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service or services provided; and the extent such activities are in competition, with the services of freight forwarders subject to this part.'
This recommendation directs immediate attention to the fundamental law under which shippers and shipper consolidations utilize public transportation agencies for the transportation of their own freight. Under the common law and all statutory provisions, both Federal and State, pertaining to transportation, it is the duty of the carrier to render service without discrimination to all who may apply for service. As a correlative to this duty on the part of the carrier, it is the right of erery shipper to demand and receive such service. Furthermore, it is beyond question that a shipper in transporting his own property through a medium of a common carrier is not engaged in a business affected with a public interest and not subject to regulation as a utility serving the public. Likewise, two or more persons who combine or consolidate their property in a single shipment are engaged in a lawful use of transportation facilities without undertaking a public service or dedication of their own property to a public service which would subject them to regulation. The same is true of a shippers' association organized and operated in good faith and on a nonprofit basis for the purpose of securing for its members the benefit of lower rates resulting from carload or other volume shipments. Such business, whether conducted by an individual, a small group, or an association of individuals, is a matter of private right. Any deprivation of such right or restriction thereof by regulation merely because it diverted traffic from regulated forwarders or other carriers would be deprivation and invasion of rights of individuals guaranteed by the Constitution, 2. Statutory Regulation of Freight Forwarders
By part IV of the Interstate Commerce Act (49 U. S. C. par. 1001, et seq.) Freight Forwarders were brought under regulation as common carriers. Under the provisions of section 402 Freight Forwarders are defined as any “person" which : "holds itself out to the general public as a common carrier to transport or provide transportation of property *** for compensation, *** and which, in the ordinary and usual course of its undertaking, (A) assembles and consolidates or provides for assembling and consolidating shipments of such property, and performs or provides for the performance of break-bulk and distributing operations with respect to such consolidated shipments, and (B) assumes responsibility for the transportation of such property from point of receipt to point of destination, and (C) utilizes, for the whole or any part of the transportation of such shipments, the services of a carrier or carriers subject to part I, II, or III of this act."
This definition sets forth in unmistakable terms "definite statutory standards” for determining the status of a freight forwarder. Conversely, it provides the statutory tests of shippers or associations of shippers who are not freight forwarders. The Interstate Commerce Commission through its investigatorial and disciplinary powers is vested with ample authority to determine who is or is not subject to regulation and who by reason of a willful failure to observe the law is subject to the penalties provided by the act for such delinquency. If any individual or group or association of individuals should attempt through subterfuge to evade the regulatory provisions of the act, there is no lack in the present law of provisions for the imposition of penalties or injunctive relief to punish or prevent such violations. 3. Eremption of shipper associations
Section 402 (c) of the act provides in part:
The provisions of this part shall not be construed to apply, (1) to the operations of a shipper, or a group or association of shippers, in consolidating or distributing freight for themselves or for the members thereof, on a nonprofit basis, for the purpose of securing the benefits of carload, truckload, or other volume rates."
This is nothing more than a clarifying provision. As above indicated, an individual shippers or group or association of shippers engaged in good faith in the transportation of their own freight on a non-profit basis are dealing strictly with their own property and are guaranteed in their right to do so under the Constitution. In so doing they are not serving the general public and are not subject to regulation as a public utility. To so declare them by legislative enactment would be in contravention of the constitutional guarantees. Neither the Congress nor any other legislative body can by legislative fiat determine an operation to be a public utility that which is not, in fact, a public utility.
The exemption provisions of section 402 (c), therefore, add nothing to the fundamental law. Individual shippers, groups or associations of shippers acting in good faith for the transportation of their own freight would be as completely exempt from regulation as if section 402 (c) had never existed. The fact that this section was included in the statute as a "clarifying” provision neither adds nor detracts from the fundamental law of the case. 4. Statutory standards are unnecessary and inappropriate to determine the
status of shipper associations There can be no question about the right of an individual shipper to have his own goods transported without subjecting himself to regulation. The same is equally true if two or several shippers acting in concert combine their individual shipments and without profit to anyone, derive the benefit from such consolidation incident to the lower freight rates applicable to volume shipments. In principle, an association of shippers stands in the same category. However, when a group of shippers act through an association, the element of good faith is necessarily presented. An association, whether incorporated or unincorporated, which performs the clerical and managerial work of consolidating the shipments, paying the transportation charges and performing such other work as may be required incidental to the consolidation, transportation, and distribution of the freight for its members on a nonprofit basis, is clearly nothing more than the business agent of each of its shipper members and is no more subject to regulation as a freight forwarder than any individual shipper comprising its membership. On the other hand, an association which does not operate on a nonprofit basis, holds its services out generally to all who may seek to avail themselves of them, or which operates as a false front for the benefit of any individual person or group of persons who derive benefit therefrom by way of compensation or otherwise, is not acting in good faith as the business representative of individual shippers whose constitutional rights are involved.
There are not, and cannot be, any statutory standards for “good faith.” The lack of good faith or, in plain terms, dishonesty, can be revealed in a multitude of ways. Whether anyone has acted honestly and in good faith is an ultimate question of fact. Its determination necessarily rests upon all probative facts and circumstances developed in each particular case. The responsibility to determine questions of fact is always that of a tribunal authorized and empowered to hear the evidence and render a decision thereon. The Interstate Commerce Commission is so authorized and can unquestionably resolve any such question which may arise in connection with "freight forwarder associations." 5. The reason assigned by the Presidential Advisory Committee in support of its
recommendation are unsound In support of the recommendation that definite statutory standards be provided for determining which shippers or shipper associations consolidating freight are entitled to exempt status, the Presidential Advisory Committee reported as follows:
"Some shipper or shipper associations involved in consolidation or distribution of volume freight on a nonprofit basis for the purpose of securing lower rates, although termed nonprofit, in fact absorb costs which include overhead, and the expenses involved go beyond those paid to a carrier. In effect, this exemption opens the way to establishment of nonregulated forwarding enterprises. Definite statutory standards should be provided as a basis for determining which of such associations are entitled to exemption and which should be subject to regulation."
In effect, this statement implies that any nonprofit operation which includes overhead costs and other expenses "beyond those paid to a carrier" cannot be regarded as a nonprofit operation. It should be apparent that this conclusion is not tenable. Any consolidation to be operated in good faith on a nonprofit basis must of necessity include supervision and management of assembling the freight of the individual owners at a consolidation point, loading of such freight into car. loads and unloading and distribution of freight at the break-bulk point. More important from the standpoint of good faith is the collection and payment of money to pay transportation and other costs and a strict accounting of all expendi. tures to give assurance that the business is honestly operated on a nonprofit basis. Obviously, such operations include expenses “beyond those paid to a carrier.” Overhead expenses which are a normal incident of every business operation are entirely compatible with the operation of such business on a nonprofit basis. Indeed, without proper managerial and other overhead expenses, it is doubtful whether any association of shippers could successfully operate in good faith on a nonprofit basis.
As previously pointed out, definite statutory standards for determining which associations are entitled to exemption are both impractical and unnecessary. The only stautory standards which are needed are those already included in section 402 in the definition of a freight forwarder. The test to be applied in any individual case is that of good faith, which is not capable of being measured by statutory standards. The quality of honesty must always be judged by the trier of the facts upon the evidence of each individual case. 6. The amendments proposed by bill s. 1920 are of doubtful legality and too
broad and indefinite in granting powers to the Interstate Commerce Commission The amendment to section 402 (c) proposed by section 19, S. 1920 reads as follows:
"(2) After hearing in an investigation instituted on its own motion or upon complaint the Commission, by order, shall make the exemption provided for by paragraph (1) inapplicable to any person if it finds that the activities of such person are not being conducted solely for the purpose, and within the limitations, specified in such paragraph, or that making such exemption inapplicable to such person is necessary to carry out the purpose of this part and the national transportation policy declared in this act. In the administration of this paragraph the Commission shall consider, among other things which in its opinion are pertinent and relevant, the facts and circumstances surrounding the organization and establishment of such activities; the scope of the activities, geographically and as to commodities handled and persons served; the basis of charges, if any, for the service or services provided; and the extent such activities are in competition with the services of freight forwarders subject to this part."
It will be noticed that by this provision the Commission “shall make the exemption provided for by paragraph (1) inapplicable to any person if it finds that the activities of such person are not being conducted solely for the purpose and within the limitations specified in such paragraph * * *.” This in effect says that the Commission shall act within its powers already vested by other provisions of the Interstate Commerce Act to determine whether or not an association is operating in good faith on a nonprofit basis. The Commission already has full power in this regard. No additional legislation such as proposed is necessary.
The next proposal is that the Commission be empowered to make the exemption inapplicable if it determines that it is necessary to do so “to carry out the principles of this part and the national transportation policy declared in this act."
Here, indeed, is a broad step in the extension of administrative power. It would be possible under this provision for the Commission to strike down any operation conducted by a group or association of individuals however honestly conducted on a nonprofit basis if it should conclude in its own discretion that it is necessary to keep all such operations out of the field of transportation now occupied in part by the regulated freight forwarders. Such result is both unsound and impractical. The amendment then proposes as legislative standards a consideration by the Commission of facts and circumstances surrounding organization; scope of activities; geographically and as to commodities and persons served; basis of charges, and finally, extent of competition with freight forwarders.
Bearing in mind the basic right of individuals to ship their own property and to operate in good faith through an association on a nonprofit basis, it is difficult to understand what is intended or what purpose can be served by a statutory directive that the Commission inquire as to the geographical activity of an association of shippers or as to the commodities which they handle, the persons served (assuming that the service is to members only) or the basis of charges made by the association to its members for the ultimate purpose of apportioning all expenses on a nonprofit basis. If any or all of these questions should arise in a proceeding which the Commission is now authorized to institute either on its own motion or by complaint, are pertinent or relevant to a determination of whether or not the association is operating in good faith on a nonprofit basis and for the benefit of its members only, no additional legislation as proposed by S. 1920 is required. If it is intended to extend the powers of the Commission gr to restrict the activities of shipper associations, the proposal is unsound as a matter of proper regulation and prejudicial to the interests of shippers. It is strongly suggested by the last clause of the proposed amendment that the true purpose of the amendment is to restrict or eliminate all activities of
shipper associations, to the end that they will no longer consolidate their own freight and enjoy the full benefit of carload rates, but that all such traffic shall be diverted to the freight forwarders. Otherwise, why should it be provided that the Commission concern itself with "the extent such activities (by shipper associations) are in competition with the service of freight forwarders"? Obriously the consolidation of less than carload shipments by shipper associations and the transportation of such shipments on a nonprofit basis for the benefit of the members eliminates the necessity for employing a freight forwarder as a medium to perform the same service at a profit to the forwarder which the ship pers can perform for themselves. Shippers have, in fact, exercised their corstitutional right in this respect since at least 30 to 40 years prior to the appear ance on the scene of so-called and public "freight forwarders" and their regulation by the Commission. The fact that the forwarders are thus restricted does not justify a selfish desire on the part of freight forwarders to monopolis this traffic at the expense of shippers. Shippers and associations of shippers have the fundamental right to consolidate and transport their shipinents in any manner that will effect economy in transportation charges.
CONCLUSIONS 1. The right of shippers to consolidate their own freight for the purpose of effecting the savings in freight charges pertaining to carload and other volume rates is fundamental and subject to the guaranties of the Constitution. It is a property right which cannot be taken without due process and just compens tion and is not a right in the exercise of which a service to the public is involved which would subject it to regulation.
2. The Interstate Commerce Commission under the present law is vested with powers adequate to determine the status of any operation by an association of shippers as that of a freight forwarder or a lawful private enterprise not sub ject to regulation.
3. The basic test of the lawfulness of any shipper association is that of good faith as to which no statutory standards can be prescribed.
4. The amendment proposed by S. 1920 insofar as it is consistent with the constitutional guaranties adds nothing to the present law vesting powers in the Interstate Commerce Commission to investigate and determine the lawfulness of any operation alleged to be that of a freight forwarder. The proposed amendment also suggests inquiry into subjects remote from the basic issue and in mo respect conclusive of the ultimate fact whether a particular association is or is not in reality a freight forwarder.
5. The proposed legislation is apparently inspired by and designed for the purpose of restricting or eliminating shipper associations for the selfish gais of the freight forwarders.
Mr. Harris. We have some other requests but I think we will wait until a later time.
The committee feels we have had a very informative and beneficial session of this committee today as we have in our prior hearings on this subject. We look forward to resuming again tomorrow afternoon at 2 o'clock, at which time the truckers will come on first. The committee will be adjourned until that time.
(Whereupon, at 4:20 p. m., the subcommittee recessed to reconvene at 2 p. m., on Wednesday, May 9, 1956.)