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portation conditions have materially changed since these cases were decided. In none of the above cases dealing with rates on quantities larger than a carload was it shown that the traffic in question moved in cargo quantities by water, or that the traffic in question had been diverted from common-carrier railroad transportation to shippers by private barge transportation. The movement bere involved is a plant-to-plant movement by a private barge which has been in successful operation for 2 or 3 years. What is here attempted is that the common-carrier railroads, whose sole business is transportation, seek to resume the transportation service which they formerly rendered, and which for the past 2 years has been performed largely by the shipper for itself.

It is well settled that differences in the quantities shipped as a single shipment may afford a fair and reasonable basis for d.fferences in transportation rates. In railroad transportation, these diffèrences are currently recognized as between-carload, less-than-carload, and any-quantity lots. In truck transportation, in addition to truckload and less-than-truckload rates there are so-called volume rates (235 I. C. C. 498). * * *

The Solvents Corp. is able to move molasses over the water route from New Orleans to Peoria in multiple bargeload quantities at a very low cost. This is a preference in favor of large shipments which exists and which is lawful. The record also shows clearly that the railroads can move molasses between the same points in multiple-carload quantities of not less than 1,800 tons at a materially lower cost per 100 pounds than they can move single carloads. The question at issue is whether it is lawful for them to make rates which reflect this inherent advantage in volume shipments in order to compete more effectively and profitably with the existing water transportation. In my judgment it is lawful (235 I. C. C. 503).

The then Chairman of the Interstate Commerce Commission, Joseph B. Eastman, in his concurring opinion, said:

The Commission has never condemned' as unlawful the customary discrimipation in railroad rates which gives the shipper of carload quantities a preference over the shipper of less-than-carload quantities. In past decisions, however, it has voiced the view that it is unjust discrimination, and hence unlawful, to give the shipper of trainload or multiple-carload quantities a preference in rates over the shipper of single carloads. Apparently the basis for this view has been considerations of public policy rather than considerations directly related to transportation; that is to say, that such preference would tend to concentrate business in the hands of large concerns contrary to the public interest.

The fact is, however, that certain other forms of transportation which compete with the railroads can lawfully, and do, give the shipper of large quantities a decided advantage over the shipper of quantities equivalent to a railroad carload. This is true of pipeline transportation, by its very nature, and it is also true of water transportation, where the shipper who can fill a boat or a barge can normally have his commodities carried on much more favorable terms than the shipper of lesser quantities. In recent years, also, these opportunities for transportation advantage to the large shipper have increased continually and rapidly (235 I. C. C. 502-503).

Enactment of the provision dealing with volume and incentive rates would give statutory recognition to the practical situation which exists. Under this proposal, actual competition would have to exist and any volume differential would have to be cost-justified.

PRIVATE CARRIAGE

Section 10 (c) of the bill implements the recommendation of the Advisory Committee report relating to private carriage. It amends section 203 (a) (17) of the act so as to define the term “private carrier of property by motor vehicle” as meaning any person not included in the terms common carrier by motor vehicle” or “contract carrier by motor vehicle” who transports in interstate or foreign commerce by motor vehicle property of which such person is the owner, lessee, or

bailee, provided such ownership, lease, or bailment is not undertaker for the purpose of such transportation. The term is presently de fined as including transportation of property for the purpose of sale lease, rent, or bailment, or in furtherance of any commercial enter prise.

Section 24 (b) of the bill, also in accordance with the advisory committee report, provides for the issuance, upon application and after investigation and hearing, of a certificate or permit to any person who, when the section becomes effective, is engaged in transportation as a "private carrier of property by motor vehicle” which is exempt, but which becomes subject to regulation because of the amendments made by section 10 (c).

The purpose of the amendments is to enable the Interstate Commerce Commission to cope with the invasion of the for-hire motor carrier industry by persons allegedly operating as private carriers. Quite frequently manufacturers and mercantile establishments, which deliver in their own trucks articles which they manufacture or sell, purchase merchandise at or near their point of delivery and transport such articles to their own terminal for sale to others. Such transportation is performed for the purpose of receiving compensation for the otherwise empty return of their trucks.

Also, to an even greater extent, truckowners transport in both directions freight which they have purchased for sale. In general, the sale price of the merchandise is the original cost plus amount equal to or slightly below the transportation charges of authorized carriers. The Commission pointed out in its 67th annual report that,

In instances where this so-called private carriage is a subterfuge for engaging in public transportation, it constitutes a growing menance to shippers and to carriers alike. It is injurious to sound public transportation. It promotes discrimination between shippers and threatens existing rate structures.

The Commission had previously stated in its 66th annual report that

While the tests of private carriage which we have developed have been supported after rigorous review in the courts, the application of these tests to concrete situations presents continuing difficulty. The Commission reiterated in its 69th annual report that, it could not effectively cope with this problem without some changes in the act.

In determining whether persons are "private carriers," as distinguished from common carriers” or “contract carriers” as defined by section 203 (a) (14) and (15) of the act, the Commission and the courts have applied what is known as the primary-business doctrine, that is, whether or not the primary business of the carrier is that of supplying transportation or whether the furnishing of such transportation is merely incidental to its nontransportation business.

The basic test was laid down in Woitishek Common Carrier Application (42 M. C. C. 193), where the Commission reviewed the entire subject of for-hire as compared with private carriage. The test was stated by the Commission as follows:

After careful reconsideration of the entire subject, we are convinced that we should continue as in the past to determine all issues of for-hire versus private carriage on the basis of the operator's primary business. In so doing, we shall, of course, give appropriate consideration to the fact, when shown, that an operator receives compensation for transportation performed identifiable as

such, but we do not think that such fact alone should be allowed to control our decisions. Neither does it follow that an operator having a bona fide business other than transportation may not also be a carrier for hire if it appears that any transportation which he performs is not primarily in furtherance of his nonearrier interest but rather is performed with a purpose to profit from the transportation as such.

In short, each case must be determined upon its own particular facts and neither the receipt of compensation for transportation identifiable as such for the existing of some noncarrier business to which the transportation may be incidental is alone conclusive.

A number of other Commission decisions followed which applied the primary business test, and the principle was affirmed by the Supreme Court in Brooks Transportation Company v. United States (340 U.U. 925).

Although the definition of "private carrier” proposed in section 13 of the bill would delete the term “or in furtherance of any commercial enterprise” now contained in the definition in the act, we do not believe that the primary-business test would be nullified. It seems to us that the Commission and the courts, in determining whether or not the property was “acquired for the purpose of such transportation,” would have to look at the business in which the person transporting the property was engaged. The new definition would constitute å modification of the primary-business doctrine to the extent that its application has enabled persons to transport property for compensation under an owner, lessee, or bailment relationship which was acquired specifically for the purpose of such transportation.

We also do not see how the new definition would work a hardship upon legitimate private carriers. The definition says nothing about "for compensation.” It simply says that persons transporting goods as an owner, lessee, or bailee must not have acquired such relationship for the "purpose of such transportation.” Manufacturers, department stores, and service establishments of all kinds would still be able to transport their goods without difficulty. As to those persons who were engaged in transportation as a private carrier of property by motor vehicle which was exempt prior to its redefinition but which becomes subject to regulation because of the new definition, section 24 (b) of the bill would require the Commission upon application to issue a certificate of public convenience and necessity or a permit, whichever is appropriate.

The Commission recommends in its report to your committee that the changes in the definition of a private carrier by motor vehicle proposed by section 10 (c) of the bill not be enacted, and that provisions suggested by it be enacted as subsection 203 (c) of the bill for the purpose of tightening up its interpretation with respect to persons allegedly operating as private carriers. We do not propose to comment in detail on the reasons set forth as the basis for the Commission's recommendations. However, we feel that some of them require clarification.

The Commission states that since the purpose of the private carrier definition is to indicate those transporters, other than common and contract carriers, who shall be subject to regulation with respect to safety of operation, hours of service, and so forth, any exclusion from such definition would have the effect merely of relieving the excluded carriers from such regulation. It adds that whether the excluded

carriers are common or contract carriers would depend upon whether their activities bring them within the definition of common or contract carriers. The Commission concludes under the circumstances that the proviso in the new definition relating to ownership, lease, or bailment which “is not undertaken for the purpose of such transportation” would not have the intended effect of subjecting such persons to economic regulation.

We do not agree with this conclusion, but we would not object to any clarifying language in this respect.

The Commission also states that elimination in the new definition of the clause "in furtherance of any commercial enterprise" would result in subjecting to safety regulation any person transporting property in interstate or foreign commerce which he owns or leases. If the new definition of a private carrier is read in segments, it could be construed as intending this. However, if it is read as a whole and in conjunction with the definitions of common and contract carriers in section 203 (a) (14) and (15), we do not believe that such would be the result. In any event, there was no intention to include such individuals in the definition. We suggest that any ambiguity be avoided by inserting a comma after the word “who” in line 3, page 18, of the bill and adding the words "in a commercial operation.

Concerning the proposal of the Commission that a section 203 (c) be added which would define a person "engaged in transportation and a person "engaged in transportation for compensation," it seems to us that enactment of such provisions would make it difficult under certain circumstances for persons engaged in business enterprises to provide transportation incidental thereto. No transportation is provided without certain costs, and it is only reasonable to assume that the person providing such transportation intends to recoup such costs. We believe that the test as to whether or not an ownership, lease, or bailment relationship with respect to the property to be transported was acquired for the specific purpose of transportation is much more equitable.

Needless to say, we do not have any pride of authorship in the definition of "private carrier of property by motor vehicle” and will be most happy to accept any suggestions which will accomplish our objective with equity to those affected thereby. Stated in simple terms, we are trying to make certain that persons allegedly operating as private carriers are not transporting property for others for compensation.

Mr. HARRIS. I believe there is another call of the House. The members of the committee will, of course, be required to respond. Naturally, I regret the interruption, but it is something that cannot be helped.

In view of the circumstances, the committee will adjourn until tomorrow morning at 10 o'clock, at which time you may resume the stand and continue with your statement.

Mr. Ray. Thank you.

(Whereupon, at 2: 50 p. m., the hearing was adjourned until 10 a. m. Wednesday, April 25, 1956.)

TRANSPORTATION POLICY

WEDNESDAY, APRIL 25, 1956

HOUSE OF REPRESENTATIVES,
SUBCOMMITTEE ON TRANSPORTATION AND COMMUNICATIONS
OF THE COMMITTEE ON INTERSTATE AND FOREIGN COMMERCE,

Washington, D.C. The subcommittee met, pursuant to adjournment, at 10 a. m., in the caucus room, Old House Office Building, Hon. John Bell Williams presiding.

Mr. WILLIAMS. The committee will please come to order. I regret very much that it is impossible for the chairman of the subcommittee to be with us this morning, Mr. Harris. He had to go downtown with the delegation from his district and attend to some matters of local interest, and he has requested that the committee proceed in his absence.

Yesterday, the testimony of Mr. Philip A. Ray, General Counsel of the Commerce Department, was interrupted at the time the committee found it necessary to recess. Mr. Ray, if you are ready, we will ask you to proceed with your testimony. STATEMENT OF HON. PHILIP A. RAY, GENERAL COUNSEL, DEPART

MENT OF COMMERCE, WASHINGTON, D. C.—Resumed Jr. Ray. I believe that I discontinued at the top of page 18 of my prepared statement, and I will resume there.

CONTRACT CARRIERS (MOTOR)

Section 10 (a) of the bill implements the recommendation of the Advisory Committee report relating to a redefinition of the term "contract carrier by motor vehicle. Section 203 (a) (15) of the act is amended so as to define the term as meaning any person who engages in transportation by motor vehicle of passengers or property in interstate or foreign commerce for compensation (other than transportation by common carriers) on the basis of bilateral contracts for specialized or individualized service or services equivalent to bona fide private carriage by motor vehicle.

Section 24 (a) of the bill, also in accordance with the Advisory Committee report, provides that any person holding a valid to operate as a contract carrier by motor vehicle, as presently defined in the act, must advise the Interstate Commerce Commission of its election to operate hereafter as a contract or common carrier. The Commission is required, after investigation and opportunity at hear

permit

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