General Counsel Edward Aptaker مناظر Liles January 26, 1955 Procedural Requirements in Board Approval of agreements A17-9-1 By memorandum of December 17, 1954, you requested a legal opinion on the questions whether an order, approving or disapproving a Section 15 filing, is governed by the provisions of Sections 4 or 5 of the Administrative Procedure Act (referred to herein as APA), and whether, and to what extent, a hearing can be dispensed with by the Board. The following is a statement of my legal opinion on the questions presented by your memorandum. Administrator's Order No. 166 (A.0. 166), as currently amended, establishes the procedure to be followed in connection with the submission and disposition of agreements subject to Section 15.1 Under the Order, agreements must be referred to the thief, Regulation Office, and made public by posting, by release to the press, and by publication in the Federal Register. The Federal Register notice must identify and abstract the proposed agreement, and notify interested persons that they may inspect the agreement and/or obtain copies at the Regulation Office, and may submit to the Board, within twenty days after publication, written statements expressing their position as to the agreement, together with a request for Hearing, if desired. Following receipt of such statements, the Chief, Office of Regulation, initiates a memorandum recommending appropriate action on the agreement, which, after olearance by the General Counsel, is forwarded to the Board. The agreement and the positions taken by the interested parties are then reviewed by the Board in the light of the statutory standards established in Section 15, and disposed of appropriately. Two provisions of A.0. 166 are of particular importance in this connection: "5.03 When hearing is ordered, it will be held prior to final action by the Federal Maritime board, except that where the Federal Maritime Board determines that the proposed agreement will confer immediate benefit upon the public, the Federal Maritime board may approve the proposed agreement and provide for a hearing in the Administrator's Crder 156 was promulgated following the dincussion held at the nited States Maritime Comission meeting of August 10, 1949 (Volume 118, Minutes, U.S.M.C. 55176). General Coun 1-26-55 nature of a public reconsideration of its action in "Section 6. Exception to Procedure: "6.01 The Federal Maritime Board may dispense with publication of notice and the receipt of public comment in circumstances warranting such omission pursuant to Section 4 of the Administrative Procedure Aor or other applicable laws." Whether these provisions are consistent with the requirements of the applicable law will be developed in the course of the following analysis. It is necessary at the outset to determine whether Board approval of a Section 15 agreement is an act of rule-making, of adjudication, or of licensing. These terms are defined in Section 2, APA, as follows: "(o) RULE AND RULE MAKING.-- 'Rule' means the whole or any part of any agency statement of general or partioular applicability and future effect designed to implement, interpret, or prescribe law or polioy or to describe the organisation, procedure, or practice requirements of any agency and includes the approval or prescription for the future of rates, wages, corporate or financial structures or reorganization thereof, prices, facilities, appliances, services or allowances therefor or of valuations, costs, or accounting, or practices bearing upon any of the foregoing. 'Rule making' means agency process for the formulation, amendment, or repeal of a rule. "(d) ORDER AND ADJUDICATION.-- 'Order' means the whol or any part of the final disposition (whether affirmative, negative, injunctive, or declaratory in form) of any agency in any matter other than rule making bur including licensing. 'Adjudication' means agency process for the formulation of an order. "() LICENSE AND LICENSING.-- 'License' includes the whole or part of any agency permit, certificate, approval, registration, charter, membership, statutory exemption or other form, of permission. 'Licensing' includes agenoy process respecting the grant, renewal, denial, revocation, suspension, annulment, withdrawal, limitation amendment, modification, or conditioning of a license." General Couns.. 1-26-55 It is evident that there is much overlapping and some looseness in these definitions. For example, while the key distinction between rule-making and adjudication is that the former is of "future effect", agencies do, in the proper exeroise of rule-making, occasionally promulgate retroactive rules, clearly distinct from their adjudicative acts. The proper application of these definitions must really depend upon an understanding of the type of agency action which is involved. "Thus, in determining whether agency action on a particular type of application is 'rule-making', the purposes of the statute involved and the considerations which the agency is required to weigh in granting or withholding its approval will be relevant..." Attorney General's Manual on APA, p. 14. The approval of a proposed conference agreement bears a more than superficial resemblance to licensing (and hence, by definition, adjudication under the APA). Its effect is an award of exemption from the anti-trust laws, and constitutes a permission to act in a manner otherwise prohibited. The considerations which the Board must canvass are those which traditionally attend licensing: whether the proposed activity will operate to the detriment of commeros (akin to the finding of public convenience and necessity), whether it will violate any section of the Shipping Aot, and whether its operation will result in unjust discrimination or unfairness. In this respect, the Board's action falls within the traditional concept of licensing, in which the arguments of applicants and protestants are entitled to fair consideration – and, often;-ea opportunity to be heard - before the agency may disapprove their application. It is true that a "rule" under the APA may be of partioular applicability, but agency action of particular applicability tends to assume the appearance of adjudication. Indeed, courts have, in appropriate cases, held action of particular applicability to be adjudication, notwithstanding the agency's vigorous contention that it was a "rule". Philadelphia Co. v. SEC, 175 F 2d 808 (1948), dismissed as moot, 337 U.S. 901. In general, it would be difficult to support the argument that section 15 approval, being of particular applicability, authorizing an otherwise prohibited course of conduct, and having an impact upon easily identifiable third persons such as non-conference competition and shippers, constitutes an act of rulemaking, rather than licensing-adjudication. I think it is clear that insofar as the APA is concerned section 15 approvals constitute an act of licensing and hence, by definition, adjudication, rather than rule-making. This conclusion is buttressed by the consideration that section 15 approvals frequently involve agency consideration of a protestant'a charge that the agreement is discriminatory, or violative of the 47063 0-60-pt. 1, v. 1—6 3.02 Statements from interested parties shall be referred to the Chief, Regulation Office, who shall consider them in making his recommendations relative to the agreement to the Chairman for presentation to the Federal Maritime Board. Section 4. Recommendation to the Chairman: 4.01 The Chief, Regulation Office, shall subedt the agreement and shall make a recommendation to the Chairman for presentation to the Federal Maritime Board for action on the agreement, 4.02 The memorandum of recommendation shall contain short summaries of the statements received from interested parties. 4.03 When an interested party has requested a hearing, the Chief, Regulation Office, shall recommend appropriate action with respect to the request. 4.04 The agreement and the mmorandım from the Chief, Regulation Office, shall be forwarded to the Chairman after legal clearance by the General Counsel. Section 5. Action by the Federal Maritime Board: 5.01 The Federal Maritime Board will review the agreement, statements of interested parties, memoranda from the Chief, Regulation Office, and other available information. 5.02 The Board may (a) approve the agreement; or (b) order a bearing on the matter; or (c) if it appears that the agrement may be unjustly discriminatory or unfair as between carriers, shippers, exporters, importers, or ports, or between exporters from the United States and their foreign competitors, or to operate to the detriment of the commerce of the United States, or to be in violation of the Shipping Act, 1916, as amended, the Board shall so advise the parties to the agreement, affording them an opportunity to meet the Board's objections to the agreement, or to request a hearing on the agreement. 5.03 If the parties meet the objections raised by the Board under Section 5.02(c), the Board shall approve the agreement. If the parties decline or fail to meet the objections, the agreement will be disapproved, unless a hearing is requested. If a hearing is requested, the matter will be set for bearing. 5.04 The Board shall approve the agreement if not disapproved under 5.03 or set for hearing. 5.05 After hearing, the Board may by order disapprove, cancel or modify any agreement, whether or not previously approved by it, that it finds to be unjustly discriminatory or unfair as between carriers, shippers, exporters importers, or ports, or between exporters from the United States and their foreign competitors, or to operate to the detriment of the commerce of the United States, or to be in violation of the Shipping Act, 1916, as amended, and shall approve all other agreements, 5.06 Notice of a hearing provided for under Sections 5.02 and 5.03 will be published in the Federal Register, the Office of the General Counsel reviewing the notice before publication, |