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years it is extremely large and furnishes the dominating trade outlet. It may truly be said that this body of rates from Oklahoma and Texas to the gulf ports is one of the most important of trade movements of grain.
The extent of the differences in rates is shown by the following table:
As stated, the quotation was for the benefit of Commodity Credit Corporation, an agency of the United States Government, created for the purpose of effectuat. ing Government price-support policies authorized in the agricultural marketing acts. Price support is provided by nonrecourse loans based on prices higher than the market price. When these loans mature and are defaulted Commodity Credit Corporation acquires the grain and thereafter has the task of disposing of it. It is by all odds the largest and most important dealer in the grain business of the country at this time. Its tremendous importance is indicated by the following statement of a Government agency : Wheat situation as of Jan. 1, 1956
Bushels Total wheat stocks in all positions in the United States----- 1, 535, 016, 000
Total owned by Commodity Credit Corporation.--
887, 679, 000 1955 crop under support and not yet acquired by the Corporation.- 256, 480, 454
Total owned by CCC or soon to be acquired by the Corpora-
1, 144, 159, 454 Source: The Wheat Situation, U. S. Department of Agriculture, February 28, 1956.
The Commodity Credit Corporation must dispose of these enormous stocks and to do so must become a grain merchandiser and thereby in competition with private grain merchants. Before the section 22 quotation was made private merchant firms gathered grain from Oklahoma and Texas sources or bought it from Commodity Credit Corporation where the grain was stored at local stations and applied such grain to sales to foreign buyers. It was, of course, immediately apparent that these operations could no longer be carried on because the freight rate from any of these country shipping points to the gulf available to private dealers would substantially exceed the rates made available through the section 22 quotation. Not this only, but commodity Credit Corporation changed its selling policy to provide that its grain would be sold to exporters delivered at the gulf ports only, and this prevented the trade from originating and shipping its own grain to the ports. Private competition obviously became impossible.
Upon inquiry the trade was advised that the purpose of the section 22 quotation was to meet the competition of truck haulers of wheat and as the railroads were principally interested in this matter it developed that the railroads originated the idea of the quotation and that the Government, out of a desire to improve its own showing of the operation of the Corporation, accepted the quotation. The trade appealed to both the railroads and Commodity Credit Corporation to cancel and abandon the quotation, but their appeals were rejected by both parties.
The quotation was canceled effective December 1, 1954. The reasons for this cancellation we do not know. While this cancellation disposed of this particular quotation, the grain trade has been made aware of the possibilities and fully conscious of a weakness of the Government officials managing Commodity Credit Corporation; that is, a desire and willingness to improve the showing of the agency at the expense of the transportation companies and in disregard of the effect upon competing taxpaying citizens.
Always before this quotation Commodity Credit Corporation throughout its life had been content to deal with the enormous quantities of grain it acquired on the basis of the open tariff rates, but the cupidity of the railroads and the weakness of the Government officials in readily accepting the quotation make it obvious that a serious threat remains, one which the grain trade views with deep concern.
THE GOVERNMENT AS A SHIPPER SHOULD BE SUBJECT TO SAME RATES AND
REGULATIONS AS ARE IMPOSED UPON PRIVATE SHIPPERS
There is we believe, a general feeling among shipping interests in all industries that it is wrong for the freight of the Government to be handled by transportation companies at less than the tariff rates charged other shippers.
As stated, section 22 was part of the original act approved in 1887. Apparently it was of no great consequence to other shippers then as the Federal Government was mostly confined in its operations to purely governmental functions, and impedimenta of war, coins, postcards, etc., are not commodities competitive with private industry. Neither the kind nor the amount of Government freight was of much importance. In recent years, however, the Government has expanded prodigiously. Socialistic ideas have driven the Government into a great number of private businesses, including the grain busiDess. The result is that the increased defense arrangements and the intrusion of the Government into business have together brought about a tremendous increase in the quantity and kinds of freight the Government seeks to have handled at lower than the tariff rates.
Insofar as the Government is in competition in any line of business with private, taxpaying industries the reduced rates granted the Government under section 22 are unjust to those industries for two reasons:
(1) The loss of freight revenue suffered by the carriers must be made up by other shippers through higher rates on commercial traffic in order to secure to the carriers in the aggregate a fair return upon the property devoted by them to the service of the public;
(2) The reduced rates available to the Government place the private, taxpaying private industries at a commercial disadvantage which they should not be expected to assume. This is no idle protest for, obviously, with its ability to secure rates less than the published tariff rates that its competitors are required by law to pay, the Government not only has a competitive advantage but actually has in its hands the power to destroy any competing business. USE OF SECTION 22 QUOTATIONS TO SECURE COMPETITIVE TRAFFIC IS ABUSE OF LAW
When section 22 was enacted, railroads had a virtual monopoly of the transportation business of the country. Therefore, this section could not have been intended to be used as a means by which one carrier undercuts the rates of a competing carrier in order to secure the Government's traffic. This section, however, is grossly abused by the carriers in their rivalry with each other to a degree that should call down condemnation.
It is a matter of transportation history that before the rates were stabilized by the passage of the Hepburn Act in 1906, the railroads were not able to maintain their rate structure because of its constant cutting in the wild, cutthroat competition of the carriers themselves. The struggle for traffic operated to reduce rates below any reasonable level. The requirement of the law that the railroads post, maintain, and enforce their tariff rates was of tremendous advantage to the railroads, and also beneficial to shippers who are better able to operate under a system of stable rates changed only after timely notice to the world of the intention to make a change.
The operation of section 22 has brought back this cutthroat competitive condition as applied to the large and important volume of Government traffic. The effect of this competition is well illustrated in a pending case before the Interstate Commerce Commission in which it was pointed out that the tariff rate on wool and nylon shirts from Anderson, S. C., to Memphis, Tenn., of $2.39 was reduced by section 22 quotations of competing carriers, successively, to $1.50, $1.10, 90 cents, 80 cents, and finally 75 cents. Obviously, if $2.39 is a reasonable rate for this service, 75 cents is below the cost of the service.
The plain fact of the matter is the carriers do not have it within their own power to prevent this cutthroat rate cutting when there are no restrictions such as those required by the Hepburn Act. Some restraint must be exercised.
The requirement of the Hepburn Act that rates be published and not changed on less than 30 days' notice is just as reasonably applicable to Government transportation as to commercial transportation. It is in the public interest to require timely notice of proposed changes in rates and due publication of and adherence to the effective rates in connection with Government traffic as required for commercial traffic.
RAILROADS' PERFORMANCE UNDER SECTION 22 INCONSISTENT WITH THEIR REPBE
SENTATION IN CONNECTION WITH THEIR SECTION SA APPLICATIONS It is a matter of recent history that the railroads made extraordinary and determined efforts to secure the passage of the Bulwinkle bill to legalize their procedures for determining rates by joint action in rate bureaus. One of the important arguments advanced in seeking that legislation, enacted as section 5a of the act, was that shippers should be advised of proposed changes in their rates and in the rates of their competitors and, that full opportunity be given to them to make their representations to the carriers in support of or in opposition to any proposed change. If this argument is good as between private competitors, it is just as good between a citizen and his Government when the latter is undertaking to compete with him.
We, as shippers, strongly resent the secrecy which surrounds the application of section 22 and the desire of the railroads to maintain that cloak so that they can cut rates at their whim without advising the private shipper of their intention to do so and apparently with disregard of the effect upon that shipper.
SUGGESTED AMENDMENT OF H. R. 625 H. R. 525 is a model of brevity, and its purpose is well understood. We suggest, however, that it could be improved by adding the positive injunction that "the full applicable commercial rates fares, or charges shall be paid for transportation by any common carrier subject to the act of any persons or property for the United States.” This language was used in the repeal of land-grant rate requirements (54 Stat. L. 954; U. S. C., title 49, sec. 66).
No financial necessity requires that our Government compel the carriers to transport its freight for less than the regular published rates, which other shippers are obliged by law to pay. Nor are we aware that any attempted justification of lower rates has been presented.
On the other hand, the great purpose of the Interstate Commerce Act was to provide strict uniformity in the treatment by the carriers of all who use their facilities. “The act was intended to cut up by the roots the entire system of rebates and discriminations and to put all shippers on an absolute equality," Union Pacific R. R. v. Goodridge (149 U. S. 680). The Government as a shipper should be placed on an “absolute equality" with other shippers.
The Government's rates under section 22 are not only lower than those available to other shippers, but they are also secretly negotiated and concealed from other shippers, and this, too, is inconsistent with the purposes of the act. "Secret rates will inevitably become discriminatory rates," United States v. Illinois Terminal R. Co. (168 F. 546).
These shipping interests, therefore, urge the approval of H. R. 525 with the amendment suggested above.
Mr. HARRIS. Mr. James F. Pinkney is the next witness.
Mr. Pinkney, I believe you are the general counsel of the American Trucking Associations, Inc.
Mr. PINKNEY. Yes, sir.
STATEMENT OF JAMES F. PINKNEY, GENERAL COUNSEL, AMERI
CAN TRUCKING ASSOCIATIONS, INC. Mr. PINKNEY. Mr. Chairman and gentlemen of the committee, I appear today as general counsel of the American Trucking Associations, Inc.
We were unaware until yesterday of the extent to which the railroads had withdrawn their active support from a great many of the Cabinet Committee recommendations, dealing with changes in the national transportation policy and with changes in the rate provisions in the present Interstate Commerce Act.
I might say it is encouraging to note that the railroads have abandoned their previous position and now agree with us and many others in our contention that there is no need to change the present national transportation policy. Railroads now suggest no changes in the rate provisions of the present act, a position which this industry has consistently maintained.
They do, however, suggest proposed additions to the rule of ratemaking, section 15a, and with that particular recommendation we find ourselves in sharp disagreement just as we are with the provisions in H. R. 6141 recommended by the Commerce Department witnesses.
We have divided our presentation into several parts. In view of the testimony yesterday morning on the rate provisions of the bill we should like first to present our position on those provisions of H. R. 6141 and H. R. 6142 which deal with the national transportation policy and the rate powers of the Commission, paritcularly the latter.
Our principai witness is Mr. John R. Turney, a gentleman well qualified to speak on this subject. Next we wish to call Dr. John Frederick, an eminent transportation authority who will discuss the background of today's Interstate Commerce Act as it relates to the issues before you and some of the economic implications of H. R. 6141.
I will conclude with a brief statement dealing with some of the other issues before you in H. R. 6141 and the other bills you have under consideration in this hearing.
Mr. Chairman, if I may, I should like, before presenting Mr. Turney to you, to present a gentleman who has been a part of our preparation, who has done a great deal in connection with the preparation of our case, and whose statement appears as an appendix to the presentation of Mr. Turney this afternoon.
I refer to Commissioner Clyde B. Aitchison, who was with the Interstate Commerce Commission for 34 years, and, prior to that, for about 16 years, with a State regulatory body. He has spent his lifetime in the study of regulatory matters with particular regard to rates. Mr. Aitchison is here this afternoon, sir.
Mr. Harris. Judge, we are very glad to welcome you back to the committee.
Mr. AITCHISON. If the chairman please, it seems quite familiar to be here, but I trust my appearance will be short.
Mr. Harris. Well, whether it is short or long, we are always glad to have you come back with us.
Mr. AITCHISON. You are very kind.
Mr. PINKNEY. Mr. Chairman, knowing the first witness, I do not believe he will read the first paragraph in his statement.
I should like to point out that John R. Turney is an attorney with an office at 2001 Massachusetts Avenue NW., Washington, D. C. For the past 39 years he has been exposed to transportation rate-and-cost problems. He was counsel of the St. Louis-Southwestern Railway System from 1917 to 1929, and from 1929 to 1933, vice president in charge of law and traffic of that system.
He served as Director of the Section of Transportation Service under the late Joseph B. Eastman, Federal Coordinator of Transportation, beginning with the institution of that agency in 1933 and ending in 1935. As Director of the Section of Transportation Service, he made extensive surveys, analyses, and reports respecting transportation problems, and particularly rates and costs.
These reports, known as Merchandise Traffic Report, Passenger Traffic Report, Freight Traffic Report, and Traffic Organization Report, covered railroad, express, bus, and truck operations insofar as information was then available.
In 1942, he organized and served as Director of the Divisions of Traffic Movement and Transport Conservation in the Office of Defense Transportation, again under Mr. Eastman, who was Director. From 1935 to 1942, and following his service with the Office of Defense Transportation, he has been engaged in the private practice of law, principally before the Interstate Commerce Commission in rate and other transportation proceedings.
If the committee please, I should like to present Mr. Turney at this time.
Mr. HARRIS. Very well.
STATEMENTS OF JOHN R. TURNEY, ATTORNEY, WASHINGTON, D. C.
AND CLYDE B. AITCHISON, ATTORNEY, WASHINGTON, D. C., APPEARING IN BEHALF OF THE AMERICAN TRUCKING ASSOCIATIONS, INC.
Mr. TURNEY. If the committee please, this statement was prepared in connection with H. R. 6141 and H. R. 6142, and the remarks are directed primarily to those two bills.
At the time it was prepared, I did not know of the radical change in the position taken by the railroads. It may be that some of the remarks in here which I shall endeavor to avoid are perhaps too critical of the railroads in view of their present position.
All I can say on that is that we are glad to welcome them in their progress toward the truth and hope ultimately they will join us.
Since the enactment of the Interstate Commerce Act the Congress has relied upon regulation by the Interstate Commerce Commission to assure just and reasonable charges by carriers. Under that policy, a comprehensive system of rate regulation has been developed which generally has proved satisfactory to the shipping public and under which the finest transportation system in the world has developed.
The bills here under discussion propose a radical change in that policy and revert to almost complete reliance upon rate competition as a means of assuring reasonable rates.
I might add, Mr. Chairman, that I will not read this entire statement, but I will attempt to summarize it as I go along. I ask that the entire statement be included in the record.
Mr. HARRIS. Yes, it will be included, the entire statement, together with any appendices that you might desire, or tables or other information.
Mr. Turney. There are three appendixes, A, B, and C, and there are some graphs as I go along, all of which I would like to have incorporated in the record, if I may,