In 1940 the policy was established, the national transportation policy which you have now, which is the key to the administration of the Interstate Commerce Act.

Mr. HALE. Then you think it was established directly by that legislation?

Mr. ARPALA. I think it was very wise. I think it was one of the finest pieces of legislation-and the results prove it-because we do have today in this country healthy transportation; sufficient transportation; and public protection by way of reasonable rates without dislocating markets. We have that in every section of this country. Today every section of the country has an equal opportunity to develop, to an equal degree with other sections, because of dependable transportation service.

Mr. HALE. Now, this committee is going to spend, I should think, the better part of a month in hearings on these bills. Do you think we are wasting our time?

Mr. ARPAIA. I think it is necessary to hear the public comments on this thing. We are expressing our reactions. We see these things happening every day and these are our comments. If things are all right, we see no reason for changing it. That is a question for Congress to decide.

Mr. HALE. You think it is salutary to discuss the whole question? Mr. ARPAIA. Oh, yes. I think it is good to hear everybody out. Certainly. I think that it is a very valuable function in a democracy. Mr. HALE. That is all.

Mr. HARRIS. Mr. Dolliver.

Mr. DOLLIVER. Mr. Chairman and Mr. Commissioner, if I am familiar with the history of transportation legislation, the early railroad law was started for the protection of the consumer, the user of transportation.

Mr. ARPAIA. Yes, sir.

Mr. DOLLIVER. That was to prevent abuses by the railroads who at that time had a virtual monopoly on long-distance transportation. Mr. ARPAIA. It also had in mind at the time, however, the destructive competitive practices which were taking place between the railroads.

You will recall then that they had rate wars. At one time-I have forgotten the exact figure-you could go from New York to Buffalo for a dollar.

I mean, they were trying to knock each other out then. There was another aspect of the problem. It was not just the user but the national interest which was involved, even though the main means of transportation was rail. You still had excessive competitive practices. You had other things. Some railroads would not interchange traffic with each other. They were partial in their connections regardless of customer interests. They would route the traffic by roundabout methods in order to help their friends and destroy their enemies.

Mr. DOLLIVER. These two last aspects you speak of, namely, the protection of the transportation business itself, and the destructive competition, and the requirement that there be interchange, those aspects came later than the original objective of the protecting of the public. Mr. ARPAIA. I think any regulation must have as its basic and fundamental purpose the protection of the public.

Now, those practices were part of the evils which they were then complaining about, but it was the effect on the public that counts. If a

carrier benefits from the stability which regulation offers, if competition is forced out, it is not because you want to benefit the carriers concerned particularly; it is because the public needs reliable, continuing transportation services, and you cannot allow them to break down.

So that, basically, the public interest is paramount in the maintenance and preservation of a sound system of transportation, an efficient, economical system available to everybody on an equal basis.

Now, incidental to that, surely, carriers benefit or they may have to bear some burden, but that is not unusual because the broad public interest is of paramount importance.

Mr. DOLLIVER. Of course, you have just outlined the real objectives of your Commission, the Interstate Commerce Commission, have you not?

Mr. ARPAIA. That is our obligation.

Mr. DOLLIVER. That is your obligation under the law.

Mr. ARPAIA. Yes.

Mr. DOLLIVER. Is it a fair statement to make, Mr. Commissioner, that a substantial majority of your Commission does not view with favor the major proposals made in the President's committee's report? Mr. ARPAIA. The entire Commission, every single member, does not favor the major proposals. It is only the business of cutting down the suspension period, section 22, and the volume rates on which there has been any difference of opinion and that remains only by one of the present members of the Commission.

Mr. DOLLIVER. Are you prepared this morning to go into discussion of the long-and-short-haul clause proposals? I would like to hear your comment about that.

Mr. ARPAIA. The long-and-short-haul clause of the act covers two types of movement. First, direct movement, where the aggregate of the intermediate rates control the rate at destination. Then there is that same application to a circuitous route or circuitous movement.

Now, from our experience, and I might say, our approach is not intended to unduly restrict-that has not been the theory of the Commission-where you have, let us say, movement from-well, using Washington, although it is not an industrial city, to Chicago, and the rate over the direct route from Washington to Chicago-let us take a figure like a dollar-and then you have another route which is circuitous. It It goes, let us say, from Washington by way of St. Louis to Chicago, which is just an extreme case I am using to illustrate, where the rate to Chicago is $1.10 or $1.15.

Now, there is no reason, in our opinion, why, if that rate over the circuitous route is compensatory, that carrier over the circuitout route should not be able to meet the competition at Chicago of $1, even though at an intermediate point the rate might be higher. The reason for that is the market competition in Chicago is not affected.

The consignee or shipper in Chicago is enjoying the dollar rate anyway and the other carrier is only trying to meet that competition at that point-not at the intermediate point. There is no possibility of preference and prejudice and, if there is not, we permit the competition to be met whenever possible.

Therefore the relative position of consumers or industry or industrial competition in Chicago is not injured by virtue of allowing the same rate over a circuitous route to a mere distant point.

Mr. DOLLIVER. Reference was made yesterday in the testimony to the fact that the Commission had only denied 77 applications for the suspension of the long-short hauls out of some 1,400 applications. Would you care to elaborate?

Mr. ARPAIA. Yes, I think I want to elaborate on that.

The fact is that the necessity of asking for the permission, or of getting the permission is enough to prevent a great many of them from being applied for. You see, that feature is important all through this act. Carriers, for example, do not file rates that they know would be regarded as unlawful because they know the act as administered would ultimately defeat such action.

Now, those 77, or whatever number of instances are involved, may be extremely important. You cannot evaluate them as against the others which were granted, even though there are only 77. If they involve circuitous routes, we say it is not necessary, but if it is over a direct route, then we feel it is, and we ourselves have proposed such a change in the fourth section to relieve the carriers.

Mr. DOLLIVER. I take it then, Mr. Commissioner, you would not agree with the testimony of Mr. Rothschild yesterday that the same logic should be applied to the circuitous route universally?

Mr. ARPAIA. Not at intermediate points; only to meet competition at the points of destination where the two routes meet, at a point where the two routes meet.

Mr. DOLLIVER. As I recall it, the logic behind the passage of the longshort haul clause was to protect intermediate points, was it not, from undue competition between the larger centers of population

Mr. ARPAIA. That is right, that is the purpose.

Mr. DOLLIVER. Another matter that was alluded to yesterday, in which I am greatly interested, was the reduced rates for bulk carriage of products, trainload lot as opposed to the carload lot.

What has been the attitude of the Commission with respect to that matter?

Mr. ARPAIA. Well, in a way I do not see how that is really necessary, this business of trainload lots. Obviously, one of the factors which goes in to determine, an element that goes in to determine a rate is the regularity and volume of movement and things of that kind.

Where a shipper has an extremely large and steady movement, let us say, iron ore or any other kind of ore or things of that kind, most of such rates are negotiated. Most of these rates that shippers have today are negotiated as a result of conferences. Then they go through the rate committees of the carriers and they are pretty carefully considered before they get to the Commission.

Now, those rates are already fixed on the basis of volume. With those factors already taken into consideration, it really is not necessary, in my opinion, to have this refinement. It could be abused.

So we have taken the position that it is not desirable. The impact on the shipper, the shipping public, might be dangerous. We have on Occasion permitted volume rates when proper. It is possible under the present law.

Mr. DOLLIVER. Would you envision that in the case of such bulk movements, you might run into the same situation that developed with respect to the freight forwarders using a train instead of a carload lot? Mr. ARPAIA. Yes; that could happen.

Mr. DOLLIVER. Do you think that would happen?

Mr. ARPAIA. Yes; it could. I do not know whether they have had it in mind or not, but it could.

Mr. DOLLIVER. If the differential between a trainload lot and a carload not was sufficient, why, you would find that springing up, I think. Mr. ARPAIA. You could find all those evils.

As I say, you cannot measure the impact of such a power.

Mr. DOLLIVER. Well, I take it then, your Commission, with respect to these two items, namely, revision of the provision as to long-short haul clause, and the provision with respect to bulk shipments, you do not view those two provisions with favor in the Commission?

Mr. ARPAIA. On the revision of the long and short haul clause, we have House bill 6208, which was proposed by us.

Now, the difference between our proposal and the proposal of the Cabinet committee legislation is that they would shift the thing so that, instead of having to get the permission on the direct route, they could put it in and then later on you would have to go through the process of condemning it. Now, those things are not as easy as that.

As a matter of fact, it might result in more of a burden to the railroads because they might be subjected to fines and penalties for violations later if they were wrong. However, it puts the burden on the shipper to complain. He has to carry the load, and it is not easy.

Of course, carriers may say, "Well, if we are wrong we will make a refund." Yet, recently, in a section 13 case, where the intrastate rates in Tennessee, I think, were raised to the level of the interstate rates by the Commission because they were an unfair burden on interstate commerce, the railroads went into court and said, in answer to a request for a restraining order, "We will make refunds if the court should decide that these higher rates are unlawful."

The court said:

No, that is not reparation for the injury which will result here because there is a loss of business which the shipper might incur. There are other damages that cannot be measured.

Therefore, the impact on the public in all of these suggested changes in the act are not as easy to measure as it might seem. You have to protect the public and you have an act here that has proven its merit and has been interpreted by the Commission and the courts. The public knows where it stands.

Today we allow competition, we allow competition to the maximum possible. We have not been unduly restrictive. We have eliminated, for instance, the restriction on the railroads to compete at terminal points by eliminating the distinction as to where the line haul ends and begins and the narrow definitions that previously existed. Piggyback operations have been encouraged.

We have sponsored relaxation of the fourth section so far as circuitous movements are concerned. Furthermore, when protests are filed, we use the power of suspension sparingly. As Mr. Rothschild said yesterday, I think it was Mr. Rothschild, only 3,500 of the thousands upon thousands of rates that are filed, were protested. So that

you see the advantage of the present law is that carriers refrain from filing rates which they know are clearly destructive and unlawful. It serves as a deterrent.

However, I had some figures drawn up to break down that figure of 3,500 and, incidentally, it turns out to be 4,000 for the year 1955. Only 1,500 of those which were protested were suspended. Out of those 1,500 that were suspended, 45 percent were voluntarily canceled. The carriers knew they did not have a chance. They knew they could not prove that the protested rates were not unlawful.

Adding to those, the instances where there was no attempt made to justify the rate, 80 percent of the 1,500 filings were in effect withdrawn.

Out of all the protests that were filed, we only found that 27 percent were justified in full, 12 percent were justified in part, and 61 percent were not justified. So that it really is not true that the Commission interfers with managerial discretion to the extent that might appear as a result of this power to suspend. It is used sparingly.

When protestants come in and show that there is no justification for filing that rate because no traffic is moving at the rate the carrier is trying to meet, it is a paper rate, and there are paper rates that do not move traffic, naturally there is no competitive necessity for a rate like that.

Now, this happens between motor carrier and motor carrier and it happens between railroad and railroad and it happens between water carrier and water carrier and also between all of them. It is not as if it were exclusively between rival forms of transportation.

Mr. DOLLIVER. One comment I would like to make, Mr. Commissioner, and I am sure my questioning has revealed one of my major interests in this legislation, and that is the protection of the smaller communities by way of the long- and short-haul clause and the protection of the smaller business enterprises by way of the bulk shipment, opposition to the bulk shipment.

There is one other phase of this whole subject, this is merely an inquiry and perhaps it is not pertinent to this hearing, but I would like your comment about it.

Some time ago there was authorization for the filing of joint rates between rail or land carriers and water carriers. Has any progress been made in the development of such rates?

Mr. ARPAIA. There are joint rates, of course, between rail carriers; and there are some between water carriers and rail carriers. They are needed where there is shipper request, where the shipper demands them. Those exist.

Mr. DOLLIVER. That has been a substantial development, would you say, or is it minor in character?

Mr. ARPAIA. As between rail carriers, it is a substantial development. As between water carriers, necessarily it is limited because there is not a great deal of that type of movement, but where it is found to be necessary, it exists.

Mr. DOLLIVER. Has the Commission required the filing of joint rates between land and inland waterways?

Mr. ARPAIA. Prescribe them?

Mr. DOLLIVER. Yes.

Mr. ARPAIA. Oh, yes.