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executive branch in the formulation of sound transportation policies which will work toward the development of a healthy and privately owned transportation system.
To assist the Secretary of Commerce in his transportation responsibilities, the Office of the Under Secretary of Commerce for Transportation was established. This Office provides the Secretary with policy advice, analysis of current transportation problems, and administrative guidance in the implementation of transportation programs.
An important part of the responsibilities of the Under Secretary for Transportation is to assess the adequacy of transportation facilities and services and to Telurmend such modifications or changes in Federal policy as appear necessary to correct deficiencies.
The transportation responsibility of the Department of Commerce, great as it is, has very definite and appropriate limitations.
The Department has no direct responsibility for the economic regulation of domestie transportation. That authority has been delegated by Congress through statute to be exercised by the Interstate Commerce Commission, the Civil AeroDautics Board, and the Federal Maritime Board.
Therefore, the Department is not accountable for the day-to-day administration of transport regulatory legislation.
Nevertheless, our concern with the ability of the Nation's transportation to met commercial and defense needs requires that the Department give close attention to whether the regulatory laws are in any way inhibiting the development of a healthy and reliable transportation system.
It was this basic problem that prompted the establishment of the President's Advisory Committee on Transport Policy and Organization under my chairmanship.
The Secretary of Defense and the Director of the Office of Defense Mobilization served as the other regular members. The Committee examined present-day requirements in transportation and changes needed in the Interstate Commerce Act to permit the industry to function and develop more soundly in accord with today's dynamic economy. Our report was released in April of this year and zislation (S. 1920, H. R. 6141, and H. R. 6142) incorporating our recommendatons are pending in Congress.
The Committee made two basic findings :
1. That regulatory policies have not kept abreast of the intensive and widespread competition which characterizes domestic surface transportation today.
2. That the commerce and defense of the Nation demand the maintenance of an adequate common carrier system by all forms of transport, rail, highway, water, and air.
The Committee found that the present Interstate Commerce Act is not in all respects well adapted to the current situation in transportation.
Certain regulatory standards in the statute were felt to be better suited to a period 30 years ago when monopoly conditions characterized the industry.
Also, deficiencies in the act have resulted in an erosion of common-carrier services through extensive expansion of private and contract haulage and in tiemptions from regulation of important sectors of the transportation industry cifering common-carrier services.
The committee was convinced that the Interstate Commerce Act should be amended to aline it with current conditions in transportation. We recommended first that the national transportation policy should be restated to make it clear that common carriers should have greater freedom, short of unjustly discriminatory practices, to reflect their true economic and service characteristics in competitive pricing. In other words, we believed that greater reliance should be placed on competitive forces in ratemaking.
There has been a tendency in recent years for the Commission, under the present policy, to disallow certain reductions in rates in order to preserve an Fisting relationship of traffic division among carriers, even when these rates spre otherwise fair and compensatory.
This is generally known as the fair-share doctrine, which, when applied, has had the effect of causing many shippers to pay higher rates for transport services than they would if the forces of competition were given freer rein. Under the terommended change in the national transportation policy which stresses full hat fair competition, the Commission would not be required to apply the fairstare doctrine.
In this connection, I invite your attention to the declaration of policy contained in section 202 of the Small Business Act of 1955 (Public Law 268, approved
August 9, 1955), which states that “The essence of the American economi system of private enterprise is free competition * * * The preservation an expansion of such competition is basic not only to the economic well-being bu to the security of this Nation."
Such sentiments parallel the thinking of the Presidential Advisory Committe on Transport Policy as an appropriate philosophy for the regulation of trans portation. The recommendations for changing the national transportation polie: are, I beliere, in accord with the spirit of the Small Business Act.
The Advisory Committee's recommendations dealing with the ICC's authority to fix rates do not depart radically from current regulatory practices. The ICC would continue to have authority, as now, to prescribe reasonable maximun or reasonable minimum rates. Only the authority to prescribe precise rates is eliminated. No change whatever is proposed in its authority to correct unjustis discriminatory pricing or practices.
As you know, the initiative and responsibility for fixing rates in the first instance rests with the carriers. Normally carriers must give 30 days' notice before instituting any rate and all rates must be filed and published in accordance with ICC tariff circulars.
Needless to say, none of this procedure would be changed by the Advisory Committee's recommendations. The overwhelming majority of rates are published and go into effect without challenge.
The ICC now exercises its authority to prescribe rates only when a proposed rate or one in effect is assailed by a shipper or a competitor, or when it investigates a rate on its own motion. This practice likewise would continue.
The Committee did not intend that any particular form of transportation should have the power to destroy another whether it excels, equals, or falls short in service characteristics. Its purpose here in line with the revised declaration of policy was to assure an environment of fair competition.
Fair opportunity for responsible carriers to fix reasonable competitive rates under proper supervision of the ICC will not result in ruinous rate wars.
Retention of the ICC's authority over minimum rates recognizes that pricing below the directly ascertainable costs of doing business is an unfair competitive practice. At the same time, retention of the maximum rate authority protects the shipper from unreasonably high rates.
Modification of the Commission's suspension authority was also recommended by the Advisory Committee. This authority was put into the Interstate Commerce Act in 1910 primarily to benefit the shipper. Under the act today, the Commission has authority to suspend rates upon protest by shippers or competing carriers or upon its own initiative.
Rates can be suspended for up to 7 months, and the burden of proof that the proposed rate is just and reasonable is placed on the carrier initiating the rate. However, very few rates are protested and suspended at the request of shippers, particularly smaller shippers. The great majority of requests for suspension are filed by competing carriers and it was the feeling of the Advisory Committee that this procedure has become a device to thwart competition by preventing or delaying the institution of new rates. Therefore, the Advisory Committee recommended that the period of suspension be shortened to 90 days and that when the protestant is a carrier the burden of proof be placed on the protesting carrier.
These recommendations were designed to strengthen the forces of effective but fair competition among transportation agencies. Other recommendations have as their purpose the elimination of specific abuses or unfair competition.
The Committee found areas of unfair competition in the field of motor private and contract carriage. Certain private carriers conduct operations which go beyond the appropriate sphere of private transportation and in effect have invaded for-hire carriers' rights.
Similarly many contract carriers perform in effect a type of common carriage through the practice of entering into a large number of contracts.
Such unfair competition is further accentuated by the fact that the act requires contract carriers to file only their minimum rates, which leaves the actual rate charged undisclosed. This is in direct contrast to the requirement that all common carrier rates be published.
The Advisory Committee recommendations to cope with tihs growing area of unfair competition are felt to be effective and equitable. The Interstate Commerce Act would be amended to redefine both private and contract carriage. Private carriage would include transportation incidental to the conduct of a nontransportation business but would clearly exclude operations of those who acquire goods for the purpose of transporting them.
Contract carriage would be defined as for-hire transportation providing specialized services under bilateral contract or services equivalent to bona fide private carriage. Contract carriers would be required to file actual charges, rather than minimum charges as now required by the act.
The Advisory Committee recognized that these changes would render illegal many private and contract operations which are now conducted on a legal basis.
Such carriers, in the interests of equity, should be given the opportunity to qualify either as contract or common carriers, as appropriate.
On many occasions I have stated that free and fair competition is in the best interests of small business. Small business also has a very real interest in the other major concern of the Advisory Committee on Transport Policy; preservation and strengthening of a healthy common carrier service. No area of busiDihs activity has a greater dependence on common carriers than has small business.
The maintenance of a private fleet of trucks or barges requires not only a large volume of business if any economies are to be realized, but capital investments generally beyond the capacity of small businesses.
The same is true of contract carrier services, which invariably require an 2-sured volume. While private and contract transportation have proved ecoDomical in many instances, the conditions for their success are seldom found in suall business. Only comman-carrier service can handle efficiently and ecoDomically small or irregular shipments and they can do this only because they combine the shipments of thousands of individual businesses, great and small.
For this reason small business has a special interest in the preservation and derelopment of a stable and strong common-carrier industry. If the common farrier cannot retain the large volume shipments of the larger shippers. his ut and revenue outlook is adversely affected.
Often he must as a result raise his rates to shippers who cannot ship except be common carrier. Most often this means small business.
This fact was recognized by the President's Advisory Committee and was one of the motives for the measures designed to eliminate unfair competition and to enable common carriers to compete more effectively for all types of traffic.
The Committee had in mind the welfare of all segemnts, small and large, of the common-carrier industry subject to the Interstate Commerce Act. In this connection the recommendations apply equally to common carriers by truck, water, and rail.
Likewise, the Committee had in mind the welfare of all classes and types of shijpers and consumers.
The Committee made no recommendations concerning the certification carriers, other than those relating to revisions in the definition of private and contract carriage. The basic law governing the certification of common carriers gives considerable administrative discretion to the ICC, so that adjustments can be made as circumstances warrant. This appears to be a sound approach. The number of carriers in a field should never be so great as to weaken the common carrier industry through excessive and cutthroat competition.
At the same time there should be sufficient common carrier service for the smaller communities and for the smaller shippers, wherever they may be located.
But the relationship of transportation and small business may be viewed in a larzer context. The questions we should ask are:
Are adequate common carrier services available to small business? Do rates properly reflert the competitive situation in today's transport market? Are basic facilities such as highways available for carrier service to business in all sactions of the country?
The Commerce Department, through its leadership in the President's Advisory Committee on Transport Policy and through its efforts to overcome the great deficiencies in our highway system, is trying to provide the solution to these problems.
It is my firm conviction that enactment of both the Advisory Committee rer. enmendations and the President's recommendations for highway development will aid not only the small transportation companies and the small businesses who are dependent on common carrier services, but also the consumer on whose purchases rests the soundness of the entire economy.
Mr. Chairman, I would just like to add that I have been delighted to see the committee undertake this study.
It is true and we think right that we have in some ways recommended stiffen: ing up the regulation rather than taking the direction that some might take,
stiffening up the regulation of this industry about which we are talking to serve and protect the common carrier element in the transportation industry.
And certainly when I say that I am gratified that this committee is looking into it, it is for this simple reason: You are interested in small business, which I think we all are, and small business and the small shipper just could not exist without a healthy common carrier system. I urge that nothing be done to weaken the common carrier system but that some of the things that we have recommended be done to strengthen it.
Thank you very much, sir.
Senator DUFF. Mr. Secretary, before luncheon Angus McDonald, assistant legislative secretary of the National Farm Union, read a statement in the course of which on page 4 he criticized the report, and I wondered if you would like to look at what he had to say and put on the record any rejoinder to what he did say?
Secretary WEEKS. May I make answer to it later for the record ?
If you would prefer to file an addendum in answer to that later, that would be entirely agreeable if you prefer to do it that way.
Secretary WEEKS. Well, Mr. Chairman, I should like to prepare a statement for the record which will answer some of the points he has raised. I have just read one page. I don't know how long it goes on.
Senator DUFF. I would suggest that perhaps you would prefer to have some time to examine this in detail and file your answer to what he said.
Secretary WEEKS. I would like very much to do that. At the moment I will say I completely disagree with his conclusions. We have nothing in mind or in contemplation that, in my judgment, would authorize or permit any cutthroat rate wars.
Senator DUFF. In view of the fact that that is all a part of the record so far, it is very right to give you an opportunity to know that it has been said so you have an opportunity to make a rejoinder to it.
Secretary WEEKS. I appreciate that very much. I think we can make the rejoinder and make it convincingly.
(Material subsequently supplied by Secretary Weeks follows.)
COMMENTS BY Hon. SINCLAIR WEEKS ON TESTIMONY OF MR. ANGUS MCDONALD
BEFORE THE SENATE SELECT COMMITTEE ON SMALL BUSINESS, DECEMBER 2, 1955, IN Which HE CRITICIZES THE REPORT OF THE PRESIDENTIAL ADVISORY COMMITTEE ON TRANSPORT POLICY AND ORGANIZATION
On December 2, 1955, Mr. Angus McDonald, assistant legislative secretary, National Farmers Union, testified before the Senate Select Committee on Small Business which was holding hearings on the administration of the Motor Carrier Act by the Interstate Commerce Commission. During his testimony and appearing at page 4 of his prepared statement, dated November 30, 1955, Mr. McDonald stated that because the report of the Presidential Advisory Committee on Transport Policy and Organization embodied the recommendations of certain Cabinet officers, it was “entitled to careful consideration." While frankly admitting that his examination of the report was cursory, he expressed amazement that "responsible public officials would make such recommendations."
Mr. McDonald states at page 4 of his prepared statement, "If the recommendations of this committee are acted on by the Congress, more than half a century of experience in legislation will be discarded * *
If taken literally, this allegation is partially true, for the Advisory Committee in its report and the implementing legislation would discard certain obsolete provisions of the Interstate Commerce Act which the committee is convinced unduly interfere with the realization of maximum effectiveness in our transportation system. However, this allegation implies that the Advisory Committee recommends completely overthrowing all existing concepts of regulation for the transportation industry. This is not the case at all.
The Advisory Committee's reappraisal of transportation policy led to two fundamental findings :
1. That adjustment of regulatory policies to the intensive and widespread competition which characterizes the domestic surface transportation industry today is long overdue; and,
2. That restoration and maintenance of a progressive and financially strong common-carrier industry is of paramount importance to the Nation's
commercial and defense needs. The committee, however, did not find it necessary to overthrow existing regulatory patterns to meet the objectives inherent in these findings. Rather the correlative revisions in Federal transportation policy constitute a modest and well-balanced program within the framework of the present organization and jurisdiction of the Interstate Commerce Commission.
The change in the declaration of national transportation policy proposed by the Committee emphasizes that greater reliance shall be placed on competitive forces and that economic regulation shall be reduced to a minimum consistent with the public interest. Competition, which is often called the mainspring of the Nation's economy, is not a novel concept newly discovered for application to the economics of the transportation industry. It has in fact been fostered and promoted by the Government over the years. But the Committee observed that to an excessive degree the present policy declaration has interfered with the processes of full and fair competition and has substantially reduced the opportunities for carriers to reflect their true economic and service characteristics in their rates. In other words, the judgment of the regulatory body too often has been substituted for that of carrier management. For example, the prohibition in the present policy declaration against destructive competition can and has been interpreted to mean that competition which is fair but injurious to a comDeting form of transportation violates the policy of the law. Again, the policyand rate-making standards of section 15a of the Interstate Commerce Act frequently have been taken to mean that competitors shall have an opportunity to obtain a share of the traffic available regardless of the inherent cost and service advantages that one carrier may have over another in a given instance.
Thus, the Committee feels that it is essential to reword the declaration of policy to stress a philosophy of full and fair competition in order to help assure that the public might fully realize the inherent cost and service advantages of Each mode of transportation. However, the Committee would not discard, but retain with full vigor, those parts of the policy declaration which provide for the encouragement and development of a low cost, efficient and financially sound transportation system by all transportation means, and which provide that this system shall be privately owned and operated and adequate for commercial and defense Deeds. It also would continue those provisions which provide that the Interstate Commerce Commission must pay due regard to “the public interest," to the national defense, postal service and commerce," to the “highest standards of service," to the encouragement of "fair wages and equitable working conditions" and, finally, to "fair and impartial” regulation.
That the Advisory Committee does not advocate the abandonment of prevailing concepts of regulation is clearly evident in its proposals respecting the Commission's power to regulate rates. Basically the proposed changes would limit the Commission's authority to prescription of maximum or minimum rates and remore only the authority to prescribe precise rates. No change whatever is proposed in its authority to correct unjustly discriminatory pricing or practices. The Committee's proposals would provide all common carriers with greater freedom, subject to adequate statutory standards and Commission control, to adjust their rates and bid for competitive traffic in accordance with their best business jodzment.
There is attached to this memorandum a paper entitled, “Memorandum on Changes in Minimum-Maximum Rate Controls Proposed by the Presidential Advisory Committee on Transport Policy and Organization," together with sppendixes A, B. C, and D, which supplement the testimony of the Secretary of Commerce before the subcommittee of the House Committee on Interstate and Foreign Commerce, September 19, 1955. This detailed explanation of the proproxed changes fully substantiates that the committee's proposals would modernize not abandon-the regulatory processes. The committee is firmly convinced that maximum effectiveness of our transport system cannot be realized until rate regulation is modernized to recognize and place greater reliance in matemaking on the current extent of competition for traffic among carriers and Dodes of transportation.
Finally, the committee's specific proposals to strengthen the common carrier industry are designed primarily to clarify existing provisions of the act or to