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The effect to be given to section 410 (d) has been considered in a number of Commission proceedings, and, in this connection, one of the requirements neces sary to issuance of a freight-forwarder permit under section 410 (c) is a finding, “that the proposed service, to the extent authorized by the permit, is or will be consistent with the public interest and the national transportation policy." Iu the administration of part IV of the act by the Commission, applications for forwarder rights have been granted where the evidence showed, among other things, that shippers desired and would utilize a proposed service. In those cases where it appeared that substantial impairment to the services of existing forwarders might result, the Commission has taken the position that such result would be contrary to the public interest and, upon so finding, has denied applications for new rights. However, due to the difficulty which interested parties in forwarder proceedings have had in adducing evidence to show the probable effects of a proposed service, very few applications for freight-forwarder permits have been denied upon evidence that the granting of such applications might lead to situations resulting in substantial impairment to the services of existing forwarders.
The act of December 20, 1950 (Public Law 881, 81st Cong.), amended the Interstate Commerce Act by designating freight forwarders as common carriers. The Commission, in its 69th annual report to Congress, recommended (recommendation No. 31) that, since freight forwarders are now classified as cominon carriers, they be required to secure certificates of public convenience and necessity as prerequisite to engaging in service as a freight forwarder, the same type of authority required to be obtained by other types of common carriers. As stated in the annual report, the ease with which permits may be obtained, under section 410 (d), could result in general impairment of efficiency of forwarder service and harm to the general public. While it appears that the elimination of section 410 (d) is desirable so as to remove the restriction on the Commission's authority to deny applications, we believe that the act should be further amended so as to give effect to the aforementioned annual report recommendation.
While we are of the opinion that it would be more desirable to amend section 410 as suggested above, w have no objection to the enactment of H. R. 9772 as introduced. Respectfully submitted.
Committee on Legislation. Mr. ARPAIA. The views expressed in the letter of December 22, 1955, commenting on H. R. 6141 are equally applicable to H. R. 6142, which, I understand, is an identical bill, although it has not been printed to my knowledge.
The Commission was unanimous in the adoption of its report commenting on H. R. 6141. While Commissioner Mitchell and former Commissioner Elliott approved the report in general, their views differed with respect to section 7 (c), and parts of section 8. Neither Commissioner Mitchell nor former Commissioner Elliott wished to include their separate views in the report. Except to the extent mentioned above, the comments contained in the report represent the unanimous views of the Commission as presently constituted.
H. R. 6141, which is designed to implement various recommendations made in the report of the President's Advisory Committee on Transport Policy and Organization, would make far-reaching changes in the Interstate Commerce Act. I would like to say at the outset that while we favor some of the provisions of the bill, we do not recommend the enactment of other features.
I believe that the Commission's comment on H. R. 6141 is substantially complete, but I will add a short explanation in order to make more clear the reasons for the Commission's position.
The primary consideration in the regulation of transportation has heen the protection of the public interest. Congress has clearly set forth in the national transportation policy of the Transportation Act of 1910 that it is in the public interest to foster sound economic conditions in transportation and among the several carriers.
In the present statement of policy the Congress has directed that the act be so administered asto encourage the establishment and maintenance of reasonable charges for transportation services without * * * unfair or destructive competitive practirpe *** all to the end of developing, coordinating, and preserving a national transportation system by water, highway, and rail, as well as other means, avirquate to meet the needs of the commerce of the United States, of the postal rvice, and of the national defense.
Unless Congress decides that conditions have so changed that the present definition of the public interest is no longer valid and that
me restraints on competition are no longer necessary, we feel that it is unwise to make any fundamental changes either in the national transportation policy or in the present ratemaking powers of the Commission as proposed by H. R. 6141.
The most effective means of protecting the public against disruptive practices and the carriers against destructive competition which would lead to deterioration of transportation service is the present power of the Commission to fix minimum reasonable rates at a point higher than the out-of-pocket costs of rendering the service if the circumsances so require. This is so because every section of the act is administered in the light of the declared policy of Congress to prevent unfair or destructive competitive practices.
Although a minimum reasonable rate is not defined in this bill, the Advisory Committee report suggests that rates are unreasonably low only if they are not compensatory, that is, when they fail to cover the “direct ascertainable cost of producing the service to which the rates apply.” In our opinion rates which cover only direct ascertainable costs are in many instances below a reasonable minimum level. We know from experience that rate reductions tend to spread to other areas and to related classes of traffic and eventually result in rates that destroy the carriers' ability to expand, improve and innovate. In
as rates approach the noncompensatory level in the competitive scramble, the quality and quantity of service necessarily deteriorates to the detriment of the public. Public transportation under private ownership cannot long continue without a profit. The eventual result would be a demand for either subsidization or Government ownership.
When an industry is not affected with the public interest breakneck competition hurts nobody but the investors in the business. However, when the national economy depends on the service it is just as important to restrain excessive competition as it is to restrain monopoly. There is plenty of competition in transportation today-in fact the carriers themselves claim there is too much. Shippers have a choice of service not only between carriers in the same form, but where availahie, between carriers in different forms of transportation at reasonable rates. Yet in spite of this competition, or perhaps because of it, th-17 has been great improvement in the techniques of transportation ili Ivent years. Never before have so many enjoyed such good transportation service by an efficient system of public transportation under prirate ownership.
This is so because Congress has protected all segments of trans portation against unfair and destructive competitive practices.
This bill would impose upon the Commission the obligation to main tain a sound and vigorous system of transportation without the powe to restrain the excesses which history shows would defeat the accon plishment of this objective.
A detailed analysis and discussion of the various sections of H. F 6141 is contained in the appendix to the Commission's letter of Decem ber 22, 1955, commenting on the bill. Therefore, I shall not tak up the subcommittee's time to review what is stated therein. Als in the interest of saving time, I shall not undertake a review of th comments which have been submitted by the Commission or its legisla tive committee on the other proposed measures under consideration
Mr. HARRIS. Thank you very much, Mr. Arpaia.
The letters referred to will be included in the record along wit your statement.
Does that complete the statement you have to make?
Mr. Hinshaw. Mr. Chairman, I want to reiterate my question a to whether or not the Commissioners are unanimous in their approach to this subject, and if not, are there any differences in opinion that the individual Commissioner wishes to express?
Mr. ARPAIA. Well, I can report, as presently constituted, the Commission is unanimous in its views as contained in this report, except that Commissioner Mitchell, when that letter was voted on in December, had a reservation. Commissioner Elliott, who also had some reservatitons, is no longer a member of the Commission. I assume Commissioner Mitchell-he is away until later this morning-and he is expected back today, and I presume that he would now be of the same mind.
Now, here is what his opinion was at the time. The Commissioner agrees on the major features that have been expressed in the letter, but Commissioner Mitchell did not agree with the recommendations of the Commission in regard to section 7 (c). That is the one that cuts the suspension period to 3 months. He says he knows of no reason why these cases should be delayed. He favored section 7 (c) as proposed. Then he did not agree with the statement that we do not favor the enactment of the proposed section 15 (a) (4).
He also said, 'I am in favor of the abolishment of section 22." This is Commissioner Mitchell who is now expressing his views as of last December. He says, “I am in favor of the abolishment of section 22. I know of no good reason why the Government shipments should be accorded lower rates than those of other shippers.”
Now, with that one Commissioner's views on those particular points, the letters and the analysis represent the opinion, the unanimous opinion of the present Commission.
Mr. HINSHAW. Mr. Commissioner and Mr. Chairman, the members of the committee, with their manifold duties and other committee work, I presume have not had an opportunity to study this report of
I the Interstate Commerce Commission. I certainly have not and I
certainly do not know what sections they approve and what sections they disapprove in H. R. 6141, nor what parts of the other bills they may approve or disapprove.
Ür. Harris. I might say that I have had occasion, I suppose you might say, to thumb through it and it seems to me that there are very few sections that they approve of, and it might expedite matters if the Commissioner would just briefly tell us what sections they approve of, and then we will know that the rest of it is disapproved of.
Mr. ARPATA. Well, essentially, I think this is the situation: There are some of these proposed sections where we have some comment although we do not disapprove of basic objectives, that is, the redefinition of private carrier and redefinition of contract carriers, and things of that kind. We do not agree, however, that the policy or the declaration of policy, the national transportation policy, as defined in the act should be changed substantially,
The key objection to this whole thing, in our opinion, is the proposed elimination of the words "unfair and destructive competitive practices from the present declaration of policy.
In the second place, we feel that with the lack of guideposts as to the definition of a minimum reasonable rate, or rather to put it the other way, with the standard that has been expressed in tħe report, that any rate which is compensatory-let me put it in the negative only a noncompensatory rate is lower than minimum reasonable rate, you have a restriction which together with the lack of power to prevent unfair and destructive competitive practices would lead to the very conditions which existed first in 1887 when the railroads were exclusively the transportation agency and in 1934, or 1935, when the motor carriers were operating under chaotic, unsatisfactory, and unstable conditions.
Mr. HINSHAW. I take it that the Commission is not in agreement with the bill where it attempts to amend paragraph 4 of section 1 of the Interstate Commerce Act?
Mr. ARPAIA. We, ourselves, propose an amendment to section 4 (1). That is the letter to which I referred. That is
Mr. Hinshaw. Paragraph 4 of section 1.
Mr. ARPAIA. Well, that is H. R. 6208 you referred to. You are talking now about the long-and-short haul.
Jír. Hixshaw. I am talking about H. R. 6141, the present bill before us, and lines 18 and 19 of page 3 specifically, where the bill would propose to establish what is called just and reasonable minimum charges and just and reasonable maximum charges as a substitute for just and reasonable rates.
Mr. ARPAIA. That is the one that takes away the power to fix a precise rate, and we feel that that is unnecessarily restrictive even though the Commission actually does not use that power very frequently. There are times when it uses it, necessarily. Mr. Hinshaw. I think that the zone of reasonableness can be understood and can be defined, and can be found by the Commission, but it is difficult for me to see how a just and reasonable and minimum, and a just and reasonable maximum can be established.
Mr. ÁRPAIA. We do it, and it has been done, and a just and reasonable minimum charge is one which under the circumstances that exist
should be fixed at a point at times when it bears enough to cover the out-of-pocket cost; and at other times at a point higher than that, depending upon the type of traffic; the regularity of movements; the competitive situation, the entire background of related rates and things of that kind. When we fix rates, as a result of either an investigation and suspension proceeding or a complaint, we very seldom fix a precise rate. We either say a rate shall be no lower than a certain amount, that is, a rate lower than such an amount will be less than a minimum rate, or a rate higher than a certain amount will be above a maximum rate. Seldom do we fix a precise rate.
It depends upon the situation which is prevalent at the time.
Mr. HINSHAW. Am I wrong in assuming that class rates are established in part on the basis of what the traffic will bear? That is, what the merchandise is worth in the transportation of the merchandise, or some other basis for the establishment of class rates.
Mr. ARPAIA. Although there are, under exceptional circumstances, commodity rates that are higher than class rates, and justifiably so class rates are generally a ceiling intended to cover a movement which is not regular or which may be less than carload, to a point where there is no regular movement. Class rates are based on mileage blocks. It is a sort of a catchall to take care of every type of movement which might arise and those class rates are fixed as maximum reasonable rates. Commodity rates cover movements from point to point on a specific commodity.
Mr. HINSHAW. It has been a long time since I have had occasion to examine a tariff book, but in those days, it seems to me, you had to decide what you wanted to ship and then look up in the book to see what class applied at that particular item. Something like an electric motor or storage battery had a higher classification than some other things.
Mr. ARPAIA. Oh, yes.
Mr. Hinshaw. That is what I refer to in referring to what the traffic would bear.
Mr. ARPAIA. It depends on the value of the commodity, the susceptibility to damage, density, and other characteristics of the commodityall such factors.
Mr. HINSHAW. I believe that silk takes a much higher rate than almost anything.
Mr. ARPAIA. Yes; you have higher rates on things more valuable and more susceptible to damage and which do not load as heavily as to density and things of that nature.
Mr. Hinshaw. Now, therefore, that is an element in certain ratemaking
Mr. ARPAIA. That is right.
Mr. Hinshaw. I think that is all, Mr. Chairman, except that I have not been able to see just yet why the whole Commission does not agree with Commissioner Mitchell on section 22.
Mr. ARPAIA. Well, our view on section 22 is not too different Frankly, our view is that, except in times of emergency or war, Gov. ernment traffic should move on the same basis as industrial or other traffic; but we would not abolish the privilege of special rates com