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Midtec Paper Corp. v. United States
Citations: 273 U.S. App. D.C. 49; 857 F.2d 1487; 1988 WL 95671Docket: No. 87-1032
Court: Court of Appeals for the D.C. Circuit; September 16, 1988; Federal Appellate Court
The Court reviewed an Interstate Commerce Commission (ICC) decision regarding 'competitive access' rules in the railroad industry, stemming from a joint complaint by Midtec Paper Corporation and Soo Line Railroad. They contended that the Chicago and North Western Transportation Company (C.NW.) monopolized rail transportation for Midtec, exploiting its market power. As a 'captive shipper,' Midtec sought ICC intervention to compel C.NW to provide 'reciprocal switching' and 'terminal trackage' rights to Soo, arguing these were essential for competition and aligned with the Staggers Rail Act. The ICC dismissed the complaint, a decision the Court found consistent with statutory standards and supported by substantial evidence. In the background, Midtec, having invested nearly $130 million in a paper mill in Kimberly, Wisconsin, relies heavily on rail for raw materials and product shipment. The C.NW and Soo are the primary rail carriers serving the area, with their main lines intersecting at Appleton, necessitating cooperative arrangements for traffic sharing. These arrangements could include establishing 'through routes' with joint rates or allowing another railroad to operate over C.NW’s tracks for 'single line' service. The ICC, under section 223 of the Staggers Act, can mandate joint use of terminal facilities if it serves the public interest without significantly hindering the facility owner's operations. Carriers unable to reach an agreement on terminal trackage rights may have terms prescribed by the Commission, which historically requires a demonstration of "actual necessity or compelling reason" for such rights, beyond mere convenience for shippers. The Commission can also mandate reciprocal switching services when deemed "practicable and in the public interest" or necessary for competitive rail service. The criteria for terminal trackage rights and reciprocal switching are interpreted as substantially identical, focusing on the necessity for competitive service rather than evaluating existing rates charged by the carrier. In 1981, during a downturn in the paper products market, Midtec sought assistance from C.NW for transportation needs but received an inadequate response. Midtec and Soo urged C.NW for negotiations regarding operating rights over the Kaukauna branch line. C.NW rejected the proposal, prompting Midtec and Soo to file a complaint with the Interstate Commerce Commission, asserting that Midtec, as a “captive shipper,” was disadvantaged compared to competing mills with access to multiple rail carriers. They requested the Commission to order C.NW to provide reciprocal switching and terminal trackage rights to the Soo for Midtec traffic, propose a compensation agreement within 90 days, or have the Commission establish terms if no agreement was reached. Following a hearing on a joint complaint, an Administrative Law Judge (ALJ) ordered the Chicago and North Western Transportation Company (C.NW) to establish agreements with Soo Line for terminal trackage rights and reciprocal switching, supporting this decision with the pro-competitive framework of the Staggers Act. The ALJ determined that the existing service to Midtec Paper Corp. was inadequate, necessitating reciprocal switching to enhance competitive rail service. The ALJ noted that C.NW only responded to Midtec’s needs under pressure and indicated that having access to only one rail carrier showed a lack of competition. The ICC Review Board affirmed the need for reciprocal switching but deemed terminal facility joint use unnecessary, emphasizing that reciprocal switching would impose less burden on the railroad's operations. However, the Commission later reversed the Review Board's decision, asserting that the evidence did not substantiate claims of inadequate service by C.NW. The Commission found that Midtec's allegations were primarily based on the unreasonableness of rates, which required proof of market dominance by the serving carrier—a showing Midtec failed to make. The Commission established that to request terminal trackage or reciprocal switching, shippers must demonstrate existing rail service is severely deficient, impairing competitiveness. It concluded that reciprocal switching wasn't essential for providing competitive service to Midtec due to existing intermodal and geographic competition that could motivate C.NW to offer necessary rates and services. Midtec and Soo sought judicial review of the Commission's decision. While that review was pending, the Commission introduced new rules for competitive access remedies, prompting a remand of the case to the agency for reconsideration under these new regulations. The Commission reopened the record on remand to gather evidence and arguments regarding the role of competition in relation to the standards of the CARs, despite the absence of specific provisions for terminal trackage rights. It recognized that resolving a request for terminal trackage rights was intertwined with the considerations of Midtec's request for reciprocal switching. After reviewing additional submissions, the Commission dismissed the joint complaint, determining that the primary concern was whether C.NW engaged in conduct contrary to rail transportation policy or exhibited anticompetitive behavior. The key inquiries were whether C.NW exploited its market power for unreasonable terms on through movements or disregarded shipper needs through inadequate service. The Commission's examination revealed that C.NW had cooperated in establishing through routes and joint rates for certain commodities, indicating that the complaint focused on the terms and quality of service rather than access denial. However, the record lacked sufficient evidence regarding the terms of through transportation offered by C.NW, which undermined the complaints regarding both terminal trackage rights and reciprocal switching. While acknowledging that the complainants may have struggled to document anticompetitive conduct due to the nature of the case, the Commission noted C.NW's significant concessions since the original complaint in December 1982. It expressed readiness to expedite relief for any future anticompetitive conduct by C.NW. In the subsequent review, both parties raised procedural questions concerning the application of the CARs in the Commission's earlier decision (Midtec I). Supporters of the petitioner argued that the Commission did not apply the appropriate statutory criteria for reciprocal switching and that the initial findings in Midtec I should be considered the "law of the case" and thus subject to review in the current proceeding. The Commission's earlier position considered competitive access only if existing service severely impaired a shipper's ability to compete. However, in Midtec II, the Commission applied a different standard, asserting that its later decision superseded the prior one. The criteria in the CARs, established post-Midtec I, formed the basis for the Commission's request for reconsideration in Midtec II. Although the Commission's interpretation of the CARs can be challenged, there is no need to review Midtec I. The Commission contends that Midtec's challenge is a collateral attack on the CARs, arguing Midtec is collaterally estopped from contesting them since it participated in their adoption and the CARs were previously upheld by the court. Additionally, some amici suggest the court lacks jurisdiction due to Midtec's failure to seek timely judicial review of the CARs. However, Midtec's challenge specifically targets the Commission’s application of the CARs, not the CARs themselves. The Commission had acknowledged that the CARs would be applied flexibly to various situations, including reciprocal switching requests, and did not explicitly govern terminal trackage rights. Midtec questions whether the Commission's application of the CARs to its case adhered to statutory mandates. Consequently, the expiration of the review period for the CARs does not impact the court's jurisdiction over Midtec's challenge, nor is it barred by collateral estoppel. The court noted that the CARs do not clearly define the circumstances for granting reciprocal switching or terminal trackage rights, and the application of these rules to Midtec's situation has not been previously adjudicated. Thus, Midtec is entitled to pursue its arguments regarding the merits of the case. The court addresses Midtec's assertion that no deference should be given to the ICC's decision on the merits due to its adjudicative nature. The court identifies two key issues: the review standard for the agency's interpretation of the CARs and the scrutiny applied to the evidence and conclusions drawn by the agency. It clarifies that the distinction between adjudication and rulemaking is irrelevant; the review process remains consistent. The court examines the statute's text and legislative history to ascertain Congress's intent. If Congress has not clearly resolved specific legal issues, the agency's reasonable interpretation must be accepted. The court emphasizes the importance of deferring to the agency's expertise in administering national rail transportation policy, as intended by Congress. This principle of deference applies equally to both agency rule-making and adjudication, allowing for a nuanced understanding of conflicting policies through case-by-case adjudication. Courts must honor the agency's interpretation of statutes that Congress has tasked it with administering, provided that interpretation aligns with Congressional intent or is deemed reasonable when intent is unclear. In reviewing agency actions, courts apply different standards based on the type of proceeding. Under the Administrative Procedure Act, agency actions can be overturned if found arbitrary or capricious. In adjudications, findings must also be supported by substantial evidence. While the arbitrary and capricious standard overlaps with the substantial evidence test, it serves a distinct purpose by ensuring that agencies do not make arbitrary inferences from established facts. Courts are required to conduct a comprehensive review of the agency's rationale, confirming a logical connection between the facts and decisions made. While agencies are afforded deference in this review, courts will uphold decisions lacking clarity if the agency's reasoning can still be reasonably understood. Midtec contends that the Commission's dismissal of its complaint was arbitrary and capricious for several reasons: (a) the Competitive Access Rules (CARs) misalign with the Staggers Act's provisions on reciprocal switching, and the Commission did not consider the complaint under these statutory guidelines; (b) the Commission incorrectly applied CARs' standards to Midtec's request for terminal trackage rights, which are not explicitly addressed by the CARs; (c) the CARs' requirement for Midtec to show that reciprocal switching is necessary to address anticompetitive behavior was interpreted using irrelevant criteria, such as rate reasonableness and competition types; and (d) substantial evidence of the C.NW's anticompetitive conduct existed, rendering the Commission's dismissal unjustified. Midtec and its supporters argue that the Commission failed to evaluate the complaint under the criteria of the Staggers Act, specifically section 11103(c)(1), which assesses whether reciprocal switching is practicable, in the public interest, or necessary for competitive rail service. Midtec asserts that if the Commission is required to order reciprocal switching when these conditions are met, it need not prove that C.NW's conduct was contrary to the competition policy of the Staggers Act. Conversely, intervenors recognize that the statute allows but does not mandate the Commission to establish reciprocal switching if criteria are satisfied, arguing that the Commission's failure to address these criteria constitutes an error. The document notes that previous rulings, such as in Baltimore Gas, upheld the Commission's discretion to impose switching agreements only to prevent anticompetitive acts. While Midtec's arguments are not entirely precluded by this precedent, they are deemed unconvincing. The discussion also touches on the interpretation of legislative language regarding discretion, suggesting that while "may" typically indicates discretion, the legislative intent and the statute's structure can imply a requirement for action. The intent of Congress and the framework of section 11103, as well as the overarching goals of the Staggers Act, guide the interpretation of railroad switching agreements. Historically, railroads were hesitant to enter reciprocal switching agreements before the Staggers Act, which aimed to encourage, but not mandate, the approval of such agreements by the Commission. Legislative history confirms that the Commission is not obligated to impose reciprocal switching if it believes it would be unwise, although it must base its decisions on reasoned analysis rather than arbitrary judgment. The Commission's adoption of the CARs effectively narrows its discretion under section 11103 by specifying conditions that would prevent discretionary relief, particularly concerning anticompetitive concerns. The evaluation aligns with the standards set by Chevron, focusing on whether the Commission has balanced the conflicting policies within its governing statute reasonably. The regulations consider the interests of shippers in fair rates and emphasize competition while limiting federal regulatory oversight of the industry. The distinction between the Commission’s authority over through routes and reciprocal switching is crucial, as the effectiveness of through routes relies heavily on mutual agreements among participants. Although the Staggers Act restricts the Commission's powers over rates and joint rates, it does not express similar limitations concerning reciprocal switching. Section 11103(c)(1) enhances the Commission's authority to mandate switching agreements, indicating that while the Commission's power may have increased, it does not imply a more liberal application regarding reciprocal switching compared to through routes. Congress expanded options for shippers and carriers regarding competitive access while clarifying the Commission's authority to mandate such access. However, this does not imply that one form of relief should be favored over another or that one is mandatory while the other is discretionary. Both "joint service" agreements and reciprocal switching are intended to enhance competition. The Committee promotes reciprocal switching to foster competition and support joint service agreements for improved shipper efficiency. If Congress aimed to create a disparity in the Commission's discretion, it would have made reciprocal switching less accessible. When parties cannot agree on competitive access, establishing through routes offers carriers more flexibility than mandatory reciprocal switching. Through routes align the interests of participating carriers in setting joint rates responsive to market demand, reducing the need for regulatory oversight. In contrast, mandated reciprocal switching can lead to disputes over switching rates, with the favored carrier potentially seeking Commission intervention to fix rates, thereby undermining competitive pricing. The Commission noted that the switching carrier would lose the ability to adjust pricing in response to varying demands under reciprocal switching, which may lead to increased regulatory reliance for rate setting—contradicting the competition policies of the Staggers Act. The U.S. Government aims to maximize competition and allow market demands to dictate reasonable transportation rates. Both through routes and reciprocal switching are subject to the same threshold requirement: access must be necessary to address anti-competitive acts or policies. This reflects an attempt to balance the various goals of national rail transportation policy outlined in the Staggers Act. The statute and its legislative history do not support claims that the Commission acted unreasonably by applying the same rules to alternative means of "competitive access." Arguments asserting that the Competitive Access Regulations (CARs) are either "optional" or "extra-statutory" are rejected, along with claims that the Commission must reassess its statutory discretion in each case rather than utilize the CARs framework. Regarding terminal trackage rights, the Commission justified extending anticompetitive behavior considerations to these requests, asserting that, despite terminal trackage rights not being explicitly covered by competitive access rules, the public interest test remains consistent. The Commission refrained from establishing specific rules for terminal trackage rights due to the rarity of such cases and the belief that existing mechanisms, like joint rates and reciprocal switching, provide adequate competitive access. Requests for terminal trackage rights will be evaluated individually, focusing on potential anticompetitive conduct by the carrier of essential rail lines. Petitioners argue that this decision is unreasonable and diverges from previous precedent, necessitating a thorough explanation from the Commission. However, the Commission's analysis was deemed neither arbitrary nor inconsistent with congressional intent or past precedents. The rationale aligns with section 11103(a), which allows the Commission to require terminal trackage rights when practicable and in the public interest, supported by legislative reports indicating that this standard should be uniformly applied across similar provisions. The use of terminal facilities by one carrier is viewed as a more significant operational impact than reciprocal switching, which is described as a more limited action. The Commission's authority to grant terminal trackage rights is more constrained than its authority for reciprocal switching. Historically, a complainant requesting terminal trackage rights must show “some actual necessity or compelling reason.” This requirement is not significantly altered by recent standards, which do not appear arbitrary or capricious. Midtec and intervenors have not adequately argued why terminal trackage rights should be granted when reciprocal switching is deemed unwarranted. Midtec's claim hinges on its "captive status," which it argues leads to service and rate disadvantages, yet lacks sufficient evidence to demonstrate the necessity for terminal trackage rights to address anticompetitive behavior from the C. NW. The Commission has outlined essential questions to determine if relief is appropriate, focusing on whether the railroad has misused market power or inadequately served shippers. It is also considering classic competitive abuses such as foreclosure and price squeezes. Midtec has challenged the Commission's requirement for evidence regarding the reasonableness of rates offered by the C. NW. The Commission concluded that service inadequacies were not relevant to determining competitive access needs and emphasized that, under section 11103, it was required to consider only intramodal competition, specifically rail-to-rail. In assessing "market dominance" and rate reasonableness, the Commission highlighted the importance of specific evidence categories—such as the involved railroads' revenues, routing efficiencies, cost/revenue ratios, and proposed rates. Despite reopening the proceeding to evaluate these issues, complainants failed to provide the necessary evidence, leading the Commission to dismiss Midtec's general allegations about the C. NW's pricing practices. Midtec contended that the focus on rate reasonableness in reciprocal switching requests was arbitrary, arguing that the inquiry should not extend to determining maximum reasonable rates, which would unfairly burden complainants to prove the C. NW's market dominance. The Commission, however, overruled the notion that market dominance was a prerequisite for relief in competitive access cases, affirming that rate issues are relevant, particularly in evaluating whether access was granted on reasonable terms. The Commission indicated that competitive access could be mandated if a carrier’s rate practices were found contrary to competition policies, even if those rates did not establish market dominance. Midtec's complaint highlighted its disadvantage due to a lack of competitive options compared to its competitors who benefit from multiple carriers. Midtec's operational challenges have intensified due to its expanded operations and new pricing flexibilities under the Staggers Rail Act of 1980. The complaints presented to the Commission include: 1) Midtec's severe market disadvantage compared to competing paper producers, 2) C. NW's refusal to negotiate lower rail rates, which negatively impacts Midtec's profit margins and allows C. NW to retain efficiency gains, and 3) C. NW's monopolistic practices that unfairly benefit it at Midtec's expense. Although the "market dominance" test typically applied to rate unreasonableness complaints may not be relevant for competitive access requests, evidence is necessary to substantiate Midtec’s claims. Simply asserting that C. NW’s rates are higher than those of competitors does not, on its own, demonstrate anticompetitive behavior. The Commission must consider various factors, including the revenues of involved railroads and the rates sought from them, as outlined in 49 C.F.R. 1144.5(a)(1). The Commission's requirement for evidence raises questions about what specific data is necessary to evaluate Midtec’s case for competitive relief. Midtec argues that evidence of specific rates is not pertinent to its request for competitive access, positing that Congress intended section 11103 to enhance interrail competition against the backdrop of substantial rate advantages given to railroads under the Staggers Act. Midtec maintains that even without proving market dominance, C. NW possesses market power that it has exploited to deny Midtec competitive rates, and that section 11103 was designed to address such situations where the Commission cannot prescribe reasonable rates. Captive shippers experiencing supra-competitive rates may confront a "heads-I win, tails-you lose" scenario. Midtec argues that section 11103 serves as an alternative method for rate relief, compelling the Commission to steer the national rail system towards conditions resembling perfect competition, characterized by marginal cost ratemaking. Under this interpretation, captive shippers unable to prove market dominance could still gain competitive access through a regulatory mandate requiring a non-market dominant carrier with some "market power" to facilitate access to another carrier. This theory implies that a carrier charging captive shippers above competitive rates without sufficient competition violates the competition policies established by the Staggers Act, suggesting such practices are anticompetitive. However, this interpretation contradicts Congress's intent to deregulate railroad rates when no market-dominant carrier exists. The Staggers Act defines "market dominance" as the lack of effective competition from other carriers or transport modes for the applicable rates, with a presumption against market dominance if a carrier's rates do not exceed a specified percentage over its variable costs. The Staggers Act aims to grant non-dominant carriers the freedom to set rates based on market conditions, effectively reducing regulatory control over maximum rates and promoting competition. The overarching goal of the Act was to revitalize the railroad industry by alleviating regulatory burdens, ensuring adequate revenue, and addressing the industry's financial challenges. Congress acknowledged the necessity for regulatory measures in scenarios of inadequate competition and where rail rates generate excessive revenues, surpassing what is necessary for maintaining the rail system and attracting capital. The "market dominance" test was established to uphold these policies, allowing the Commission to refrain from rate scrutiny in the presence of effective competition while preventing captive shippers from shouldering an unfair burden for the railroads' financial improvements. The presumption of effective competition applies in the absence of a market-dominant carrier, negating the need for rate regulation. Midtec has not requested the Commission to set rates charged by C. NW, recognizing that the Commission lacks authority to intervene unless the rates exceed the market dominance threshold. It would be contradictory to suggest that a non-market-dominant carrier could still be subject to access regulation solely because its rates are above competitive levels. The market dominance test does not guarantee captive shippers will pay rates reflective of perfect competition; rather, it delineates when competition is considered effective and regulation unnecessary. Midtec's interpretation suggests that Congress intended for a market to be simultaneously effectively competitive, thus avoiding direct rate regulation, yet insufficiently competitive to necessitate indirect rate regulation through mandated access. Granting the Commission the power to enforce reciprocal switching or terminal trackage based on enhancing competition could drastically alter the railroad industry, with no evidence indicating Congress intended such a shift towards perfect competition. The Staggers Act allows C. NW to possess some market power, enabling it to set prices above marginal costs without being liable for compelled access. The Commission's policy to reserve authority for access orders only when necessary to counteract anticompetitive actions aligns with the Staggers Act's competition policies. Market dominance is essential for determining unreasonableness but not for prescribing joint rates, and anti-competitive carrier practices can be addressed without establishing market dominance. A request for competitive access based solely on a carrier's high rates can only be deemed anti-competitive under the Staggers Act if market dominance is demonstrated. Midtec's challenges to this concept are noted, yet its specific allegations suggest more than just claims of supra-competitive rates. Midtec asserts that the C. NW's rates disadvantage it against competitors, appropriate excessive revenue, and abuse market power by extracting undue revenues. However, evidence does not support Midtec's assertion of competitive disadvantage; production has increased significantly since investing in the Kimberly mill, and the number of cities served rose from 90 in 1982 to 157 in 1985. There is no evidence showing that competitors have gained access to more favorable rail rates or been able to serve markets denied to Midtec. Furthermore, there is nothing inherently anti-competitive about transportation rates that prevent distant shippers from competing effectively. For rates to be considered anti-competitive under the Staggers Act, there must be evidence of intentional actions to limit competition or that the rates result in market dominance, neither of which Midtec has claimed. Midtec's assertion that C. NW's refusal to negotiate lower rates harms its profit margins lacks specificity regarding anti-competitive effects. Ultimately, a rate cannot be deemed unreasonable without a showing of market dominance, and rates below this threshold cannot be viewed as contrary to the Staggers Act's competition policies. C. NW is allowed to charge a proportional rate for inbound woodpulp shipments between Neenah, Wisconsin, and the Kimberly mill, contingent upon sharing in the line-haul rate from Canada to Neenah, which C. NW does not participate in. Complainants argue this demonstrates C. NW's monopolistic exploitation of the Soo to gain unwarranted revenues without providing service. However, the Commission found that the key issue is whether the overall compensation received by C. NW is reasonable for the services performed, and no evidence suggested it was unreasonable. The rate arrangement, intended to attract traffic away from higher-cost rail routes, was deemed competitive rather than anti-competitive. Midtec, benefiting from the arrangement, described it as favorable for their operations. The Commission concluded that without substantial evidence of anti-competitive behavior or unreasonable terms, Midtec's allegations could not succeed. Midtec's claims of C. NW abusing market power due to improved rates were dismissed, as the Commission noted that hard bargaining does not equate to market power abuse. The Commission highlighted that Midtec's ability to negotiate rate reductions indicates some constraint on C. NW's market power. C. NW's attempts to maximize profits at Midtec's expense do not constitute a violation of the Staggers Act. Evidence suggests that C. NW began offering reduced rates prior to any legal threats, and its rate concessions were responses to competitive pressures and the deregulated environment rather than merely an attempt to avoid regulatory scrutiny. The agency's decision to deny immediate relief is justified, as it has indicated readiness to intervene swiftly if future anticompetitive behavior is demonstrated. Midtec claims the Commission imposed an unreasonable burden by requiring specific evidence on rates, revenues, and costs, arguing that such analysis is logistically infeasible. However, the Commission has previously accepted representative shipment data for similar complaints, indicating that Midtec's claims about evidentiary burdens may be exaggerated. Additionally, while Midtec contends it was not adequately notified that such evidence would be required, the Commission's guidelines (CARs) clearly indicate that rate evidence is relevant in competitive access complaint proceedings. The reopening of the record was justified based on prior evidence not meeting CAR standards, and this context sufficiently informed Midtec of the evidence expectations. Midtec's assertion that it lacked notice regarding the relevance of rate evidence in its complaint (Midtec II) is deemed implausible, particularly given the prior case (Midtec I), where the absence of such evidence was deemed detrimental to the joint complaint. Although Midtec contends that the Commission's discovery rules are restrictive and that it would have been denied specific evidence requested by the CARs, it did not pursue discovery until after the Commission's decision, which placed the matter in court rather than before the Commission. A litigant cannot justifiably complain about not receiving information that it did not attempt to obtain through available procedures. Even if discovery was perceived as futile, some relevant rate evidence was accessible to Midtec, such as its payments to the C. NW and potential rates proposed by the Soo. The discussion also addresses the adequacy of the C. NW's service to Midtec, with Midtec and its supporters failing to argue that service issues are irrelevant under the CARs. Instead, they suggest that these issues pertain only to the public interest standards of section 11103, not the necessity for reciprocal switching to promote competitive rail service. However, evidence of a carrier's actual or threatened conduct, including service adequacy to captive shippers, is critical in determining potential anticompetitive behavior, aligning with the requirements of the CARs and the Staggers Act. Midtec's initial claims of "serious service and price disabilities" necessitated evidence to support those allegations, reinforcing the relevance of service quality in assessing compliance with competition policies. The document concludes that monopolistic practices may manifest through excessive pricing or inadequate service quality, necessitating careful evaluation of the C. NW's actions. A railroad cannot circumvent regulatory oversight by setting rates below the regulatory threshold while simultaneously extracting monopoly rents through service quality degradation. The Commission lacks the authority to evaluate service adequacy when determining market dominance, and assigning quantitative measures to service quality is deemed impractical. Thus, a qualitative assessment is necessary to ascertain if a carrier is exerting market power in violation of the Act’s competition policies, particularly concerning the national rail transportation policies promoting a robust public rail system and preventing discrimination. Midtec contends that the quality of C. NW's services is inadequate, citing specific examples to support this claim. One issue raised is C. NW's alleged unavailability of special 100-ton capacity boxcars, which are essential for Midtec’s operations since its customers require this capacity to avoid cost increases from splitting loads. However, C. NW asserts that it upgraded its boxcars to meet Midtec's needs, and the Commission found no evidence of Midtec formally requesting larger-capacity cars. Another concern involves Midtec's clay shipments, where it seeks competitive access to a mill for a more efficient routing. Midtec argues that the current routing through an interchange at East St. Louis is less effective than a proposed route through Louisville, which would enhance competitive options and enable rate relief. C. NW counters that it has offered a more efficient route via Chicago and is confident in its ability to compete with any service provided by the Soo. Midtec acknowledged its decision to route clay shipments through East St. Louis instead of Chicago was not mandated by the C. NW but was intended to provide C. NW with a longer haul to exert pressure on the origin carrier. Midtec requested Soo competitive access rights to increase its leverage on origin carriers for lower rail costs. The Commission agreed that C. NW should not be held accountable for the chosen circuitous routing, which it could address if requested. The claim of inadequate service was deemed not anticompetitive under the Staggers Act. Additionally, for inbound coal shipments currently transported by barge and truck from Eastern Kentucky and West Virginia to Wisconsin, Midtec asserted that Soo could offer a more efficient single-line rail service. C. NW countered that it could provide through route service via Chicago but noted that the choice of truck over rail was due to limited capacity at Midtec’s facilities, not service quality. Midtec rejected C. NW’s lower rates due to the derelict state of its coal storage track, indicating no market power abuse by C. NW. Overall, the evidence did not support claims of inadequate service by C. NW harming Midtec. Midtec further argued that the Commission improperly considered intermodal and geographic competition in evaluating its complaint under section 11103, insisting that only intra-modal competition should be assessed. However, the Commission maintained that evaluating all relevant factors, including intermodal competition, is essential to understanding potential anticompetitive conduct, as emphasized by the Staggers Act's provisions. Shippers lacking transportation alternatives and facing excessive rates are protected under current regulations. A viable transportation alternative—such as another railroad, barge, or truck—indicates competition, which helps to control rates and limits railroad market power. Historical context shows that the Interstate Commerce Act aimed to prevent railroad monopolies, but today, most freight transport is competitive, with significant reliance on non-rail modes. The Staggers Rail Act reflects Congress's intent to reduce federal regulation of railroads, allowing the Interstate Commerce Commission (ICC) to recognize competition from other transportation modes. Legislative history does not support a narrow focus on intramodal competition among railroads, and the concept of reciprocal switching is meant to enhance service where rail competition is limited. The absence of rail competition does not automatically justify regulatory intervention, as shippers may still receive adequate service without such measures. The ICC previously misinterpreted its mandate to focus solely on intramodal competition, a point that has been recognized and corrected in subsequent rulings. The Commission has revised its interpretation of section 11103(c)(1) of Senate Bill No. S. 1946, moving away from a focus solely on existing intramodal competition among railroads to a broader evaluation that includes all forms of competition, particularly where competition is inadequate. This updated interpretation aligns with the rail transportation policy aimed at ensuring effective competition among rail carriers and other transport modes. The Commission emphasized that considering geographic competition is essential in evaluating competitive access complaints, placing the burden on the respondent carrier to provide substantial evidence that pricing is restrained by competition from other sources. Midtec's argument that section 11103(c) limits the Commission's consideration to intramodal competition was found unconvincing, as excluding geographic competition evidence would not align with the Commission's responsibilities. While the Commission acknowledged the presence of various competitive factors, it determined that structural evidence alone, including geographic and intermodal competition, did not demonstrate anticompetitive conduct by the carrier in question. Ultimately, the Commission concluded that the evidence presented by complainants was insufficient to establish that the carrier acted anticompetitively, reaffirming that the actual behavior of the carrier is paramount in assessing the necessity for reciprocal switching or terminal trackage rights. The Commission's reliance on relevant factors such as rates, intermodal and geographic competition, and service inadequacies was deemed appropriate and not arbitrary in addressing potential anticompetitive behavior in the railroad industry. The conclusion emphasizes that Midtec's ability to substantiate its claims as a "captive shipper" may have been hindered by the case's procedural posture. The evidence suggests that Midtec relied primarily on its status to argue for increased carrier access, a theory dismissed by the Commission, which determined that its rules align with the Staggers Act's language and policies. Despite the procedural changes potentially complicating Midtec's case, the Commission remains open to expedited relief, indicating that Midtec's fears of financial ruin are unfounded. The Commission's dismissal of the joint complaint is deemed non-arbitrary, leading to a denial of the petition for review. Additionally, Midtec has alternatives through a "combination rate," which aggregates rates from participating railroads, as established in relevant case law. The Commission confirmed that the C. NW’s Kaukauna branch line qualifies as a terminal facility under 49 U.S.C. 11103, a point not contested. The Commission also outlined a four-step inquiry for reciprocal switching, emphasizing feasibility, terminal capacity, operational impact on carriers, and the balance of benefits to shippers versus detriments to carriers. Market dominance evaluations consider the presence of effective competition across various dimensions. Notably, the Soo did not support Midtec's petition, while several industry groups have intervened on Midtec's behalf, with the C. NW filing a brief as an intervenor respondent. The Association of American Railroads and Consolidated Rail Corp. have submitted a brief as amici curiae supporting the respondents. A key distinction exists between the "substantial evidence test" and the "arbitrary and capricious" test regarding judicial review of agency factfinding; this distinction pertains to the scope of judicial inquiry rather than the review standard itself (Data Processing, 745 F.2d at 684). Even if a carrier’s rates surpass the "market dominance" threshold, there are designated zones of rate flexibility based on revenue adequacy, allowing rate increases for carriers with inadequate revenues (Coal Exporters Ass’n, 745 F.2d at 97; 49 U.S.C. § 10707a). Additionally, orders granting terminal trackage rights or reciprocal switching can result in direct rate regulation, with the Commission authorized to set compensation terms if carriers cannot agree (49 U.S.C. § 11103(a) and (c)(1)). Midtec's main witness acknowledged a lack of knowledge regarding competitors' rate contracts but claimed successful negotiations due to competition. The Commission found that general allegations of anticompetitive conduct by C. NW were unsupported. C. NW asserted that it offered similar rates and services to all mills in Wisconsin and Upper Michigan, including Midtec, and that failing to do so would jeopardize its revenue from the Kimberly mill. The Commission supported this view with evidence of geographic competition, noting that without effective competition, the economic distribution between carriers with market power and shippers is significant (Coal Exporters Ass’n, 745 F.2d at 95). In scenarios of effective competition, carriers may set rates freely. The Commission emphasized the importance of intramodal, intermodal, and geographic competition in regulatory determinations, countering Midtec's interpretation that only evidence of such competition was necessary. To establish the potential for geographic competition, evidence must address three key factors: 1) the number of alternative geographical sources or destinations available to shippers or receivers for the specific product; 2) the number of these alternatives served by various carriers; and 3) the uniformity of the product from each source or required at each destination. Previous rulings have expressed skepticism about the significance of geographic competition in determining whether captive shippers are vulnerable to market power abuse, especially without evidence of cross-elasticities with substitute products or commodities from other areas. The Commission has not dismissed geographic competition evidence outright, but it requires that such evidence be "clear and convincing," which constrains its reliance on it in cases governed by the CARs. In a specific instance, the Commission found the evidence of geographic competition for coated paper shipments to be compelling, a conclusion supported by Midtec's own evidence.