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Legitimate private carriage is not in issue. The practice of shippers handling their own merchandise is sanctioned legally and is frequently sound economically.
But the report emphasizes that
Where so-called private carriage is a subterfuge for engaging in public transportation, it constitutes a growing menace to shippers and carriers alike; is injurious to sound public transportation; promotes discrimination between shippers; and threatens existing rate structures.
The subterfuges employed and the destructive effect of pseudo-private carriage on the common-carrier segment of the transportation industry have been clearly described by the Interstate Commerce Commission. Rather than state facts as being of my own knowledge, I believe I could serve the committee better by calling the commitee's attention to these facts that the Interstate Commerce Commission sets forth in its report. In its 67th annual report, 1953, the Commission said at page 55:
ENCROACHMENT ON PUBLIC TRANSPORTATION ("BUY AND SELL" ACTIVITIES BY
Merchandising by motortruck, whether actual or pretended, over long distances is increasing to such an extent that it is becoming a major factor in the transportation of freight between distant points. Manufacturers and mercantile establishments, which deliver in their own trucks articles which they manufacture or sell, are increasingly purchasing merchandise at or near their point of delivery and transporting such articles to their own terminal for sale to others. Such transportation is performed for the purpose of receiving compensation for the other. wise empty return of their trucks. Sometimes the purchase and sale is a bona fide merchandising venture. In other cases, arrangements are made with the consignee of such merchandise for the "buy and sell" arrangement in order that the consignee may receive transportation at a reduced cost.
To an even greater extent, drivers of trucks engaged in transporting exempt commodities in one direction engage in similar transporting of general freight on the return trips. There are also a number of truckowners engaged in such so-called merchandising exclusively, transporting, in both directions, freight which they have purchased for sale at destination. Generally, the "sale" price of the merchandise is the cost at origin plus an amount equal to or slightly below the transportation charges of authorized carriers, either rail or motor. Usually it is difficult, if not impossible, for the Commission to determine whether such transportation is a bona fide merchandising venture or is a subterfuge intended to provide transportation for hire without the required certificate or permit and, of course, without payment of the transportaion tax.
Not only do they escape regulation when they perform public carriage under the guise of private carriage, but they escape the payment of the transportation excise tax.
A large amount of freight which would otherwise move by rail or authorized motor carriers is now being transported by motortruck over long distances under the “buy and sell" arrangements. The Commission has received informal complaints from shippers and authorized carriers concerning such transportation of canned goods from the South to the Midwest and the west coast and from the North to Florida; transportation of meat and meat products from the Midwest to all parts of the country; of fertilizer from Massachusetts to Maine; of various manufactured products from Denver to Cleveland, New York to Detroit, and between numerous other producing and consuming points. Investigations of such complaints rarely produce evidence that would establish in a formal proceeding before the Commission or the courts that the present provisions of the Interstate Commerce Act are being violated.
The existence and expansion of this method of transportation is here called to the attention of Congress because of its possible impact on the national transportation policy to "foster sound economic conditions in transportation and among the several carriers ; * to the end of developing, coordinating, and preserving a national transportation system by water, highway, and rail, as well
as other means, adequate to meet the needs of the commerce of the United States, of the United States, of the postal service, and of the national defense." In instances where this so-called private carriage is a subterfuge for engaging in public transportation, it constitutes a growing menace to shippers and to carriers alike. It is injurious to sound public transportation. It promotes discrimination between shippers and threatens existing rate structures. It was to curb such practices that part II of the Interstate Commerce Act was enacted.
The Commission again referred to this situation in its 68th annual report (1954) saying at page 97 that one of the long-range problems involving regulation of the Nation's motor carriers
involves the increase in transportation being performed by shippers in equipment which they lease from vehicle owners, and by use of the "buy and sell” method of operation. The latter method involves execution of a bill of sale intended to establish that the property being transported belongs to the owner of the vehicle transporting it and that the transportation, therefore, is private carriage. This method has caused much concern within the regulated transportation industry, and presents a difficult question for us. In fact, both of the methods result in the performance of unlawful for-hire transportation by the vehicle owners, in many cases.
In its latest annual report (69th Annual Report of the Interstate Commerce Commission, November 1, 1955) the Commission spoke again of this matter, as follows:
There are also * * * many private motor and water carriers, and the competition of such carriers creates increasingly difficult problems for regulated carriers. Because of the lack of effective legislation and adequate means of enforcing present statutes, practices of persons who operate unlawfully in forhire service, such as the "buy and sell” operations discussed in our last report and mentioned later herein, add further to the difficulties of regulated carriers (p. 7).
The "buy and sell" method of operation whereby bills of sale, invoices, et cetera, are issued to make the goods being transported appear to be those of the vehicle owner is * * * growing to the extent that a very real enforcement problem exists. In most cases, these * * * practices appear to be only subterfuges whereby vehicle owners perform transportation for compensation without the required operating authority (p. 99).
In its report the Presidential Advisory Committee reached the conclusion that the legitimate role and proper place of private carriage by motor vehicle should be more adequately delineated. The recommendation of the Advisory Committee is stated as follows:
Redefine a private carrier by motor vehicle as any person not included in definition of a common or a contract carrier who transports property of which he is the owner, provided that the property was not acquired for the purpose of such transportation.
The railroads endorse and support the purposes and objectives of this recommendation, as tending toward some measure of relief for regulated common carriers from the destructive competition of various types of unregulated “private carriage” that is actually for-hire transportation and that ought to be recognized as such.
It seems clear, however, that the provisions of H. R. 6141 purporting to accomplish the result intended by the Advisory Committee would not in fact do so. Section 10 (c) of those bills would amend section 203 (a) (17) of the Interstate Commerce Act in such a way as to redefine the term "private carrier of property by motor vehicle" along the lines proposed in the report; but redefinition of the term “private carrier of property by motor vehicle” would not appear to accomplish regulation of fictitious or pseudo-private carriage. Private carriers do not appear to be exempt from economic regulations under present law because they fall within this definition, but rather because they do not fall within the definition of either common or contract carrier in section 203 (a) (14) and (15). The term “private carrier" seems to be defined in the present law only for the purpose of describing those carriers, other than common and contract carriers, whose operations may be controlled by the Interstate Commerce Commission as to safety, hours of service, and related matters referred to in section 204 (a) (3) of the act.
Hence the new definition of a private carrier contained in the pending bills, so far as we can see, would not serve to extend economic regulation to any carriers not now subject thereto. Its only effect would be in matters of safety regulation.
The Interstate Commerce Commission has also taken occasion to remark on this, saying in its written comments on H. R. 6141, sent to the chairman of the House Committee on Interstate and Foreign Commerce under date of December 22, 1955, that,
* * the amendments, as proposed, would not accomplish the objectives the draftsman had in mind *
The Commission, in its written comments on the bill, discussed at some length theproblems involved in this matter of unauthorized transportation for compensation by persons claiming to be private carriersand expressed itself as being in general agreement with the purposes of the amendments proposed in that regard in H. R. 6141. It came forward, however, with certain amendatory language of its own, as a means of tightening up the interpretation and the administering of the act with respect to persons who, under the guise of operating as private carriers, or pretending not to be carriers of any kind, actually are transporting for compensation.
We agree with the Interstate Commerce Commission, as we do with the Advisory Committee, that for-hire carriage performed under the guise of subterfuge of private carriage ought to be restrained or regulated.
CONTRACT CARRIERS Contract carriers are defined in the Interstate Commerce Act as persons, other than common carriers, which, under individual contracts or agreements, engage in interstate transportation by motor vehicle or water for compensation. Because of less restrictive requirements for entry into the transportation field and of the relative ease with which their operations may subsequently be expanded and enlarged, many of them have become competitors of and substitutes for common carriers.
The report of the Presidential Advisory Committee recognizes that: These contract carriers are taking substantial blocks of traffic in their service areas through excessive numbers of shipper contracts constituting in effect common carriageand makes reference to the development of
an area of conflict between certain motor contract carriers and competing motor and rail common carriers over whether the contract carriers are not, in many instances, actually performing a common carrier service.
This problem has not escaped the attention of the Interstate Commerce Commission. In its 67th annual report (1953), the Commission said (p. 116) that one of the difficult problems with which it is faced in connection with regulation of motor carriers is "the line of demarcation between contract carriers and common carriers.” It said:
Experience indicates that many carriers who now hold authority as contract carriers are more properly to be classified as common carriers by reason of the nature of their present operations *
The Commission again referred to this matter in its latest annual report (69th Annual Report of the Interstate Commerce Commission, Nov. 1, 1955), and recommended remedial action by the Congress. In doing so, it said (p. 131):
* the Commission is prohibited from restricting a motor contract carrier from substituting or adding contracts within the scope of its authority. As a resalt, some contract carriers have so many effective contracts that they are actually rendering a specialized common carrier service comparable to the specialized service rendered by common carriers of automobiles, liquid freight, household goods, and others, and they are holding themselves out to serve any shipper willing to enter into contracts with them.
The Commission has interpreted the contract carrier authority as requiring specialized service or dedication of equipment which a common carrier cannot give. However, even though the original authority is based on specialized service, there is no guaranty, after a permit has been granted, against a contract carrier supplanting the service of a common carrier by subsequent contract arrangements with other shippers. The common carrier has no protection against such inroads and the Commission has no control over the situation.
A recent decision of the Supreme Court of the United States lends emphasis to the very matters of which the Commission was speaking. In United States v. Contract Steel Carriers (76 S. Ct. 461 (1956)), a case where the Commission had issued an order directing a contract carrier “to cease operations as a common carrier by motor vehicle” after having found that "by indiscriminate solicitation and advertising, among other things” the carrier had from 1951 to 1954 secured 69 contracts to serve shippers, it was held that under present law:
the fact that appellee has actively solicited business within the bounds of his license does not support a finding that it was "holding itself out to the general public." A contract carrier is free to aggressively search for new business within the limits of his license.
That is the way the Court interprets the existing statute. The Commission suggested in its 69th Annual Report that it be given the power to restrict the number of contract arrangements of contract carriers, and further recommended that the law be so amended as to provide that motor contract carrier permits may be issued only upon a showing that existing common carriers are unwilling or unable to provide the type of service for which a need has been shown. In this latter regard it said (p. 131):
The further recommendation to permit the issuance of motor contract carrier authorities only upon a showing that existing common carriers are unwilling or unable to provide the required type of service, would give the Commission a further measure of control over the expansion of contract carriage and, at the same time, would serve to protect shippers whose peculiar needs cannot adequately be met by a common carrier.
Contract carriers enjoy marked advantages over the railroads and other regulated common carriers. The treatment accorded them, from the standpoint of regulation, can hardly be described as other than preferential.
In the first place, the applicant for contract carrier operating authority need show only that the proposed operation is consistent with the public interest” and the national transportation policy, in addition to a showing of fitness, willingness, and ability to perform the service, wheras the common carrier applicant must carry the burden of showing that the proposed operation is required" by public "convenience and necessity.”
After contract carrier operating authority has been obtained to haul only such traffic as has been selected—contract carriers are chief among “pickers and choosers" of traffic—other advantages over common carriers are realized. The contract carrier is privileged to discriminate among shippers, wherever advantageous. The actual charges of contract carriers may be concealed, since only their schedules of minimum rates are required to be filed and published. Since the contract carrier does not hold itself out to the public to provide common carrier service, advantages are available also in lesser terminal costs, in the assurance of traffic, in advance knowledge of volume and the ability to fit equipment needs to that volume.
The resulting disadvantages to the common carrier segment of the transportation industry are very great and present a serious problem in the field of Federal carrier regulation.
When there is competition for business between two classes of carriers with one free to discriminate at will and the other held fast by sweeping prohibitions against discrimination, the competition is conducted on an unequal and unfair basis. The competitive condition is made much worse when the contract carrier's actual charges may be concealed while those of the common carrier must be made public and strictly observed without change except upon substantial advance notice to the public.
The nondisclosure of contract carrier rates, particularly when coupled with the broad expansion of operations by contract carriers, has resulted in placing railroads and other common carriers under a severe handicap. The report of the Advisory Committee points out in this connection that:
The provisions of * * * the Interstate Commerce Act with respect to publication of rates are * * * more lenient to contract than to common carriers. The former are required only to post their minimum rates in contrast to the requirement that actual rates of common carriers be published. Due to this disparity it is not possible for common carriers to compete effectively because they have no means of determining the actual rate charged by contract carriers.
Saying that the purpose of its recommendationis to protect common carriers against contract carriers who are in effect engaged in common carrier operation without having had to demonstrate the "public convenience and necessity' of the service offeredthe Advisory Committee concluded in its report that:
The definition of contract carrier by motor vehicle and contract carrier by water provided in the Interstate Commerce Act should be sharpened to make clear that such carriers are of a specialized nature, and that they should be sp regarded only if they clearly substitute for a feasible private carrier operation and do not perform common carrier services which would ordinarily be undertaken by common carriers— and as a means of assuring furtherthat motor and water contract carriers will operate in their appropriate roles in the transportation system