Outward Continental North Pacific Freight Conference and Its Members, Petitioners, v. Federal Maritime Commission Andunited States of America, Respondents, 385 F.2d 981 (D.C. Cir. 1967)

This is a petition for review of an order of the Federal Maritime Commission disapproving, under Section 15 of the Shipping Act (46 U.S.C. § 801 et seq.), petitioners' ocean shipping conference agreement for their failure to comply with three General Orders of the Commission. Petitioners not only attack these Orders as beyond the rule-making authority of the Commission, but also challenge the power of the Commission to enforce them by withdrawing approval of the conference agreement. Many of petitioners' contentions we have already rejected in Pacific Coast European Conference v. Federal Maritime Commission, 126 U.S.App.D.C. 230, 376 F.2d 785 (1967); and, finding petitioners' other allegations to be without merit, we affirm the order of the Commission.

The General Orders 7, 9, and 14 involved in this dispute were issued by the Commission after extensive rule-making proceedings¹  in which petitioners participated fully. They were designed to implement the 1961 amendments to Section 15 of the Shipping Act, relevant portions of which are set out in the margin.²  Petitioners neither sought review of these Orders in a federal court of appeals,³  nor took any steps to comply with them. After petitioners had ignored several inquiries concerning this failure, the Commission issued an order to show cause why their agreement should not be disapproved for noncompliance with Section 15 and Orders 7, 9, and 14. Petitioners were permitted to submit affidavits and memoranda of law and to present oral argument, after which the Commission issued the disapproval order now before us.

In view of our decision in Pacific Coast, the validity of General Order 9 as an exercise of the Commission's broad rule-making authority is no longer subject to dispute in this court. That case established that the specifications of General Order 9 were "reasonably adapted to the accomplishment of the Congressional objective [in Section 15] of providing the shipping conference with freely swinging doors in respect of carrier membership."⁴  376 F.2d at 790. General Orders 7 and 14 were likewise intended to further other Congressional policies expressed in Section 15; and they also represent, at least in the particulars relevant to this case, permissible exercises of the Commission's authority to promulgate precise guides to compliance with the Shipping Act.⁵ 

General Order 7 is designed to facilitate the Commission's statutory obligation to disapprove any conference agreement on a "finding of inadequate policing of the obligations under it." The Order's specifications — neither of which was met by petitioners — are that each agreement must include a provision describing the policing system used by the members, and that the conference must file with the Commission semi-annual reports describing the nature and disposition of any complaints received by the conference. General Order 14 was promulgated to aid the Commission in ensuring that no conference be approved unless it fulfills its statutory duty "to adopt and maintain reasonable procedures for promptly and fairly hearing and considering shippers' requests and complaints." Those requirements of Order 14 with which petitioners were found not to have complied were that the conference (1) file with the Commission and publish in its tariff a statement outlining the procedures for disposition of shippers' requests and complaints, (2) submit semi-annual reports to the Commission describing the nature and disposition of shippers' complaints, and (3) designate a resident representative in the United States with whom U.S. shippers may lodge their requests and complaints.

It is evident that these specifications were devised primarily to keep the Commission informed about the actual practices of the conferences.⁶  Congress has entrusted to the Commission the task of ensuring compliance with the mandates of Section 15. Since diligent performance of this duty demands almost constant surveillance of conference activities, and since all of the information required by the Orders pertains directly to the statutory criteria, we cannot say that these Orders are in excess of the Commission's rule-making authority. Petitioners' most strenuous objections are directed not so much to the Commission's general power to inform itself as against the particular feature of Order 7 which requires the conference to adopt a full-fledged policing system and to incorporate it by amendment into the agreement. However, we think it a reasonable interpretation of the Congressional insistence upon adequate policing that the conference be able to point to some systematic and regular procedures for securing its members' adherence to the obligations of the agreement. Nor do we think the Commission exceeds its bounds in requiring that these procedures be described in a provision of the agreement.⁷  Compulsory amendment of the agreement is a reasonable manner of ensuring that the conference has in fact adopted a policing system and that it is brought clearly to the Commission's attention.

Petitioners' argument continues, however, that even assuming the Commission is empowered to promulgate such rules and to enforce them under another section of the Shipping Act,⁸  it cannot withdraw approval of the agreement under Section 15 without first making a specific finding, after notice and hearing, that the actual operations of the Conference fail to conform to the statute. As it applies to General Order 9, this argument was considered and rejected in Pacific Coast. We there noted that "where the rule does not transgress the authority under which it is issued, it is still the statute which speaks." 376 F.2d ta 790. Admittedly the nexus between the statutory directive and General Order 7 is more attenuated. Order 9 defines certain "reasonable and equal terms and conditions for admission" whose inclusion in the agreement Section 15 makes a prerequisite to Commission approval; an agreement which does not include those provisions is per se in violation of the Act. While it is less obvious that a conference whose agreement does not contain a provision describing its policing system necessarily violates the statutory proscription of "inadequate policing," we think the Commission may be permitted to draw such an inference. The Commission can reasonably "find," without the necessity of an extended evidentiary hearing,⁹  that any conference which refuses to adopt and communicate to the Commission an outline of its policing methods does not adequately police its members.¹⁰ 

Petitioners suggest that because they are a foreign conference whose shippers are predominantly European, they are in certain respects beyond Congressional limitations of the extraterritorial jurisdiction of the Commission. In view of the immunity from our antitrust laws which conference members whose agreements are approved enjoy, we find these contentions to be without substance.¹¹  The order under review is

Affirmed.