intervener's reliance on Classification Ratings on Passenger Automobiles, Nationwide, supra, was rejected since the issue here is the lawfulness of the exceptions ratings on past shipments and not the lawfulness of the classification basis for future shipments.

The Administrative Law Judge also rejected the cost evidence of record, stating that the issue of classification is separate and distinct from the issues of rates and revenues, citing Western Classification Case, 25 I.C.C. 442 (1912); Southern Class Rate Investigation, 100 I.C.C. 513 (1925); Class Rate Investigation, 1939, 262 I.C.C. 447

(1945); and Absorbent Cotton or Waste and Cotton Swabs, 48 M.C.C. 233 (1948), in support thereof. He stated that the presumption of unreasonableness attaching to an exception rating higher than the classification rating cannot be rebutted by costs. relating to a specific shipment, otherwise either the exceptions rating and/or the classification rating could be found reasonable on one shipment but not reasonable on another. Further, intermodal competitive elements that might be considered in assigning a truckload classification rating on a commodity might not be given the same consideration in assigning LTL ratings on other commodities. In any event, he concluded that the "modus operandi of the carrier, as evidenced by costs, is not in issue in determining whether exceptions ratings higher than classification ratings are just and reasonable." Also pointed out is the conflict between the initial decision and the report of Review Board No. 4 in No. 35370, United States of America v. Merchants, Inc., et al., decided October 16, 1972 (not printed). There, proffered cost evidence rejected by the initial decision, was accepted in the report of the review board under the theory that while carriers in proceedings concerning exceptions ratings higher than the classification ratings are in a position to increase classification ratings or to lower the exceptions ratings to cover costs of operation with respect to future shipments, no such alternative is open to carriers in connection with shippers' claims for reparations with respect to past shipments. While the Administrative Law Judge took notice of the review board's reasoning in No. 35532, United States of America v. Navajo Freight Lines, Inc., et al., decided April 19, 1974 (not printed), and cases cited therein, that a rate and revenue issue is involved to avoid reparation claims on a basis which would be noncompensatory to the carriers, he argues that the Commission's authority to determine retrospectively the reasonableness of legal charges of motor common carriers under section 204a(5) of the Interstate Commerce Act is that which authorizes the Commission to make the same determination prospectively under section 216(e). Accordingly, he argues that if the issue of classification is separate and distinct from the issues of rates and revenues prospectively, it is equally separate and distinct retrospectively, and cost evidence in proceedings of this nature are irrelevant. Finally, the Administrative Law Judge stated that rate bureaus act unethically when they publish "any basis which exceeds the classification basis whenever they believe the classification basis is wrong" and that the Commission should expunge from the tariffs all prima facie unjust and unreasonable

bases of rates, ratings, and regulations, and ordered that the initial decision herein be served on all parties to Ex Parte No. 297, Rate Bureau Investigation, 349 I.C.C. 811.

On exceptions, the defendant and intervener argue that the Administrative Law Judge's initial decision contains the following errors: (1) a failure to recognize cost evidence; (2) a general assumption that the exceptions bases at issue are unreasonable since they pertain to all points throughout the South, when the issues relate only to specified shipments; (3) "speculation" by the Administrative Law Judge that the exceptions basis on automobiles is discriminatory, an improper finding of undue discrimination unsupported by the record; (4) rejection of cited prior class rate cases with with a specious distinction between class rates and classification ratings; and (5) the statement that rate bureaus act unethically by publishing exceptions ratings higher than the class ratings when the latter are thought to be too low. The complainant replied.

Statements in reply to the exceptions of the defendant and intervener and supporting the initial decision were filed by SPI, and jointly by DTP under rules 96(c) and 23 of the Commission's General Rules of Practice. Defendant and intervener jointly filed a motion to strike the above shippers' statements. These statements in support of the initial decision take no position on the 21 shipments at issue in this proceeding, but instead argue that all exceptions ratings higher than the classifications ratings should be considered conclusive, rather than prima facie, unjust and unreasonable. To achieve this goal, SPI, with DTP concurring, asks the Commission to establish regulations requiring the carriers to obtain specific permission (similar to requirements for released valuation) from the Commission to publish exceptions ratings higher than the class ratings except for minimum charge schedules as contemplated by the Commission's order in Ex Parte No. MC-77.

The request for rulemaking procedures is inappropriate to this proceeding and which request, we note, has separately been filed by SPI with this Commission. This present proceeding is concerned only with the 21 shipments listed in the complaint. Since SPI and

'This matter has now been considered by the Commission in Rules Governing Publication of Exceptions Ratings, 351 1.C.C. 716 (1976), wherein regulations were adopted requiring that tender to the Commission of any motor common carrier tariff provision, which would result in a higher charge than would result from application of the classification rating and rules to the class rates, be accompanied by a clear statement of the justification relied upon to warrant the publication of such provision.

DTP specifically disavow any interests regarding the specific shipments under considerations herein, other than rulemaking considerations, the issues raised in their reply statements go beyond the scope of this proceeding. The defendant's motion to strike is granted.

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. A threshold question is whether cost evidence is relevant in a proceeding of this nature. Both parties submitted cost evidence, but as previously indicated, the Administrative Law Judge concluded that the issue is one of classification and thus revenues and costs are not relevant herein. In Classification Ratings on Passenger Automobiles Nationwide, supra, cost data was accepted into evidence but it was held that cost considerations were merely one of the factors to be considered.*

In Rules Governing Publication of Exceptions Ratings, 351 I.C.C. 716 (1976) (hereinafter referred to as the Exceptions case), 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. Inasmuch as the Commission determined that exceptions ratings higher than the classification should have a limited function, it was concluded that higher ratings be allowed only: (1) when transportation characteristics of the excepted articles moving between certain points differ substantially from common characteristics of similar articles generally, or (2) where special circumstances peculiar to a local area warrant special treatment. However, the Commission found that exceptions ratings are not the proper vehicle to remedy classification ratings which become too low because of universal transportation characteristics of a certain article. By the same token, it was held that higher exceptions ratings are not justified simply because classification ratings, when applied to the class rates, are noncompensatory. Unlike the instant proceeding dealing with issues

'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 development and consideration of cost evidence relating to the classification increase in issue. The case is presently on appeal to the Supreme Court.

relating to past shipments, the Commission's finding and conclusions in the Exceptions case concerned classification matters for future application.

Contrary to the Administrative Law Judge's position that the only issue herein is one of classification where cost evidence is not relevant, we view this proceeding as involving the justness and reasonableness of transportation charges on specific shipments for reparation purposes. Accordingly, we deem all evidence of the transportation circumstances and conditions surrounding such movements as relevant. Inasmuch as the cost evidence presented in this type of proceeding generally does not tend to establish peculiar transportation characteristics or other special circumstances, such evidence ordinarily has little relevance in rebutting the presumptive unlawfulness of an exceptions rating higher than the classification. However, in other similar proceedings, Review Board No. 4 has accepted cost evidence for the purpose of avoiding reparations in connection with rates which would have been noncompensatory and possibly confiscatory. See 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). Furthermore, in docket No. 35723, United States v. Ryder Truck Lines, Inc., et al (not printed), decided July 1, 1974, by Review Board No. 4, the Government took the position that costs are relevant in this type of proceeding and specifically stated that it "does not contend that defendants should be required to transport public property at a loss." The Government has also indicated in other arguments and testimony that carriers are not expected to provide service below cost plus a reasonable profit. See, for example, docket No. 35637, United States v. Alamo Express, Inc. and Ryder Truck Lines, Inc. (not printed), decided May 2, 1974, by Review Board No. 4. Obviously, then in those and other similar adjudicatory proceedings, it would be inappropriate to award reparations if the reparations result in rates and charges that are noncompensatory and possibly confiscatory to the carrier.

Complainant appears, however, to have shifted its position in this proceeding and characterizes cost evidence in a somewhat ambiguous manner. On the one hand, complainant agrees with defendant that cost evidence may be material in proceedings of this type and that the Commission may set the reasonable level of rates based thereon, while on the other hand, it agrees with the ruling of the Administrative Law Judge (as the Government interprets the