reason or another been deemed by the carriers to require reduced rates which the carriers have accordingly published. It is possible that such reduced rates may have reached such a level as to be challenged on the ground that they now fall below a minimum reasonable level. The Commission might under such circumstances prescribe reasonable minimum rates notwithstanding that the order prescribing reasonable maximum rates still remains in effect. In such a situation both sides of the zone of reasonableness will have been defined by the Commission, although it is very likely that the order prescribing maximum rates is at this point so old that it might well be challenged upon a new state of facts should the question again arise.

No substantial change in the ratemaking powers of the Commission would occur under the Presidential Advisory Committee's proposal. The processes described above would continue about the same except for (1) the modification of the suspension powers, (2) the absence of the requirement for prior approval of long- and short-haul departures, and (3) the fixing of precise rates. Rate initiation by the carriers, petitions for suspension, and filing of complaint subject to the modifications of requirements as to the showing to be made when seeking suspension, would continue as heretofore. The Commission in passing upon rates depending upon the nature of the complaint or protest before it, could fix a minimum reasonable rate if the protesting action was to the effect that the proposed rate was unreasonably low. On the other hand, it might fix a maximum rate in those instances where it was alleged the proposed rate was unduly high, subject to limitation on the Commission's power not to reduce a rate below the fully distributed costs exclusive of losses from other types of traffic. As indieated above, it would not be the normal situation in those instances where the Commission would investigate a given rate for it to prescribe both the minimum and the maximum for any given rate or rate structure.

The courts have traditionally recognized the existence of a zone of reasonableness insofar as it bears upon the regulation of public utilities. With respect to transportation rates, however, the zone of reasonableness has been seriously Darrowed by the trend of Commission and court interpretation. Whenever the Commission is called upon to fix a precise rate and does so, clearly the carrier is deprived of discretion, for that precise rate is fixed within the traditional zone of reasonableness. The court has also made clear in a recent decision that the Commission may prescribe a rate or rates which fall below the cost of performing the service when such rate or rates are a part of a structure of rates which, taken as a whole, is compensatory in character. Under these circumstances, it is conceivable that rates might be prescribed which even fall below the lower limit of the zone of reasonableness as traditionally understood. In any event, the carriers have encountered great difficulty in increasing rates where the present rates are not compensatory on certain types of traffic, not because the Commission has prescribed rates which are not compensatory, but because it fails to find that the proposals of the carriers for increasing the rates are in all respects lawful.

The intent of the committee's recommendations is to open out the zone of reasonableness and put it back into its traditional form. Under the committee's proposals the carriers would initiate rates as now. They would publish and file the rates in tariffs under the provisions of the present applicable tariff circulars. They would be required under the provisions of the amended Interstate Commerce Act, and so far as railroads are concerned under the provisions of the Elkins Act, to charge no other rate for any service than the applicable rate shown in the effective tariff. That is to say, the rate will always be published and its exact amount known or available to shippers. Upon a substantial preliminary showing that proposed rates contained in tariffs filed with the Commission probably fall below a reasonable minimum level, the Commission could, as at present, suspend and investigate. If the Commission found the protest to be warranted by the facts, it might prescribe reasonable minimum rates, or it might refuse to permit the tariffs to become effective just as it does today. It would be left to apply precisely the present sandards in considering whether such a rate fell below a reasonable minimum level, with one major exception. Under the proposed rule of ratemaking, the Commission would not be entitled to declare that such a rate was unlawful merely because it fell below rates cur

Baltimore & Ohio Railroad Co. v. U. S., 345 U. S. 146 (1953).

rently in effect in the tariffs of competitors, or merely because it might have adverse effects upon competitors. Indeed, the Commission would not be entitled to take into consideration at all the level of rates of competitors or the effect of the proposed rates upon competitors. Otherwise, however, it would be required under the act to apply all of the present standards in testing the rates to determine their lawfulness as a reasonable minimum rates for the carrier or carriers naming the rates. Parenthetically, even today some argue that the proviso of section 3 (1) which states, "That this paragraph (which forbids undue or unreasonable preference or advantage) shall not be construed to apply to discrimination, prejudice, or disadvantage to the traffic of any other carrier of whatever description," precludes the Commission from a consideration of the effect of the rates on competing carriers.

Under the committee's proposals, as now, the Commission would not be required, nor indeed would it be permitted, to prescribe any rates or to fix any standards for rates except when the Commission found after proper proceedings that certain existing or proposed rates were, or would be, unlawful. Such proceeding would necessarily result from an investigation on the Commission's own motion in the belief that certain existing rates were unlawful in some respect, or as a result of substantial protest or complaint. In such instances, it would, under these proposals as at present, exercise its available ratemaking powers to correct the proved unlawfulness. In other words, the Commission would not, as a result of a particular proceeding, fix both a minimum and a maximum level of rates, nor would it be required to fix any such minimum or maximum except when in a proper proceeding some element of unlawfulness was disclosed in the rates initiated by the carriers.

ATTACHMENTS

(APPENDIX A. BRIEF HISTORY OF THE ICC's RATEMAKING POWER)

The original Act to Regulate Commerce of 1887 did little more than write into statutory law the common-law rule that rates of common carriers by railroad should be just and reasonable. It changed the common law by vesting with a new agency of its creation, the Interstate Commerce Commission, the power of determining the reasonableness of a published rate and awarding reparation where the rate was found to be unreasonable. This power was theretofore exercised by the courts. The act relegated to the courts the authority to enforce the Commission's awards. The Commission was without authority either to prescribe a rate to be charged in the future or to fix the maximum level to be observed. Neither could it entertain the question of the lawfulness of a proposal to increase rates.

In 1906, the Commission was authorized to prescribe a reasonable maximum rate upon complaint as to the lawfulness of an existing rate. In 1910, it was authorized to suspend a proposal to increase rates pending a determination of its lawfulness. In 1920, the authority was extended to the prescription of a precise rate, or the maximum or minimum rate, or the maximum and minimum limits within which the carriers' rate must range. The suspension power became available in reduced-rate situations. Subject to certain exceptions, the Commission was authorized to exercise substantially the same authority over the rates of motor common carriers in 1935, rates of water common carriers in 1940, and rates of freight forwarders in 1942.

Mr. STULTS. Mr. Secretary, I will start off by asking several specific questions, on your statement. On page 8 you say that "Some of the operations of the private contract carriers would be made illegal under the recommendations of the Advisory Committee. Such carriers in the interests of equity should be given the opportunity to qualify either as contract or common carriers as appropriate." On page 9 you say:

"The basic law gives considerable administrative discretion to the ICC"-that is, in granting certification.

This appears to be a sound approach and would not be changed.

ICC may on its own motion and such hearing and decision suspend the operation of the References to memorandum: Page

56 pt. 1 (Face p. 53) No. 1

Under the committee proposals, carriers would be required, as now, to establish just and reasonable rates, fares, charges, and rules and regulations applicable thereto. All rates in the first instance are initiated by the carriers and the vast majority become applicable without protest or suspension and investigation.

As now, carriers could not charge any rate other than the applicable tariff rate shown for the particular traffic. This rate will always be published and its exact amount shown. Section 4 of the Interstate Commerce Act requires that rail and water common carriers shall obtain prior approval of the ICC before initiating a charge which is less for a longer tan for a shorter distance or a charge which is greater as a through rate than the aggrerate of the intermediate rates. The advisory committee proposal continues the statutory probabilon against charging less for the longer than the shorter distance, but would authorize carriers to initiate such rates provided the charge is necessary to meet actual Competition and does not result in less than a just and reasonable charge. Such rates would be subject to complaint and suspension and could be attacked as being discriminatory nder section 3 and section 4 of the act. be deleted. The aggregate of intermediates clause would

My question, Mr. Secretary: How would the legislation you sent up assure us that those men who are now operating in the contract and private field would be given certification by the ICC?

Secretary WEEKS. Well, the implementing legislation, if it does not require such action, should. Our intention has been that it should require the ICC to certify these as appropriate.

Mr. STULTS. So your answer is that the legislation introduced in the last session of the Senate and the House would make a change in the certification power of

the ICC?