TRANSPORTATION POLICY TUESDAY, MAY 8, 1956 HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON TRANSPORTATION AND COMMUNICATIONS, Washington, D. C. The subcommittee met, pursuant to adjournment, at 10 a. m., in room 1334 New House Office Building, Hon. Oren Harris (chairman of the subcommittee) presiding. Mr. HARRIS. The committee will be in order. We are resuming the hearings this morning on the transport policy and the bills to carry it out. The first witness will be Mr. J. Carter Fort, vice president and general counsel of the Association of American Railroads. I might say, for the record and for the information of those who are interested, it is hoped that we can conclude this week the testimony of the Association of American Railroads, the American Trucking Association, the Short Line Railroad Association, and the Railway Brotherhoods. That constitutes quite a big order. The Chair hopes that he will have the cooperation of all interested in this objective. Mr. Fort, you may proceed. STATEMENT OF J. CARTER FORT, VICE PRESIDENT AND GENERAL COUNSEL, ASSOCIATION OF AMERICAN RAILROADS, WASHINGTON, D. C. Mr. FORT. May it please the chairman and gentlemen of the committee, My name is J. Carter Fort, and I represent the Association of American Railroads. You may recall that I appear for that association at the preliminary hearings which your committee held last September. At this hearing, with the permission of your committee, we shall present two witnesses. Our first witness will be Mr. Jervis Langdon, Jr., and I will follow him. Mr. Langdon is chairman of the Association of Southeastern Railroads, and is a member of the law committee of the Association of American Railroads. He will appear here for the Association of American Railroads. His testimony will deal, generally speaking, with the ratemaking proposals of the Presidential Advisory Committee and with the provisions of H. R. 6141 implementing those ratemaking proposals, and particularly those proposals that have to do with competitive rates between different modes of transportation. My testimony will deal with other features of the report and of the proposed legislation designed to assure a strong system of common carrier transportation, including such features as private carriage, contract carriers, the repeal of the dry bulk exemption for water carriers, the expansion of the authority of the Interstate Commerce Commission over the discontinuance of unprofitable passenger services and like matters. With the permission of your committee, I will call Mr. Langdon as our witness at this time. Mr. HARRIS. One of our colleagues has asked me to inquire if you intend to, Mr. Fort, also discuss the proposed bills, and the sections in the bill, and the transport policy, regarding section 22. Mr. FORT. It is not our purpose to discuss section 22. The interests I represent take no position with respect to section 22 changes. Mr. HARRIS. Very well. Mr. Langdon? STATEMENT OF JERVIS LANGDON, JR., CHAIRMAN, ASSOCIATION OF SOUTHEASTERN RAILROADS, APPEARING FOR THE ASSOCIATION OF AMERICAN RAILROADS, WASHINGTON, D. C. Mr. LANGDON. May it please the committee, my name is Jervis Langdon, Jr. I am chairman of the Association of Southeastern Railroads, with headquarters at Washington, D. C. I appear here today, however, for the Association of American Railroads by authority of its board of directors. That association is a voluntary, unincorporated organization including in its membership railroad companies operating more than 95 percent of the total railroad mileage in this country and having operating revenues which are more than 95 percent of the total railroad operating revenues. My appearance is in response to the notice of these hearings dated March 26, 1956, which announced that your subcommittee will begin hearings Tuesday, April 24, 1956— on H. R. 6141, and related bills, incorporating the recommendations made in the report of the Presidential Advisory Committee on Transport Policy and Organization. It was stated in the notice that the hearings represent a continuation of the preliminary hearings held by the subcommittee last September during the recess of the Congress, at which time an explanation of the report was made by the Advisory Committee members and by representatives of the four transport industries involved. It seems unnecessary for me to undertake a comprehensive summary of this report or the recommendations contained therein. Your committee, as pointed out in the notice of these hearings, met during the recess of Congress last September and at that time the report was discussed and explained by members of the Presidential Advisory Committee and others, including a spokesman for the railroad industry. You have heard additional discussion and explanation during the course of these hearings. For me to summarize the report and its recommendations would be unduly repetitious. 2 During the September hearings1 you invited representatives of the affected transport agencies "to comment upon the basic principles and proposals involved in the (Presidential Advisory Committee's) report." The railroad industry was represented on that occasion by Mr. J. Carter Fort, vice president and general counsel of the Association of American Railroads. He discussed various features of the report and undertook to support, with certain reservations, the general purposes and objectives of the Advisory Committee's several recommendations. His testimony was in large measure restricted, as indicated, to comment upon "basic principles and proposals" in accordance with the pattern of the preliminary hearings. It is not my purpose at this time to repeat unnecessarily the views of the railroads on the general aims and objectives of the Cabinet Committee report. The record of Mr. Fort's testimony, as well as that of all others who appeared before you during the recess hearings, has been printed and is available for examination and reference. Furthermore, as we all recognize, the pattern of the present hearings differs from that of those conducted by your committee last September. You are considering now, in much greater detail than you did then, and individually, the several specific recommendations of the Advisory Committee as those recommendations are reflected in the two substantially identical bills, H. R. 6141 and H. R. 6142. It will be the purpose, therefore, of those of us who appear for the railroad industry during the course of these hearings to deal individually with the specific proposals of the Advisory Committee for amendment of the Interstate Commerce Act, as implemented by the pending bills, and to indicate our support or opposition-or lack of a position-with respect to each To some extent, of course, reference to the overall philosophy and objectives of the report will be essential to a complete understanding of the individual proposals. In his letter transmitting the report of the Presidential Advisory Committee on Transport Policy and Organization to the President, its Chairman, Mr. Weeks, said: In brief, the principal emphasis of our report is that, in conformity with today's availability of a number of alternate forms of transport, Federal policies should be amended (1) to permit greater reliance on competitive forces in transportation pricing and (2) to assure the maintenance of a modernized and financially strong system of common carrier transportation adequate for the needs of an expanding and dynamic economy and the national security. To those two ends the Advisory Committee made a number of specific recommendations. With your permission I shall, in my testimony, deal exclusively with those recommendations in the report and features of the proposed legislation that fall within the first of the two categories so described, i. e., "greater reliance on competitive forces in transportation pricing" or, to put it another way, increased freedom in ratemaking by regulated carriers in competitive situations involving different modes of transportation. Mr. Fort, as he pre 1 See the printed record of hearings before a subcommittee of the Committee on Interstate and Foreign Commerce, House of Representatives, 84th Cong., 1st sess., on the Report of the Presidential Advisory Committee on Transportation Policy and Organization, September 19-22, 1955. 2 See notice of hearings dated August 2, 1955. * Id. Revision of Federal Transportation Policy, a Report to the President, prepared by the Presidential Advisory Committee on Transport Policy and Organization, April 1955. viously indicated, will discuss the Advisory Committee's other recommendations and their proposed implementation. In turning to the specific recommendations which fall within the category assigned to me, it is important to realize that, in accordance with the conclusion of the Cabinet Committee: Increased reliance upon competitive forces in ratemaking constitutes the cornerstone of a modernized regulatory program. To achieve this objective and it is one which the railroads emphatically endorse the recommendations of the Cabinet Committee, as made clear at pages 7-8 of its report, contemplate revisions of the national transportation policy as well as four elements of current statutory provisions relating to: (a) Maximum-minimum rate control; (b) suspension powers; (c) the long and short haul clause (sec. 4); and (d) volume freight rates. In dealing with these in my testimony, I think it would be helpful to do so in two major parts. In part 1 of the testimony which follows and under the heading "Maximum-Minimum Rate Control," I discuss the basic and underlying recommendation of the Cabinet Committee, together with certain supplementary proposals which are designed to support it. This basic recommendation is to the effect that the long-recognized zone of reasonableness 5 within which carriers are free to set nondiscriminatory rates be continued, but that the standards often used by the Interstate Commerce Commission in the fixing of reasonable minimum rates be modified to allow competitive railroad rates to be judged in the light of railroad conditions and competitive truck rates be judged in the light of truck conditions. In part 2 of this testimony I deal with the other recommendations of the Cabinet Committee which are related to is program of "increased reliance on competitive forces in ratemaking," that is, the proposed revisions of "elements of current statutory provisions" relating to suspension powers; the long and short haul clause (sec. 4); and volume freight rates. More specifically, in part 1 of this testimony will be considered the several steps recommended by the Cabinet Committee for carrying out its basic proposal, including: (a) The proposed provision which would direct the ICC in passing upon reasonable minimum rates not to consider (1) the effect of such rates on the traffic of any other mode of transportation, or (2) the relation of such rates to the rates of any other mode of transportation, or (3) whether such rates are lower than necessary to meet the competition of any other mode of transportation. (See proposed sec. 15a (1) at pp. 13-14 of H. R. 6141 and H. R. 6142.) (b) The proposed provision which would confirm the exclusion of the three related standards for minimum reasonableness listed in the foregoing subparagraph by affirmatively providing that differences in the rate levels or practices of competing modes of transportation shall not, by themselves, constitute grounds for Interstate Commerce Commission disapproval-a principle which has always obtained in the regulation of water carrier rates because of the special provisions of In United States v. Chicago, M., St. P. & P. R. Co. (294 U. S. 499), the Supreme Court said, at p. 506: "A zone of reasonableness exists between maxima and minima within which a carrier is ordinarily free to adjust its charges for itself." |