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Petitioners contend that respondent’s proposed network fee
adjustment and joint venture theory are baseless, without
substance considering the record, and inoperable as a matter of
law. We agree with petitioners. We have found as facts that DHL
and DHLI were allowed to operate and develop separately in their
own geographical markets. The separate foreign operation and use
of DHLI was due to regulatory concerns, though it may have been
nurtured because of tax advantages. The business entities within
and without the United States were allowed to operate
independently in terms of their marketplace but were commonly
controlled within the meaning of section 482. In that
environment, DHLI, over time, was more successful than DHL. That
is not to say that DHLI was allowed to become more successful by
the DHL shareholders. DHLI, through the 1980’s, became the
leader in its market, and DHL was generally unsuccessful in its
attempt to increase its market share. In this particular
context, the success of DHLI was not the result of the
manipulation of income or expense or the lack of arm’s-length
dealings.
DHL and DHLI were separate in order to meet the legal
requirements for CAB certification. Whether the shareholders
honored that separation in their shareholder relationship is a
question that would affect their income from any sale of the
entities or in the division of residual corporate income. The
shareholders’ hypothecation of shareholding ownership should not,
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