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the resultant charge per car would be substantially the same as the charge generated under the 40,000-pound rates.

2. Percent of increases.

The protesting shippers argued that the increases were abrupt and excessive, pointing to the percent of increases experienced at the various weight brackets.

The fundamental point which this argument overlooks is that the prior rates were woefully inadequate, far below variable costs at the lower weight minima. Thus, to Boston, protestants point to an 85.7-percent increase at the 40,000-pound weight bracket, but overlooked the fact that the prior Boston rate required a 48-percent increase before it would even reach the variable cost level. Thus the percent of increase required to place the rate structure on an appropriately compensatory footing necessarily overcomes years of prior subsidy of the Texas shippers through noncompensatory transportation services.

If the Commission in the past had any authority to require noncompensatory rates on fruits and vegetables in certain limited circumstances, it was revoked in the 4R Act. Amended section 1(5)(b) states:

Nothing in this paragraph shall prohibit a rate increase from a level which reduces the going-concern value of the proponent carrier to a level which contributes to such going-concern value and is otherwise just and reasonable.

Thus the increases in the lower weight brackets are attributable in substantial part to the fact that the prior rates were unreasonably low, producing a direct subsidy at the expense of the railroads and their other customers, for the benefit of Texas shippers. That subsidy has been properly withdrawn.

But there is more to be said in response to the shippers' argument. The increases taper, with the result that at the very highest weight bracket there are actually significant reductions under the prior rates. SP's traffic records show that 69 percent of its Texas perishables consisted of carloads of carrots, cabbage, and onions, all of which can and do load well in excess of 60,000 pounds. In fact, 55 percent of SP's carrot shipments, representing 16 percent of the SP perishable movement, consisted of bulk carrots with a carload average of 95,942 pounds. The rail charges on these carrot shipments were substantially unchanged, averaging $2,561.65 per car prior to the publication of the new rate structure, and $2,590.04 after, an increase of 1.1 percent.

Considering the fact that heavy loading, or potentially heavy loading, shipments constitute 69 percent of the perishable total, a more accurate characterization of the effect of the increases would be that the actual increases resulting from the new rates range from 30 percent down to nothing, and in some cases producing reductions, for the bulk of the rail traffic.

Thus the large percentage increase figures cited by protestants pertain to the light loading traffic, traffic which has been carried for years at horrendous out-of-pocket losses, and is traffic for which the railroads cannot, from a cost standpoint, effectively compete with the exempt trucks which dominate the market.

3. Florida competition.

The protesting shippers complain that Florida vegetable rail rates have not been readjusted to reflect the obsolescence of the old ice bunker refrigerator car, as the Florida vegetable rates are still based upon small, 33-foot 6-inch length refrigerator cars, with minimum weights of 20,000, 24,000, and 30,000 pounds. The shippers further complain that the level of the rail rates is relatively lower from Florida than from Texas. Grapefruit is cited as an example of this disparity.

Respondents observe that the rate exhibits do not entirely support the claim in the text. Statistic reveal that car-mile earnings are lower from Texas than from Florida to Boston and New York, major receiving points.

Also, to the extent grapefruit is shipped from Texas, it is not shipped in any volume by rail. The seaons' report from the Texas Fruit & Vegetable Market News shows two railcars of grapefruit shipped from Texas compared to 10,865 trucks. The U.S.D.A.'s

statistics for unloads in the 41 cities during 1975 show 5 Texas grapefruit rail unloads, compared to 3,455 Texas truck unloads, or a ratio of 691 truck shipments for every rail shipment.

More fundamental, however, is the fact that the Florida shippers do not rely on the railroads to any material extent and, in terms of the rates which actually move the traffic, the rail rates are largely "paper" rates. As previously noted, the rail movement of grapefruit from Texas is negligible. There is a more substantial movement of carrots by rail from Texas. For every Florida railcar, however, there were 24 Florida truck shipments. Cabbage is a commodity which moves by rail from Texas. For every rail carload of cabbage from Florida, however, there were 65 truck shipments of cabbage. Lettuce, which accounts for some rail movement from Texas, was moved entirely by truck from Florida. The rail versus truck dry onion shipments from Florida were not available. Peppers move by rail from Texas in small quantities. The Florida movement of peppers was 435 truck shipments for every railcar. Potatoes move in negligible volume by rail from Texas (one rail shipment to each 169 truck shipments). Florida truck shipments of potatoes outnumbered Florida rail shipments by more than 10 to 1.

Thus, respondents aver that:

***the rail rates from Florida on perishables are not the controlling rates actually moving the counterpart commodities from Florida origins to eastern destinations. On the contrary, the controlling rates are those of the exempt truckers with rail rates used on a standby basis. In short, the Florida competition of which these shippers complain, actually depends on motor carrier service and no realignment or readjustment of rail rates, Texas versus Florida, is going to have the slightest impact upon the Florida truckers whose rates are the going rates for transportation of Florida vegetables.

Although the Texas protestants maintain that their principal competition comes from Florida, the Texas protestants do not claim that the controlling competition comes from the handful of shippers in Florida who, for one reason or another, are still using rail service.

In view of the statistical evidence showing that the Florida shippers are overwhelmingly committed to truck service, the most that the Texas shippers can say is that buyers are "concerned" with delivered cost, that transportation cost has a bearing on which mode is used, that customers are interested in determining the laid-down cost of Texas vegetables versus the laid-down cost of vegetables from other areas, and that Florida shippers have "available" to them more favorable rail rates than do Texas shippers.

A review of protestants' evidence confirms that there is no evidence whatsoever that the alleged Florida competitors use rail service to any significant extent, if at all, or that the rail rates from Florida are anything but “paper” rates.

The protestants, in alleging that the Texas rates are unduly prejudicial and preferential of Florida shippers under section 3 of the act, have a greater burden than merely showing that the Florida shippers have "available" to them rates which appear to be more favorable than the Texas rates. They must go further and show that those "available" rates are in fact used in sufficient volume to enable the allegedly preferred producers to influence the market price which the Texas shippers must meet.

The Commission reviewed the requirements of section 3 in Lynchburg Traffic Bureau v. Chesapeake & O. Ry. Co., 319 L.C.C. 74, 81:

On exceptions, the complainant urges that its showing of more favorable rates to Danville than to Lynchburg establishes a prime facie case of undue prejudice and preference, in violation of section 3 of the act; and that, as a matter of law, the burden to show conclusively that the rates here complained of are not unduly prejudicial or preferential rests upon the defendants. In support, it cites New York v. United States, 331 U.S 284, in which the following appears:

"It is a matter of right, not by grace by the railroads, that regions and shippers shall not be prejudiced or their competitors preferred."

Nothing in the foregoing decision may be interpreted as overruling the oft-repeated holdings of the courts and the Commission that a mere difference in rates or in distances between particular points at the same rate is inadequate support for a section 3 finding; and that the burden of supporting an allegation under that section with adequate proof rests upon the complainant. To establish undue prejudice, in addition to the showing of a rate difference or a difference in distance at the same rate, there must be evidence of forceful competition between persons or localities under the rates complained of, and that the rate adjustment has operated to the complainant's disadvantage. See Cudahy Packing Co. v. Atchison, T. & S.F. Ry. Co., 234 I.C.C. 569-575. (Emphasis added)

As further proof that the differences in rates, Texas versus Florida, do not present a case of section 3 discrimination, is the fact that relief under a section 3 order is customarily in the alternative: The carriers have the option of increasing the allegedly preferential rate, reducing the allegedly prejudicial rate, or both. If the rail carriers serving Florida should increase their rates, what effect would this have on the Texas "competitors?" First, many Texas vegetables are not moving by rail in significant volume today, and surely the Texas truck shippers cannot claim "prejudice" in the Florida rail

rates.

Second, if Florida rail rates should be increased, it can reliably be predicted that there will be no material effect on the overall transportation charges from Florida to major eastern and midwestern markets, as the movement statistics show that the truck shipments outweigh the rail shipments by a lopsided margin, and those truck shipments will be wholly unaffected by any order increasing rail rates.

There is no basis in this record for requiring the Texas carriers to maintain any "relationship" to Florida rail rates which were not shown to be moving any material proportion of the Florida traffic.

G. Affirmative relief requested by Long Island Rail Road Company cannot be granted on this record.

By order dated November 8, 1976, the LIRR was granted leave to intervenc in this matter. The LIRR requests affirmative relief, namely, that the Commission direct the railroads (including LIRR) to publish increases to LIRR railroad points. The increased rates which LIRR Island would have the Commission prescribe are not the same rates as apply to destinations in New York on the lines of other rail carriers, but something lower. The relief sought by LIRR is relief which cannot be granted in this docket.

The LIRR is owned by the State of New York, and provides extensive local, commuter, and short-haul passenger services between New York City proper and points on Long Island. Though predominantly a passenger road, it also handles carload freight, and claims to have experienced exceptionally high costs in doing so.

The LIRR was able to take advantage of the unique nature of the congressionally mandated pass-through of increased retirement expenses which was accomplished in Ex Parte No. 299 for the Nation's railroads generally, and Ex Parte No. 299 (Sub-No. 1) for the LIRR decided by the Commission in Increases in Freight Rates and Charges 1973, 350 I.C.C. 673, 711 et. seq.2 By taking advantage of this unusual situation, the LIRR has been able to apply and retain a 12 1/2-percent surcharge on the entire linc-haul revenue assessed against shipments terminating on the LIRR. The "terminal" surcharge is so structured that the LIRR also obtains its normal division of the applicable through rate and then retains the entire revenue from its 12 1/2-percent surcharge.

Given this situation, it would appear that rates to and from LIRR points would be 12 2A majority of the Commission reaffirmed that decision by

December 9, 1976, which will probably be subject to judicial review.

an order served

1/2-percent above those to and from nearby points on other railroads. But this is not the case, for LIRR has arranged to manipulate its right of independent action, where it can, to keep the rates to and from LIRR points below the level of rates to adjacent points in New York State, thus leaving a margin for the imposition of LIRR's 12 1/2-percent special surcharge without upsetting shippers and receivers located on the LIRR. In order to accomplish this program, LIRR has made it a practice to refuse to concur in rate revisions applicable to eastern territory generally, or acquiesce in the cancellation of old rate stretures, and will grant concurrence in new rate structures, only if the other carriers are willing to publish a differentially lower single-factor rate to Long Island points, so as to allow the Long Island to take its 12 1/2-percent surcharge without irritating its taxpayer-receivers.

Consistent with its practice, the Long Island refused to concur in the cancellation of the prior rate structures from the Southwest, unless the railroads should agree to publish a lower basis of rates limited to apply to LIRR points, which would allow LIRR to put its special surcharge on top, without increasing the aggregate charge to its receivers above the charges paid by receivers on other railroads in the same general area. Unless the other carriers were willing to concur in such a reduced basis of rates to LIRR points, LIRR would not concur in the cancellation of the obsolete rate structure, insofar as destinations on its line were concerned.

The other railroads balked at this ill-concealed blackmail, and refused to agree to the LIRR's demands. As a result, the LIRR refused to concur in the cancellation of the obsolete rates, with the result that there is a "pocket" of lower rated receivers situated on the lines of the LIRR.

The obsolete rates, which were cancelled to destinations on all other eastern railroads, were disastrously noncompensatory. The LIRR was not as drastically affected as other participants in the move, because LIRR took not only its normal division but also its 12 1/2-percent special surcharge. It still wanted to increase the base rate on which the surcharge was calculated, however.

LIRR thereupon seized upon the possibility of inducing the Commission to prescribe some increase in the old rates, thus enabling it to take a larger division and apply its special surcharge to a larger revenue base. LIRR suggests that the Commission may lawfully take such action here, pointing to the Commission's action in docket No. 35960 as justification. Docket no. 35960 started with a complaint filed January 11, 1974, by Sunkist Growers and other western citrus shippers against the Akron, Canton & Youngstown Railroad Co., et al., seeking an order prescribing maximum reasonable rates on citrus fruit. The substance of the complaint was that the carriers were applying an obsolete rate structure, designed for ice bunker refrigerator cars, which did not recognize the heavy loading capabilities of the large mechanical refrigerator cars then in service. Sunkist sought the prescription of a scale of incentive rates which would produce an incentive to load cars heavily, thus reducing unit costs for the shippers while increasing per-car revenues for the railroads. The Sunkist complaint did not seek that rail rates be reduced across the board; quite the contrary, the scale of rates proposed by Sunkist incorporated substantial increases in the lower weight brackets, as compared to the prior rates.

One might at first blush wonder why a shipper would file a complaint proposing increased rates, but the answer is that the handwriting was on the wall, for a full-Commission decision, though disapproving a specific rail proposal, had stated that substantial increases in citrus rates were obviously justified. Citrus Fruits, Ariz. and Calif. to Eastern States, 341 I.C.C. 622 (1972).

The railroads were at that time at work constructing proposals for substantial increases in rates, which later were incorporated in the rate proposal considered by the Commission in I.&S. docket No. 8944. Thus the Sunkist complaint in effect sought to present its proposal for increased rates first, before the railroads could place in effect something which might be more onerous.

On March 4, 1975, Administrative Law Judge Frederick M. Dolan, Jr., served his initial decision approving substantial adoption of the scale proposed by Sunkist, and the prescription of such rates for the railroads.

While the matter was pending on an exceptions, the railroads, in a change of position, concluded to render the complaint meet by voluntary publication of the Sunkist scale of rates. Such rates were published effective October 19, 1975.

However, the LIRR did not concur in the new publication. It petitioned for leave to intervene in the Sunkist proceedings, and sought the prescription of rates to LIRR points differentially below rates to other nearby points which would allow LIRR to apply its special surcharge and not exceed the scale of rates proposed in New York by the Administrative Law Judge, and published elsewhere by the other railroads. Sunkist, the complainant shipper, did not object to such a prescription.

On July 29, 1976, division 2, in a brief decision and order, found that the action of the carriers in voluntarily publishing new rates had substantially rendered the complaint moot, except as to LIRR points, and that as to LIRR destinations, the rates proposed by LIRR, in which the shipper acquiesced, should be published.

This decision was the subject of a vigorous petition for reconsideration filed September 3, 1976. The rail carriers (other than LIRR) there pointed out that the Commission's decision lacked an adequate statement of findings and reasons, is internally inconsistent, does not produce substantial compliance with the Administrative Law Judge's order, and inconsistently relies upon Administrative Law Judge Dolan's findings explaining the reasonableness of prescription of rates at the Ex Parte No. 305 level to justify the prescription of maximum reasonable rates at the much lower Ex Parte No. 295 level to LIRR points. The petition further pointed out that the decision would prescribe rates to LIRR points below the variable costs of transportation, as recently determined by the Commission in its July 16, 1976, decision in I.&S. Docket No. 9092, Fresh Citrus Fruits, Transcontinental, Eastbound. The carriers pointed out that the complaint sought the prescription of single-factor rates to destinations in the East, including LIRR points, and that the prescription of such a rate, while necessarily displacing any special surcharge which the LIRR would otherwise apply to other traffic, was the only consistent response to the complaint and the evidence of record. In the event LIRR believed that it should apply a local surcharge on top of the prescribed rates, or should seek some realignment of division, that could appropriately be dealt with in other proceedings. In any event, Long Island had presented no evidence whatsoever to explain why any different basis of rates should be prescribed to LIRR points, than applied elsewhere in the same general territory. Respondents urge, therefore, that docket No. 35960 does not serve as precedent for the question which LIRR seeks to raise here, for several reasons.

(1) The decision in docket No. 35960, though administratively final, is headed for judicial review. It is the sentiment of a number of railroads affected that the docket No. 35960 decision is, legally, extremely questionable, and will be vulnerable on court review. Whether or not this is a correct appraisal of the decision, it will not become judicially final for some extended period of time.

(2) There was no question of notice involved in docket no. 35960. The shipper was not only willing to pay higher rates, but the shippers had an opportunity to, and did, express their views to the Commission on the increase proposal submitted by LIRR in that docket.

There is a serious question of notice in this proceeding. The manner in which rail rates are increased is strictly governed by law, and it does not encompass what LIRR has proposed here. The standard procedures are:

(a) The filing of a tariff of increased rates and charges, allowing the parties opportunity to file petitions for suspension and investigation, and thereafter be heard if the Commission directs an investigation. No tariff of increased charges was filed to LIRR points. The shippers were not put on notice of the proposal that LIRR had in mind.

(b) A gencarl ratemaking or rulemaking investigation, duly noticed in the Federal Register. It is undisputed that none such was ordered here.

(c) An appropriate complaint or petition for investigation, served upon or providing appropriate notice to the parties affected. It is undisputed that the LIRR petition in this proceeding was not served upon the affected shippers on their line, but only upon the tariff publishing officers, who of course do not pay and bear freight charges, and who in any event do not normally represent the shippers.

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