because the evidence of record "is not persuasive that the traffic changes are anticompetitive or that they were caused solely by the exercise of control by SCL over L&N." (Id., p. 44.) We affirm this finding. Southern and the Bureau relied mainly on chronology to establish the causal relationship between the alleged anticompetitive activities and the stock purchases. As noted by the Administrative Law Judge, changes in market trends could have resulted from other events. For example, any shift of SCL originated Chicago-bound traffic away from the Clinchfield could be traced to the superiority of the SCL-L&N service route after L&N acquired rights into Chicago in 1968 and 1970. (Initial decision, p. 44.) Changes in market trends in the early seventies may have been the result of the SCL/ACL merger (consummated in 1967). The changes may also be attributable to competitive forces, i.e., Southern's policy of eliminating routes with other railroads where a system was not subject to the standard traffic and routing conditions, and its use of a single routing designation to cover all members of its system, thus making it easier for it to get the long haul. (Initial decision, p. 44.)

Contrary to Southern's argument, it was indeed proper for the Administrative Law Judge to consider all of these factors in the section 7 Clayton Act anaylsis. In United States v. General Dynamics Corp., 415 U.S. 486 (1974) the Supreme Court stated that a merger must be "functionally viewed, in the context of a particular industry." Also see Brown Shoe v. United States, 370 U.S. 294, 321322 (1962). In order to determine the probable anticompetitive affect of a merger, the anaylsis must include an examination of the particular market, its structure, history, and probable future. 415 U.S. at 498.

Violation of section 5

The Administrative Law Judge found that in 1963 SCL obtained control of L&N when it acquired ACL's interest in that railroad, and that, in approving the SAL/ACL merger, the Commission did not restrict SCL in its exercise of control over the L&N. She noted that the Commission was well aware of the situation, yet the conditions it imposed in the SAL/ACL report and the L&N/Monon report made no mention of any requirement that the L&N be "frozen in its existing status." (Initial decision, p. 46.) Therefore, she concluded there was no reason for SCL to file a control application when it purchased more shares of L&N stock or when it began consolidating

the systems. The Commission's decision in Peoria & E. Ry. Co. v. New York Central R. Co., 334 I.C.C. 131 (1968), is cited to support the conclusion that section 5(2) approval is not needed when a carrier acquires additional stock in a company it already lawfully controls.

The Administrative Law Judge distinguished the Commission's decision in Mt. Hood Stages, Inc. -Petition for Modification, 104 M.C.C. 449 (1968), enforced, Greyhound Lines, Inc. v. United States, 308 F. Supp. 1033 (1970) (Mt. Hood). In Mt. Hood the Commission had considered reopening a section 5(2) proceeding to impose conditions to protect, a small carrier, from discriminatory and destructive competitive practices by Greyhound.

The Administrative Law Judge concluded that circumstances had changed since the time when SCL represented that the L&N would be operated independently, and that inflation and increasing labor costs were changes which necessitated the consolidations and coordination by the Family Lines.

On appeal Southern and the Bureau argue that SCL's commitment that L&N would be maintained independently formed a factual basis for approval of the SCL/ACL merger and for allowing SCL to retain 33-percent interest in L&N (instead of requiring divestiture). They contend that to allow SCL to breach this commitment undermines the administrative process, and that adherence to this commitment is especially important because antitrust immunity is involved. They rely upon Mt. Hood for the proposition that every applicant is required to abide by its representations and may not use as a defense the fact that no specific condition was imposed to enforce these representations.

We find no section 5 violation. In the SAL/ACL report, the Commission recognized that ACL controlled L&N (320 I.C.C. at 188). Many of the indexes of control discussed above had been raised by protestants who sought divestiture of the L&N. In approving the merger, the Commission specifically authorized SCL to control all carriers controlled by ACL, including the L&N. (320 I.C.C. at 213.) The Commission did not limit the merged company's control to stock control and it did not require that L&N be operated independently. During the proceeding SCL did represent that L&N would be operated independently; however, the Commission was aware that the relationship between the merged company and L&N could lead to "favoritism." (320 I.C.C. at 189 and 208.) In its analysis of the competitive effects of the SAL/ACL merger, the Commission compared the mileage of Southern and SCL systems

with the L&N included in the latter. (320 I.C.C. at 163.) Because of the potential for favoritism, the Commission imposed conditions to protect competing railroads against significant traffic diversion, but it did not require the independent operation of L&N. (320 I.C.C. at 189 and 208.)

SCL did represent that L&N would be operated independently, both in the SAL/ACL proceeding and in the L&N/Monon proceeding, yet in the late 1960's and early 1970's SCL began consolidating L&N's operations into its system. In Mt. Hood, the Commission considered reopening a section 5 proceeding and imposing conditions, where a small carrier had withdrawn as a protestant in a section 5 proceeding, based upon Greyhound's commitments which it later did not keep. Here, we find no such grounds for reopening, and we affirm the initial decision. The representations did not form the basis for the approval of those mergers. It has been 9 years since the representations were made in the L&N/Monon proceeding and 16 years since they were made in the SAL/ACL proceeding, and as the Administrative Law Judge found, circumstances have changed. However, we note that representations made in proceedings are to be construed, in context, as commitments. If a carrier does not abide by a commitment, without sound reason, we may find good cause to reopen a proceeding and issue a supplemental decision under section 5(10).

Our conclusion that the Commission authorized control within the meaning of section 5 is supported by several cases decided after the SAL/ACL report, in which the Commission recognized that L&N was "controlled" by SCL, without stating that the control was limited.25 See Louisville & N. R. Co.-Pur.-Chicago & E. I. R. Co., 334 I.C.C. 273, 280 (1968); Louisville & N. R. Co.-Merger-Monon Railroad, 338 I.C.C. 134, 136 and 223 (1970); and Finance Docket No. 25283, SCL Industries, Inc.-Control-Seaboard Cost Line R.R. (not printed), decided October 9, 1968.

Violation of section 3(4)

The Administrative Law Judge found no violation of section 3(4), which provides that a carrier shall not discriminate in rates, fares. and charges between connecting lines. She reasoned that the status

25 The word "control" is a technical word and when used without explanation means section 5 control, which includes actual control, legal control and the power to exercise control. (Section 1(3)(b) now 49 U.S.C. 10102.)

of commonly controlled carriers is different from noncontrolled carriers, and that any interpretation of section 3(4) must recognize that section 15(4) 26 protects a carrier from short hauling itself. She noted that, early in its history, the Commission found that railroads lawfully could prefer affiliates and subsidiaries.

The Bureau disputes this finding, arguing that the SAL/ACL merger conditions, which require SCL not to show favoritism in the routing of traffic, have rendered SCL ineligible for the section 15(4) exemption. Thus, the Bureau concludes, the consolidation of traffic departments and the policy of the Family Lines to divert as much traffic as possible away from competitors, in favor of its own longest haul, violates section 3(4).

We adopt the Administrative Law Judge's finding. Section 3(4) was designed to prevent discrimination between competitors at a common interchange. The test is whether a railroad has preferred one connecting railroad over another similarly situated railroad. We have ruled that a subsidiary is not a connecting line within the meaning of section 3(4). Lake Carriers' Assn. v. New York Central R. Co., 343 I.C.C. 491, 505 (1973), vacated on other grounds 399 F. Supp. 386 (N.D. Ohio 1975). In this proceeding we have found that SCL has controlled L&N since 1967, and that the Commission recognized that there would be "favoritism" between SCL and L&N, and imposed traffic and routing conditions to protect competitors. The Bureau has not shown that the consolidations and coordinations by the Family Lines in the early 1970's was the kind of discrimination which section 3(4) was designed to prevent.

The recent ruling in Sand from Marston27 is not controlling here. In that case, the Administrative Law Judge ruled that the involved routing restriction violated the traffic conditions imposed in the SAL/ACL report and unduly prejudiced Southern in the distribution of traffic in violation of section 3(4). The Fifth Circuit Court of Appeals affirmed the finding of a violation of the merger conditions but did not reach the allegation of a violation of section 3(4). Our decision here has clarified the relationship between L&N and SCL. At the time of the decisions in Sand from Marston, there had not been a definitive ruling on the control issue, accordingly, that decision is not dispositive on this issue.

26Now 49 U.S.C. 10705.

27No. 36652, Sand from Marston, N.C., to Wyoming, Ill. (not printed), initial decision entered November 28, 1977, affirmed division 2, 359 I.C.C. 98 (1978), affirmed sub nom. Seaboard C. L. R. Co. v. United States, 599 F. 2d 650 (1979).

Section 1(4) and 1(11)

The Administrative Law Judge did not consider the Bureau's evidence concerning violations of sections 1(4) and 1(11) (relating to the common carrier obligation to provide adequate transportation and car service) because she concluded that these issues were beyond the scope of these proceedings. The Bureau appeals this ruling.

We affirm the finding of the Administrative Law Judge. In directing the Bureau to participate in these proceedings, the Commission authorized it to propose action which should be taken with respect to any violation of law, and in a subsequent order, served January 26, 1978, the Commission authorized the Bureau "to raise new issues of its own" within a specific time table. At page 2 of that order, the Commission stated:

We do feel that this is enough time for it [the Bureau to decide whether there are any issues of substance in which the public or the government should have an interest, and what these issues are. It is only reasonable that the Bureau explicitly state its position before the hearing gets underway and before draft testimony begins to be circulated.

The Commission gave the Bureau until 20 days prior to the commencement of hearings to inform the Commission of any violations of law or of merger conditions it found, and to advise all parties of its positions, as required by the Administrative Procedure Act. If the Bureau could not take a position within the prescribed time, it was to petition for postponement of the hearing. These proceedings involved a voluminous record and complex legal and factual questions. It is only fair to defendants that they be afforded an opportunity to defend charges against them. The Bureau did not provide adequate notice that these violations would be at issue in these proceedings.

We should note that the Commission has recently affirmed its jurisdiction under section 1(4) to enforce the common carrier duty to provide adequate transportation in Winnebago Farmers Elevator Co., v. Chicago & N. W., 354 I.C.C. 859 (1978), affirmed (not printed), decided August 14, 1978. Since we have made no determination on the merits of the Bureau's allegations, the Bureau may raise them in a separate proceeding.

360 I.C.C.