Mr. FORT. No, sir; they do not. Mr. DOLLIVER. What is the basis of the mail charges that are made? Is it a per ton-mile, or so much per mile for space occupied, or so much per car, or is there any formula or is it just a matter of bargaining between the Post Office Department and the railroads? Mr. FORT. The Interstate Commerce Commission fixes the rates in the first place. Mr. DOLLIVER. You mean the mail rates? Mr. FORT. The mail rates, yes, and in the last case before the Commission they were fixed on an entirely different basis from any basis that had been used theretofore. That is, with terminal costs taken into account in a certain way. But I do not know that I could undertake in a short time, if indeed at all, to tell you just what the basis is for determining those rates. They are supposed to be, under the law, compensatory. Mr. DOLLIVER. Thank you, Mr. Chairman, that is all. Mr. HALE. Actually, is it not true that there are very few railroads that would not be pleased to give up all their passenger service? In other words, there are only a few railroads that have profitable passenger operations, is that not right? Mr. FORT. I do not know any railroads that have profitable passenger operations when you measure it by this formula of the Commission including the allocated costs. I know of no railroad that does have. Now, there may be railroads that are better off running the passenger service than they would be not running it. In other words, they would have no out-of-pocket loss, but some profit over out-of-pocket expenses. Mr. HALE. What troubles me is that if you give the ICC the jurisdiction to relieve the railroads from rendering unprofitable passenger service, where are the ICC going to stop? Mr. FORT. Well, under the law that was proposed and as written in H. R. 6141, the Commission can grant the authority, over a State authority, to take off a passenger train only in the event that it is an undue burden on interstate commerce. I have forgotten the other language. I think it provides that there be adequate passenger service in lieu thereof. I will give you that exact language in a moment. You will see that there are safeguards thrown around it, Mr. Hale. It says: or that any such service requirement causes or will cause a net loss in revenue to the carrier or carriers involved or otherwise unduly burdens interstate commerce. I am reading from the bill, on page 7, section 6 (b). Mr. HALE. You are drawing a distinction between passenger service that "unduly burdens" interstate commerce and one that does not? Mr. FORT. I am sorry; I did not get your question, Mr. Hale. says that any such service requirement causes or will cause a net loss in revenue to the carrier or carriers involved, or unduly burdens interstate or foreign commerce. What is the difference between a due burden and an undue burden? Mr. FORT. I should think that would be within the discretion of the Commission. Mr. HALE. Are you not getting into comparatives of unprofitability. Mr. FORT. Well, there is an "or" there, you see. It says which will cause a net loss in revenue to the carrier or otherwise unduly burden Mr. HALE. You are getting into a position of saying to a railroad that "you must lose a little on passenger traffic, but we will not let you lose too much." Is that what it comes to? Mr. FORT. No; I do not think so, Mr. Hale. Mr. HALE. It is hard for me to see how you can have an accounting system, without incurring prohibitive expense, that enables you to say that one particular train makes money and one does not. When I go to New York on the train and every seat is occupied, I think, "Well, maybe this train is making money for the Pennsylvania Railroad," and if every seat is empty, I feel sure it is not. Mr. FORT. I think you have two very good tests there. Mr. HALE. Now there is one other point that was raised this morning by Mr. Langdon. I am sorry that I missed the first part of your testimony, Mr. Fort. However, there is this business of having this test of getting a fair share of a particular business on the part of railroads as opposed to trucks. I do not understand how the ICC can say what is a fair share of a particular piece of business. Mr. FORT. We do not think that there is any rational way they possibly could make such a finding. Mr. HALE. It seems almost absurd to me to say that there is such a thing. Mr. FORT. That is the way it seems to us. Mr. HALE. Unless draw a perfectly arbitrary line and say half of this business must be carried by trucks and half by railroads, or a third by trucks and a third by railroads, and a third by water carriers. Now, the other thing was this: You are answering the complaint of the water carriers. Apparently your answer is that the water carriers now enjoy an artificially sheltered position in the general competitive situation, is that not right? That is, under this particular statute. Mr. FORT. They undoubtedly do have a sheltered position under the statute today; yes, sir. Mr. HALE. In other words, they have had this phenomenal fourfold growth due to an extraordinarily favorable legislative situation. Mr. FORT. Together with the very large subsidies that they have received through the expenditure of hundreds of millions of dollars of Government money in improving the waterways for which they pay nothing. Mr. HALE. Well, yes, and that is why one of the witnesses said that the railroad system was good and theirs was bad, because they only took what the Lord gave them. Mr. FORT. Mr. Hale, before you get too far from this passenger deficit, you will notice on page 8 of the bill the proviso Provided, That in any such investigation involving a State service requirement, the Commission shall not issue such order prescribing or requiring discontinuance or curtailment of service covered thereby unless it finds that there is or will be available to the public reasonably adequate service in lieu thereof by other carriers And so on. Mr. HALE. Well, yes, but take the passenger service that does interest me personally, which is the passenger service rendered by the Boston & Maine Railroad, when I went to go from Boston to my home in Maine. To be sure, there is an airline which the Civil Aeronautics Board does not treat any too well and there are buses which are very much less comfortable than the train. Under this language, will the Boston & Maine Railroad run trains into Maine? That is probably not entirely a fair question, but I would like to have your comment. What I am trying to get at is the meaning of this language, "there will be available to the public reasonably adequate service." What is "reasonably adequate service"? Mr. FORT. I think that that is what you would argue about in the particular case, and I think that my comment on your question is the very comment that you offered with respect to your question. It is hardly a fair question. (There was discussion off the record.) Mr. HARRIS. I had just one question, Mr. Fort. You discussed these various points at some length, but going back to the private carrier, that was, I believe, the only one of these points that you did not make concrete or specific recommendations on. You did say, as I recall the statement, that the language proposed in the Cabinet committee's report, implemented by the bills introduced, in your opinion did not reach the problem. Mr. FORT. Yes, sir. Mr. HARRIS. You never did, as I recall, give any specific suggestions as to how it should be reached. Mr. FORT. You are correct in that, Mr. Chairman. I called attention to the fact that the Interstate Commerce Commission in its letter commenting upon the bill did come forward with statutory language that it proposed to reach this matter, and I said I though that was entitled to very careful consideration in view of the experience that the Commission has had with these various subterfuges. I, myself, have not exact language, statutory language, to offer to the committee. Mr. HARRIS. Do you think if we go along and consider this, that some utopian language might come to you that might help us in considering it? Mr. FORT. It did not last night. I thought about it a lot last night. Mr. HARRIS. Very well. If you do have any suggestions we would be glad to receive them. Mr. FORT. Thank you very much, and may I express to the committee my thanks for your unfailing courtesy and consideration. Mr. HARRIS. Thank you, Mr. Fort. We are always glad to have you appear before the committee. We appreciate your presentation. We have a request from M. H. H. Ellsworth, executive secretary of the Utah Citizens Rate Association in opposition to section 19 of the proposed bills pertaining to section 402 (c) of the Interstate Commerce Commission Act. It may be included in the record. (The statement is as follows:) STATEMENT OF H. H. ELLSWORTH, EXECUTIVE SECRETARY OF THE UTAH CITIZENS RATE ASSOCIATION, IN OPPOSITION TO SECTION OF S. 1920 AND SIMILAR PROPOSALS IN H. R. 6141 AND H. R. 6142 PERTAINING TO SECTION 402 (c) OF THE INTERSTATE COMMERCE ACT The Utah Citizens Rate Association is a nonprofit association of shippers organized over 30 years ago for the purpose of promoting the business interest of its members with particular emphasis on transportation conditions and freight rates. The association functioned very effectively within this sphere through the years until 1949 at which time the membership decided to incorporate a subsidiary organization known as the Utah Freight Association for the purpose of consolidating less-than-carload shipments originating in the East into carload quantities for reforwarding and ultimate delivery to the members at Salt Lake City. Such a consolidation could, of course, have been performed at any time throughout the years prior to 1942 since there was no regulation whatsoever in this field and even subsequent to 1942 operations of this character were specifically exempted from regulation. It was not until 1949, however, that economic conditions became such that some method of reducing freight costs was imperative. Commencing on January 1, 1947, successive horizontal percentage increases in the freight rates applicable to the intermountain area produced a staggering total increase in dollars and cents in our freight rates. Because of our relatively poor bargaining condition, receivers of freight in this area were paying substantially higher freight rates on shipments moving in connection with the freight forwarders than were our competitors on the west coast. Attempts to secure reductions in these rates were to no avail. In addition freight rates to this area have been traditionally higher than in the balance of the country which fact has presently led to a complete investigation by the Interstate Commerce Commission of the scale of class rates applicable from, to and within the 11 Western States. These disadvantages costwise to the members of our association made it an economic necessity to immediately avail themselves of all possible means to reduce freight costs. It was because of these factors, and these factors only, that the Utah Freight Association came into existence. Section 19, H. R. 6141 and H. R. 6142 is sponsored by and exclusively for the benefit of the freight forwarders. There is no support for this measure from the shipping public, nor from the other common carriers. Its inclusion in the Cabinet Committee report in the exact language so often used by the freight forwarders is a tribute to the efficiency of this organization's lobbying activities. It is significant that no member of the shipping public was invited to express their views with respect to this proposed report. We are quite certain that none of the working committee could have had any accurate information as to the functions of bona fide associations other than that material supplied them by the freight forwarders themselves. It is also significant that while the freight Forwarders Institute, through its spokesman Giles Morrow, constantly insists that shipper associations are operating as unregulated freight forwarders there is no inclination or suggestion on their part to regulate such organizations. Their only suggested solution is to legislate these organizations out of existence leaving a virtual monopoly of this type of traffic in the hands of a few freight forwarders. This becomes even more interesting in the light of Secretary Weeks' testimony before your subcommittee in September of 1955 in which he stated that if a change in the law results from H. R. 6141 and H. R. 6142 with respect to private carriage and contract carriage those operations subsequently declared to be illegal would be issued permits and subsequently regulated. The inconsistency is obvious since such is not proposed in the case of the shipper associations. We think these factors very definitely point to the special interest involved in this legislation. It should be apparent to anyone that the only reason any shippers' association can exist, or needs to exist is that the rate levels of the freight forwarders are much too high. In the years where the freight forwarder rates maintained a reasonable relation to the underlying carload rates, very few associations functioned. The forwarders imply that the number of associations functioning today stems from an inability by the Interstate Commerce Commission to properly police the organizations whereas we believe that a much more valid reason is the fact that the freight rates of the freight forwarders have gotten completely out of line so that the shippers must of necessity pool their freight in order to reduce freight costs. If the freight forwarders today would reduce their freight rates to a realistic level we are confident few shipper organizations would find it necessary to continue. The magnitude of the profits which would accrue to the freight forwarders because of their high level of rates is illustrated by the fact that the shipper associations here under attack save millions of dollars for their members each year and, if the freight forwarders were to be believed that these are actually profitmaking organizations, these millions of dollars are in addition to that profit. Thus, it becomes readily apparent that the freight forwarders are not interested in the public interest, but in a very specific private interest dictated by selfish motives. The Interstate Commerce Commission itself has become the unwitting tool of the freight forwarders in their recommendation to Congress that legislative standards are needed for shipper associations. Perhaps an analysis of the background of the Interstate Commerce Commission's recommendation would be helpful. This recommendation has regularly been made since the decision in the Pacific Coast Wholesalers Association case wherein the Supreme Court upheld the right of shippers to consolidate their own freight. Much has been made of this case by the Freight Forwarder Institute by their statements that it completely freed associations from any investigation by the Interstate Commerce Commission. This is not true. A review of the Pacific Coast Wholesalers Association's case brings forth some interesting facts. In the extensive investigation conducted by the Commission's staff their original order gave the associations a clean bill of health stating clearly Pacific Coast Wholesalers Association's operations were those of a bona fide association. The freight forwarders then objected to this report and asked for reconsideration. Upon reconsideration and review, the Interstate Commerce Commission decided that so far as the shipments moving in the pool on a collect basis were concerned Pacific Coast Wholesalers Association was still operating as a bona fide association, but so far as the shipments moving on a prepaid basis only were concerned their operations were those of a freight forwarder. Thus, the Commission itself decided that only an extremely small part of the operation of Pacific Coast Wholesalers Association representing something less than 20 percent of its total operation was susceptible of a holding that it was that of a freight forwarder. The Supreme Court, of course, subsequently overturned the Interstate Commerce Commission decision with respect to this small segment of traffic. Now, however, we find the Commission and the freight forwarders using this decision as a springboard for legislation to completely outlaw all shipper association operations including those originally found to be bona fide in the Commission's own investigation. If the Commission were to be strictly accurate and logical it would appear they should seek legislation dealing exclusively with the small portion of traffic their own investigation indicated to them was that of a freight forwarder. There can be no justification for seeking such a change as here proposed. If we were to summarize the special interest legislation presently before the 84th Congress sponsored by the freight forwarders, we believe the pattern of control being sought by this group becomes very apparent. Firstly, H. R. 6141 and H. R. 6142 would completely eliminate all shipper associations establishing a virtual monopoly of this traffic in the hands of a few freight forwarders. Secondly, S. 3365 would result in freezing the holders of freight forwarder authority at present levels and completely restrict free entry to the field in the future. Thirdly, S. 3366 would permit the freight forwarders to negotiate with the underlying rail carriers for special rates not available to the shipping public in general. This legislation is opposed by the railroads themselves inasmuch as they realize the tremendous bargaining power the freight forwarders could have but one result, namely, the impairment of revenues to the rail carriers and the subsequent necessity of increased freight rates from the shipping public. Fourthly, S. 3367 would amend the Interstate Commerce Act to permit freight forwarders to control one or more carriers subject to parts 1, 2, and 3 of the act (rails, motor, or water). Putting all of these proposals together presents a rather frightening picture. It would permit a few large freight forwarders to gain control of the underlying carriers which they utilize, negotiate special reduced rates with those carriers, prevent the entry of additional competition to the field and eliminate the rights of shippers to consolidate their own freight. There is no question but what the end result would be a complete monopoly in the class of traffic presently handled by freight forwarders and increased shipping costs to the public. The specific language of section 19, H. R. 6141 and H. R. 6142 is completely impossible. Our analysis of these provisions follows: 1. Proposed language of section 19, H. R. 6141 is so broad and indefinite that the power to legislate against many for the benefit of a few would be delegated to the Interstate Commerce Commission. The proposed legislation sets up the |