3. That authority adequate to regulate and control leasing practices must certainly embrace two of the most important terms of leasing, namely, the duration of the lease and the amount of compensation allowed under the lease. 4. That H. R. 3203 denies to the Commission the authority to regulate these two important aspects or terms of truck leasing, and thus severely restricts the Commission in the exercise of its duty to prevent the employment of equipment leases to circumvent regulatory policy as determined by the Congress; and further lessens the capacity of the Commission to prevent the recurrence of those economic abuses which Congress intended to control by the regulatory policy it prescribed.

5. That because of the sweeping extent of the terms of H. R. 3203, it opens the door to and invites more widespread employment of leasing practices, potential with economic abuses, than pertain merely to the movement of exempt agricultural products, and the incidental backhaul of nonexempt products.

Therefore, the Railway Business Association is opposed to H. R. 3203 and respectfully urges that the Committee on Interstate and Foreign Commerce do not recommend this bill for passage.

The CHAIRMAN. Now, we have one patient individual still remaining aside from the proponent, who is to close the debate, and that is Mr. Helmtag.

I see your statement is of considerable length and it indicates that you have made a very careful and minute study of the question that is before us. I regret that you were not a witness earlier in these proceedings in order that more time might have been given to you, which your statement indicates you could properly have been given.

However, we will appreciate your statement in as brief form as it is possible. If I remember correctly, you said there was one particular point that you wished to emphasize above all others and that it would not take too long a time to do so. However, if you have more than just that one point that you would like to direct our attention to you have our permission to do so.

Your statement, as I have been able to go through it, indicates that under different headings you have made your points, which makes it very easy for the committee to follow your statement in the record when it is printed, even though you do not speak of it in detail today. We will appreciate your indication to us of what you would like us to particularly read.

You may proceed.

STATEMENT OF CARL HELMTAG, JR., ASSOCIATION OF AMERICAN RAILROADS, PHILADELPHIA, PA.

Mr. HELMTAG. As I pointed out earlier in the day, my name is Carl Helmtag, and I am assistant general counsel of the Pennsylvania Railroad Co. and I am from Philadelphia. I am appearing today and speaking on behalf of the association of the American Association of Railroads, and its members, in opposition to H. R. 3203, which I refer to as the truck-leasing bill.

As I said, I prepared a long statement going into the complete history of the Commission's investigation in this matter:

What the Commission did, what the Commission did not do, the effect of the Commission's rules, and finally I have summed up that statement with a short conclusion.

I might say that I have been in this litigation from the very beginning and have handled this case for the American Railroads throughout all of the proceedings, both before the Commission and in the

several courts and in the Supreme Court of the United States. The one point that I would like to invite particular attention to is the fact that throughout these proceedings before the committee it has appeared that these rules and regulations of the Commission promulgated in Ex Parte MC-43 are something new and novel, that they represent something extraordinary in the field of motor-carrier regulation. I would like to say that just the opposite is so.

The Commission has considerable precedent for what it has done in promulgating these rules. Throughout the United States, 17 of the States, including several of those in the agricultural communities, have rules substantially similar if not more severe and restrictive than those the Commission has promulgated. I invite attention to the fact that the State of Washington, one of the large agricultural States of this country, appeared before the Commission and pointed out to the Commission that it had leasing rules in effect, much of the same type as the Commission's rules since 1939; that the rules worked well; that the motor-carrier industry favored the rules; that the shippers favored the rules; that the whole economy of Washington from the transportation standpoint was benefited and enhanced from these leasing rules.

I also invite attention to the fact that Pennsylvania has rules which are far more restrictive than the Commission's leasing rules which they have had in effect since 1939. These rules, in effect, prohibit all trip leasing by motor carriers, regardless of whether the vehicles are taken with or without drivers. Those rules are in effect today, work well, and have had a helpful effect on the motor-carrier industry of the State of Pennsylvania, which you will recall is the State from which Mr. King comes.

The State of Massachusetts has similar rules and has written to this committee, I understand, indicating the success that it has had with its rules. It fears that if the Commission's rules are not allowed. to become effective, that their system of regulation might be undermined and jeopardized.

Wisconsin has rules very comparable to those that the Commission has passed. In all there are rules and regulations governing the leasing practices of motor carriers in 17 States.

It is interesting to note, too, that the State of Michigan has had introduced in its legislature, legislation to give its commission the very power which is here under attack with respect to the Interstate Commerce Commission.

So from the standpoint of precedent and history and orderly development of the motor-carrier industry, everything indicates that if this Commission's rules are allowed to become effective they will have a most helpful effect on all transportation. That is the point I would like to add to what I have already set forth in my written statement. The CHAIRMAN. Is there anything further you have for us? You have not used all the time that the committee was prepared to give you. Mr. HELMTAG. No, because many of the things I had intended to discuss more fully were taken up in the questions and answers to Mr. Preston's testimony.

The CHAIRMAN. This brief statement that you make is supplemental to the full statement that you have prepared, I understand. Your full statement will be made a part of the record.

Mr. HELMTAG. Thank you.

The CHAIRMAN. I think it is particularly fortunate that you have presented it as you have, that is, under headings which very readily attract the attention of those who are interested in giving full consideration to your statement. There is no doubt whatsoever in my mind that because of the completeness with which you have prepared this formal statement of yours, that it will be given full consideration by the committee.

If, however, as a result of what you have heard in your attendance upon these hearings, either as the result of questions or statements that have been made by other witnesses, you would wish to supplement your brief in any way, you have that permission if you desire to do so. Thank you very much, sir.

Mr. O'Hara?

Mr. O'HARA. Mr. Helmtag. I just glanced hastily through your brief and I do want to compliment you on what is obviously a very fine, orderly, and logical presentation of your viewpoints. I regret personally that we didn't have a chance to hear from you in greater detail that we have. I might express that as my personal feeling.

The CHAIRMAN. I think what Mr. O'Hara means is that he wished we had an opportunity to question you more.

Mr. HELMTAG. Maybe it is just as well he does not have that opportunity.

Mr. O'HARA. It is very obvious to me, Mr. Chairman, that Mr. Helmtag has done a beautiful job of presenting it in an orderly way. We have always heard in the Middle West of the brilliance of the Philadelphia lawyers.

Mr. HELMTAG. We are just not used to being witnesses. We like to ask questions.

Mr. O'HARA. I think that applies to all of us who are lawyers.

Mr. HELMTAG. I think so.

(Mr. Helmtag's prepared statement follows:)

STATEMENT OF CARL HELMetag, Jr., of PHILADELPHIA, PA., ON BEHALF OF THE ASSOCIATION OF AMERICAN RAILROADS

Mr. Chairman and gentlemen of the Interstate and Foreign Commerce Committee: I am Carl Helmetag, Jr., of Philadelphia, Pa. I am assistant general counsel of the Pennsylvania Railroad Co. Today I am appearing for, and speaking on behalf of, the Association of American Railroads and its members, in opposition to H. R. 3203 which I refer to as the truck leasing bill.

This bill to amend section 202 of the Interstate Commerce Act is relatively simple in context but exceedingly complex in its economic and regulatory ramifications. It is, I think, one of the most important pieces of legislation that has come before this committee in recent years, and, if enacted, will not only undo the accomplishments of 5 years of difficult litigation before the Interstate Commerce Commission, the Federal district courts and the Supreme Court of the United States, but will, as I shall show, destroy sincere and carefully considered efforts on the part of the Commission to prescribe rules and regulations essential to the preservation of the regulatory scheme created by Congress in the passage of the Motor Carrier Act of 1935 which became part II of the Interstate Commerce Act. In its full import the bill before you poses the vital question of whether the motor carrier industry shall be regulated or allowed to retain the chaotic conditions that existed prior to, and were responsible for, the advent of motor carrier regulation in the thirties.

The bill, as each of you know, takes from the Commission the power to fix the term or duration of leases or other contractual arrangements by which the

1 Act of Aug. 9, 1935 (49 Stat. 543), as amended by the act of Sept. 18, 1940 (54 Stat. 919 (49 U. S. C. 301)).

regulated segments of the motor carrier industry secure vehicles from those outside of regulation. It also takes from the Commission the power to regulate the amount paid as compensation under such vehicle leases. The specific problem then is whether the Commission should be deprived of these powers which Congress gave to it by the passage of the Motor Carrier Act of 1935.

To properly deal with this problem, a careful analysis and study of a great deal of background material is essential. We think that such a study will clearly demonstrate the unsoundness of this legislation. With the indulgence of the committee, I should like to briefly review the background of this legislation and to explain why the railroads are so strongly urging that this bill be not passed.

A. THE LEASE AND INTERCHANGE RULES PROMULGATED BY THE INTERSTATE COMMERCE COMMISSION-THE IMMEDIATE CAUSE FOR THE INTRODUCTION OF THIS LEGISLATION

While this legislation has an extensive background, the immediate cause for its introduction is the Commission's order in Lease and Interchange of Vehicles by Motor Carriers (52 M. C. C. 675 (1951)). In this order the Commission, after lengthy proceedings begun in 1948, participated in by motor common carriers, motor contract carriers, the agricultural interests, the labor unions, shippers, State regulatory agencies, the railroads, individual owner-operators of nonregulated vehicles, and associations of such owner-operators, and representatives of the Commission's Bureau of Motor Carriers; after the fullest consideration of briefs, pleadings, and oral arguments presented by the numerous parties; and after a complete exhaustion of all the procedural steps and remedies available under the Commission's rules of practice which afford the fullest opportunity to all parties to protect and advance their rights, promulgated rules and regulations governing the leasing and interchanging of vehicles by motor carriers.

These rules and regulations were thereafter made the subject of comprehensive litigation in the Federal courts. In all, 6 suits were filed of which two were hard on the merits, the other 4 upon appropriate motions being stayed or continued until after the cases that were heard were finally concluded." The two suits that were heard were American Trucking Associations, Inc., et al. v. United States et al. (101 F. Supp. 710 (N. D. Ala. 1951)), and Eastern Motor Express, Inc., et al. v. United States et al. (103 F. Supp. 694 (S. D. Ind. 1952)). In each of these cases heard by three-judge statutory courts, it was strenuously argued that the Commission was without power to prescribe the leasing rules, and further argued that the rules were in violation of the Constitution, arbitrary and capricious, and promulgated without compliance with the procedures established by the Federal Administrative Procedure Act. In both courts without dissent, the holding was that the Commission had ample power to prescribe the rules and that the rules were not otherwise unlawful.

Appeals were taken to the Supreme Court of the United States where it was again argued that the Commission did not have power to prescribe the rules. In a 7 to 2 decision issued on January 12, 1953, the Supreme Court in American Trucking Associations, Inc., at al. v. United States et al. (— U. S. —, 73 S. Ct. 307 (1953)), affirmed the ruling of the court below. This determination of the Supreme Court set forth in an opinion by Mr. Justice Reed conclusively answered the question of whether the Commission had power to prescribe the rules by squarely holding that part II of the Interstate Commerce Act contained the necessary grant of statutory power. The Court then went on and found that the argument to the effect that the rules were in violation of the Constitution, and arbitrary and capricious, was without merit. Mr. Justice Black and Mr. Justice Douglas dissented on the ground that the rules are beyond the "authority of the Commission."

A petition for reconsideration of the Supreme Court's judgment was filed. By an order dated March 9, 1953, this petition was denied.

From this brief resume of the litigation involving the Commission's lease and interchange rules, it can readily be seen that the rules have run the entire gamut of administrative and court procedures and unless modified by further proceed

The six cases were: Movers Conference of America, Inc., et al. v. United States et al. (E. D. Mich.); Greyvan Lines, Inc., v. United States et al. (N. D. Ill.); Paul G. Apger et al. v. United States et al. (N. D. Ohio); Oklahoma-Louisiana Motor Freight Corporation v. United States et al. (W. D. Okla.); Eastern Motor Express, Inc., et al. v. United States et al. (103 F. Supp. 694 (S. D. Ind. 1952)); and American Trucking Associations, Inc., et al. v. United States et al. (101 F. Supp. 710 (N. D. Ala.) 1951).

ings in the Commission3 or nullified by legislation, will become a part of the Federal regulation of the American transportation industry.

The legislation before this committee is for the purpose of nullifying the leasing rules. Immediately several pertinent questions are raised. What are these rules? What do they do and equally important what do they not do? Why were they prescribed in the first place? Why are so many groups interested in them? And most important of all, why is it that legislation is being introduced to nullify them before they are given a fair and reasonable trial? The answers to these questions are found in the proceedings before the Commission, in the reports and orders of the Commission, and in the opinions of the courts reviewing the Commission's orders. These together give a graphic account of unsound, uneconomic, and law-evading practices which have flourished in the motor carrier industry, notwithstanding the passage of the Motor Carrier Act, and which if allowed to endure will frustrate the Commission in its efforts to carry out the scheme for regulating the motor carrier industry established in part II of the Interstate Commerce Act. A review of the conditions in the transportation industry that prompted the litigation before the Commission, and the proceedings before the Commission and in the courts, is, therefore, most appropriate and essential to an understanding of the legislation that is now before you.

B. THE BACKGROUND THAT PROMPTED THE COMMISSION'S INVESTIGATION OF THE LEASING AND INTERCHANGE PRACTICES OF THE MOTOR CARRIERS

1. The purposes of Congress in passing the Motor Carrier Act

The genesis of the problem to which the Commission's rules are directed reaches back to the time of World War I. Following that war the great advances in the building of the motor truck, and the beginnings of a tremendous highway building program, presented opportunities to move over the highways, freight which had formerly moved by the railroads, and to a limited extent by the inland and coastal water carriers. But as the traffic was diverted from the railroads and the waterways to the highways, abuses began to appear for there was no national regulation of trucks moving between States, although within the borders of a few States the beginnings of regulations were appearing. Many of these abuses resulted in trucks securing competitive advantages over regulated forms of transportation. These competitive advantages furthered the diversion of traffic already begun. As the motor carrier industry grew, those within the industry began to recognize the need for some type of regulation, for abuses which orginally aided the motor truck owner in taking traffic from the railroads were just as helpful to another motor truck owner coming into the field to take traffic from the established trucker. This scramble for business ultimately began to hurt the public for the unregulated motor trucker often skimped on safety, and made inadequate provisions for his employees so as to be able to undersell his competition. Competition became more intense as each new carrier came into the field, and therefore the truckers in order to survive found it necessary to concentrate on the better types of traffic. This concentration on the better business harmed the railroads for the quality of freight handled by them was necessarily lowered. The public was also the victim of such practices for the shippers found that they could not rely upon motor-truck transportation except for the movement of freight that was profitable to the truckers. Obviously the remedy was to regulate the motor carriers in much the same manner as the railroads were regulated. Upon the urgings of large segments of the motor-carrier industry, the railroads, representatives of labor, shippers, and other segments of the public, the Motor Carrier Act of 1935 was passed which later became part II of the Interstate Commerce Act.

To briefly set forth the purposes of the Motor Carrier Act is perhaps to understate them but it is believed that the fundamental objectives were three in number. The first of these objectives was to insure the users of motor transportation that they would be afforded nondiscriminatory carriers, carriers which would not unfairly favor one person or section over another. The second objective was to insure a healthy industry, one in which the supply of transportation would be commensurate with demand. The last objective was to insure that the business would be conducted with regard to the safety of those within and without the industry.

To date, seven petitions have been filed with the Commission asking that the effective date of the rules be postponed, or that the Commission's order be reconsidered, or that exemption from the rules be granted for a particular carrier.