JURISDICTION UNDER 49 U.S.C. 11343 Under 49 U.S.C. $11343(a) (4) the Commission has Jurisdiction over an "acquisition of control by a person that is not a carrier" only if control is sought over "at least 2 carriers." -- GCA and Minnesota ask us to exert jurisdiction on the ground that Holding Company's proposed control over BN and its assets (including carrier subsidiaries) is an "acquisition of control of at least 2 carriers." Although EN controls a number of carriers, all the carrier operations are conducted as part of a single integrated system. For over 25 years the Commission has held that it does not have jurisdiction over a noncarrier's acquisition of control of a single integrated rail system and we see no reason to modify this statutory construction. Under the single system doctrine, the Commission does not have jurisdiction under 49 U.S.C. $11343 over a noncarrier's acquisition of control of a single integrated rail system, even if the system is comprised of separate corporations.. See Louisville & J. B. & R. Co. Merger, 290 . 1.C.C. 725 and 295 I.C.c. 11 (1955), aff'd sub nom. Alleghany Corp. et al v. Breswick & Co. et al, 353 U.S. 151 (1957). This doctrine has been followed in numerous cases, including several in which a holding company was created from a railroad. See Kansas City Southern Industries, Inc.-Control, 317 I.C.C. 1 (1962) (KCS case), Katy" Industries, Inc.-Control-Missouri K.-T.R. Co., 331 I.C.C. 405 (1967), (Katy case) and Southern Pacific Transportation Co.-Merger, 334 I.C.C. 866 (1969) (SP case). BN's formation of a holding company fits within this doctrine. BN controls a number of carriers, including the Colorado and Southern Railway Company, Fort Worth and Denver Railway Company, Walla Walla Valley Railroad Company, Oregon. Electric Railway Company, BN Transport Company Inc., and Prisco Transportation Company. However, as demonstrated in the verified statement attached to BN's reply, BN operates all of these companies as an integrated transportation system, under the direct control and management of BN. Their capital budget and performance plans are either established or approved annually by BN. Their accounts are supervised by BN, and their financial results are consolidated with BN's for reporting purposes. Each rail carrier subsidiary is required to maintain excess cash in BN's surplus cash account, and each is permitted to draw from the account as required. BN determines equipment purchases and assigns motive power on a daily basis for each of its rail carrier subsidiaries. The rail carrier subsidiaries solicit traffic for each other and do not compete. The directors of each subsidiary are selected by BN and are usually directors or officers of BN. The principal officers of each subsidiary are also usually officers of BN. The revenues of the motor carrier subsidiaries are generally derived from services performed for BN, including Bubstitute.line-haul service, ramping, deramping and drayage, and transportation of BN-owned material. Intercorporate hauling for BN and about 25 of its subsidiaries is also performed by motor carrier subsidiaries. They lease facilities from BN, obtain substantial management support from BN, and have common officers and directors in a number of instances. The actual operation of BN and its subsidiaries is clearly as a single system within the scope of the established doctrine. In the KCS, Katy and SP cases, motor carrier subsidiaries were also involved when the Commission determined that it did not have jurisdiction under the single system doctrine. In the SP case, pg. 867, footnote 2, it was found that the creation of a holding company to control a railroad which in turn controlled a motor, carrier constituted a change in form, rather than substance, of the motor carrier control. Thus, even with subsidiary motor carriers, BN clearly fits within the single system doctrine. GCA asks us essentially to reconsider the single system. doctrine. We decline to do so in this proceeding. We continue to believe that regulatory scrutiny is not appropriate, under 49 U.S.C. $11343, where a noncarrier acquires control of an existing, single integrated carrier system. Such a situation involves only a change in stock ownership and the insertion of a new corporate entity at the top of an otherwise undisturbed chain of affiliated carriers. It does not involve the type of change in carrièr relationships or competitive structure contemplated by section 11343. In this connection, various intercorporate relationships involving BN have already been approved by the Commission. In such circumstances, no regulatory purpose.. would be served by requiring further approvals simply because BN is creating a holding company. REOPENING THE BN-FRISCO MERGER GCA and Minnesota argue that the formation of a holding company, by BN will violate our decision authorizing the merger of the St. Louis-San Francisco Railway Company (Frisco) into BN. Burlington Northern, Inc.-Control & Merger-St. L., 360 I.C.c. 784 (1980) EN-Frisco). This merger was consummated on November 21, 1980. GCA alleges that the Commission, was misled and was induced to misunderstand management plans for BN's financial structure. GCA asks us to enjoin the implementation of the holding company formation because it will jeopardize the financial strength of BN as a railroad. GCA cites numerous passages in the BN-Frisco decision to support its proposition that we were misled. We have reviewed the record in the BN-Frisco case and the decision itself. We find no misleading representations in that case. We imposed no conditions on our approval of the BN-Frisco merger concerning the retention of assets or the formation of a holding company. Our major concern in that case was not the corporate structure of BN, but whether carrier operations could be made more efficient and less costly through the merger without disrupting essential service. Id. at 934. We considered the cost savings to the railroad, the efficiencies which could be implemented by the - railroad, and the harm to competition from the merger. All of these factors weighed in favor of the merger. We see no reason to reopen the BN-Frisco merger case. JURISDICTION UNDER 49 U.S.C. $11348(a) GCA contends that we can exert jurisdiction over the proposed holding company under 49 U.S.C. $11348 (a) in this proceeding. This is not so. We may only assert Jurisdiction over a noncarrier under section 11348 as a result of our authorization of a transaction under 49 U.S.C. $11343. Here, there is no transaction for us to approve under section 11343. Since no holding company existed at the time we approved the BN-Frisco merger, that transaction cannot serve as a basis for exerting jurisdiction under section 11348. MORTGAGE BOND JURISDICTION GCA and Minnesota assert that restrictions in two outstanding long term securities (Northern Pacific Railway Company Prior Lien Mortgage Bonds, 4 percent, due 1997, outstanding debt $81,699,000, and General Lien Mortgage Bonds, 3 percent, due 2047, outstanding balance $52,732,000) foreclose any transfer of assets to a holding company. Minnesota alleges that it is a holder of the 4-percent bonds Que 1997, and further alleges that the proposed creation of a holding company and transfer of assets violate the terms of the bonds and impair its rights as a bondholder. - GCA is apparently not a security holder and is thus without standing to assert rights in the mortgages. ་་་་ These securities were issued in 1896, prior to Congressional action subjecting securities' issuance to our jurisdiction. With no jurisdiction over these securities, it would not be proper for us to interpret the securities terms. For a holder of the mortgages to seek interpretation of the securities, his recourse would be to a court of competent jurisdiction, not this Commission. REOPENING THE NORTHERN LINES MERGER BRAC asks us to reopen the merger approved in Finance Docket No. 21478, Great Northern Pac.-Merger-Great Northern, 331 I.C.C. 228 (1967) (Northern Lines Merger), which created. BN. It argues that condition 33 (discussed at 287-288 and imposed at 359) permits us to reopen that case to consider the impact on employees of the creation of a holding company. We disagree. Condition 33 reserved jurisdiction for only 5 years for the specific purpose of either considering petitions for inclusion in BN, or cumulative and cross-over effects on . other railroads from other consolidations being considered· at that time. Clearly BRAC has not met the 5 year limitation: the Northern Lines Merger was consummated on March 2, 1970, and the reserved jurisdiction lost effect on March 2, 1975. Just as clearly, BRAC is not another railroad seeking inclusion or protection from cumulative .or cross-over effects. Finance Docket No. 28583 (Sub-No. 1) et. al. Under 49 U.S.c. $10327 (g) (1) we may reopen a proceeding on our own initiative if there is material error, new evidence, or substantially. changed circumstances. BRAC's petition presents none of these factors. This action will not significantly affect either the, quality of the human environment or the conservation of By the Commission, Acting Chairman Alexis, Commissioners Gresham, Clapp, Trantum, and Gilliam. (SEAL) AGATHA L. MERGENOVICH OFFICE OF THE CHAIRMAN Interstate Commerce Commission Washington, D.C. 20423 MAY 13 1981 Honorable Max Baucus Dear Senator Baucus: Thank you for your letter of April 27, 1981 requesting information regarding the proposed formation of a holding company to control Burlington Northern, Inc. (BN). Specifically, you asked four questions which are set forth below along with responses. 1. Has Burlington Northern filed any documents with the Commission concerning its holding company proposal? If so, please make copies of the submission and any ICC replies available for my use. By letter of January 28, 1981 BN informed individual Commissioners of its intention to pursue the formation of a holding company to control the railroad. The letter also stated BN's conclusion that its proposed transaction did not require Commission approval. The letter is set forth in Attachment I. No Commission response was made to BN's notice. You may be interested to know that the General Committees of Adjustment, Burlington Northern, Inc., a labor organization involving BN employees, has filed a petition seeking an investigation of BN's compliance with the Commission's order authorizing the merger of BN and the St. Louis-San Francisco Railway Company in 1980. The petition alleges BN has failed to comply with terms of the decision allegedly requiring all BN assets to remain with the consolidated railroad company. BN replied to the petition on May 7, 1981. The petition (set forth in Attachment II) is presently under consideration by the Commission. 2. Has the Commission concluded that the holding company formation falls within the "one carrier exclusion?" If so, please supply a copy of any documents used in making that decision. If not, I would appreciate if the Commission or its staff could analyze ICC jurisdiction --with special focus on the fact that the new holding company would incorporate more than one carrier (1.e., two trucking companies and one railroad). The Commission has not reached any conclusion regarding the applicability of the "one carrier exclusion" to the proposed BN transaction. The issue has been raised, and may be decided, in the proceeding instituted by the petition to investigate described in response to Item I above. The Commission's jurisdiction over the acquisition of control of regulated carriers is contained in 49 U.S.C. $11343 (formerly section 5 of the Interstate Commerce Act). The language of that section does not reach the acquisition of control of a single carrier by a person that is not itself a carrier and which does not control another carrier. In |