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to them, such as the right of eminent domain to railroads and pipe lines, the right to operate over the public ways by truck, bus, and waterlines and a protected right to service a particular route or area We grant these public rights and privileges to common carriers be cause they are expected and required to serve the public at all time to the limit of their facilities, at known and reasonable prices, or known and regular schedules, and without discrimination, preference or prejudice.
These heavy duties so to serve require, in justice, some measure o protection against the competition of carriers which do not bear simi Jar obligations. Yet in recent years, the common carriers' share o the available traffic has trended downward while transportation and traffic exempted in whole or in part from regulation has increased markedly. Part of this, it is realized, results from the superior cost and service characteristics of these latter operations under particular circumstances. But in important respects the traffic erosion is the result of unevenness in the degree of regulation which is imposed or the various types of transportation competing for the same traffic
Unintentionally, we believe, but nonetheless forcibly, certain provi sions of the law as interpreted tend to stimulate the growth of trans portation exempt from regulation or only nominally regulated so a: to undermine the stability of the common carried industry.
The committee's recommendations and the amendments to the Inter state Commerce Act proposed in these bills are intended therefore to equalize the opportunity for common carriers to compete with each other as well as with other types of transportation for traffic which could move economically over their lines.
Legitimate private transportation would not be affected by the amendments. Lessening ICC control over common carrier rates and imposing regulation on other forms of public transportation is, we be lieve, entirely consistent. In both instances, the regulatory environ ment is modified to engender competition on a fair and economic basi: which indeed is the heart of the transportation regulatory policy w are here advocating.
It seems obvious to me that unless our privately owned common car riers, who serve the public at large and particularly the small shippers are afforded freedom to compete for traffic carried by private and un regulated carriers, then in the final analysis we will destroy our com mon carriers financially. The economy of the country cannot ge along without common carriage.
Break down the common carrier and the next step is governmen ownership. This happened in Great Britain, and today in that coun try the railroads (Government owned) operate with secret rates and discriminatory rates. This means that the privately owned trucks and other carriers operate in the dark under difficult if not impossibl competitive conditions. It also means that the shippers have los protection against discrimination. I think we hardly want to ris] that happening here.
This subcommittee undoubtedly wants to have a more detaile explanation of the individual recommendations and amendments. Th Under Secretary of Commerce for Transportation, Louis S. Roth schild, and the General Counsel, Philip A. Ray, are prepared to pro ceed with such detailed comments. Earl B. Smith, Director, Trans portation and Communications, Department of Defense, is prepared to testify with regard to the proposed changes in section 22 of the act having to do with Government transportation.
President Eisenhower has on several occasions commended the fundamental purposes and objectives of the Advisory Committee's report. I wish to make it perfectly clear that the Department's primary concern in this matter is the correction in the public interest of the several deficiencies in transportation regulatory policy reported by the Advisory Committee. As we said in the letter transmitting the Department's bill to the Congress :
Our intention with respect to this draft of legislation is to provide a useful tool for the Congress in considering the recommendations of the Advisory Committee. The Committee believes this matter to be one of considerable public importance which the Congress will wish to give the broadest consideration and that this legislation will serve as a helpful basis for the development of a sound national program with respect to these matters.
Now, Mr. Chairman, may I repeat that in all of this we suggest no radical changes. We want to provide competition, but with adequate safeguards in the public interest. In the case of the contract carriers, we want to eliminate secrecy in rates so that the common carrier may know what the competition is. We want to protect the common carrier because in almost every instance the little shipper depends on the common carrier. The big shipper can buy his transportation where and how he pleases, but the little shipper has to have a common carrier if he is to be adequately served.
Many of our recommendations, Mr. Chairman, have been advocated by the ICC; for example, the dry bulk recommendation and the freight forwarders. Some matters which we seek to correct have been complained of by the ICC. I refer to our suggestion relative to private and contract carriers. I would like to quote here from a statement recently made by Mr. Clark, of the Interstate Commerce Commission, in which he says:
In addition to its proposal that the national transportation policy be rewritten, the Advisory Committee recommended 11 major revisions of the Interstate Commerce Act. Except for slight differences of opinion as to specific wording, the Interstate Commerce Commission agrees in principle with eight of these proposals.
I would like to quote from a statement made by the National Industrial Traffic League, which says:
It is in general agreement with the underlying philosophy of less regulation, less interference by Government, greater reliance upon competitive forces in ratemaking, and a greater degree of freedom in management.
This Interstate Commerce Act was put on the statute books first in 1887, and amended from time to time, as for example, the amendments adopted in 1910 relating to suspension powers. Considering the whole background of the act and its original features, it seems that all it intended to do was to protect the shipper and the public interest. From that point, it seemed to the committee that wrote these recommendations, and to us in the Commerce Department, that the modern development of this primary purpose to protect the public interest and the shipper has been to make the Interstate Commerce Commission the adjudicator of carrier competition, on the theory that there must be a fair share of business allocated to each of the segments
of the transportation industry. That, we think, is not in accord with the spirit of competition as we understand it.
I understand, Mr. Chairman, that it has been arranged that Mr. Rothschild and Mr. Ray and Mr. Smith proceed with their testimony and questions will be deferred until all of the Commerce representatives and Defense representatives have put the case on the table, so to speak, and then the questions may come along after we have presented our case as a whole. I hope that will be satisfactory, and the way we may proceed.
May I say that at the end of the hearings, if we might have an opportunity to present any additional material by way of clarification or response to sepecific matters that may come up, we should appreciate that opportunity.
I have just one other word. I think there is substantial agreement on the basic objectives that we seek to achieve in our recommendations. Certainly there are, as Mr. Clark suggested in his statement, slight differences of opinion as to specific wording. We do not stand on phraseology or wording. If the basic objective is good, there may be many instances, if we are able to proceed under the auspices of your committee, where we think that these differences in wording and phraseology can be reconciled, and we can proceed toward the objective.
In closing, I wish to thank this committee for pursuing the President's recommendation in his state of the Union message that the Congress give prompt attention to the Advisory Committee's proposals.
Thank you very much, Mr. Chairman. If I may, I will ask Mr. Rothschild to proceed.
Mr HARRIS. Thank you, Mr. Weeks. I feel that you suggest an orderly procedure for the presentation of the program on behalf of the Department of Commerce. Your suggestion that we defer any questions until the entire program has been presented by you and your associates seems to be appropriate and reasonable.
However, in discussing with some of my colleagues on the committee, we would like to ask you just one question because we feel that it might be of importance to us as we proceed with this program.
You referred in the last page of your statement to the fact that President Eisenhower has on several occasions commended the fundamental purposes and objectives of the Avisory Committee's report. Are you in a position now to state whether or not the legislaton before us in connection with this transport policy report is a part of the program of the President?
Secretary WEEKS. Mr. Chairman, may I say this: When we sent forward our comments respecting the legislation that is before your committee, we stated that the comments were made in accordance with the approval of the Bureau of the Budget, which is the standard procedure. In so far as the President is concerned, and in so far as the Administration is concerned, I may simply say this: The President has expressed his approval publicly of the objectives that are sought in the recommendations of the Advisory Committee. Excepting for the approval of the Bureau of the Budget, there is no Presidential approval or disapproval in so far as the specific provisions of the legislation are concerned. The subject is much too exhaustive for anyone in my position to ask the President to approve of specific legislation. He can and has approved of the objectives and of the principles. But in so far as the bills themselves are concerned, there is so much give and take, as I have indicated, in phraseology and wording to reach the objective that I think on the record we will stand on the fact that we approve the legislation and our approval has the approval of the Bureau of the Budget.
Mr. HARRIS. Very well. Thank you very much, Mr. Secretary. The committee will keep that in mind as the hearings proceed.
Mr. WILLIAMS. WIr. Chairman, I would like to have that clarified just a bit.
Mr. Secretary, along those lines, would the committee be justified in considering this to be an administration proposal?
Secretary WEEKS. I think in general; yes, sir.
Mr. Harris. I presume now that you would desire that your Under Secretary, Mr. Rothschild, proceed with further explanation?
Secretary WEEKS. Yes, I would, Mr. Chairman.
STATEMENT OF HON. LOUIS S. ROTHSCHILD, UNDER SECRETARY OF COMMERCE FOR TRANSPORTATION, UNITED STATES DEPARTMENT OF COMMERCE
Mr. ROTHSCHILD. Mr. Chairman and gentlemen, I am happy to have this opportunity to expand further on the explanation of the Presidential Advisory Committee's report and the two identical bills under discussion here today.
They are predicated upon the maintenance of a strong common carrier system within which each type of transport has opportunity to compete fairly on the basis of price and service. The public expects the common carrier system to furnish good service at a low and nondiscriminatory price and to provide a reservoir of transport capacity for defense emergencies. But our transportation policy should also permit the common carrier industry to share in national prosperity in peacetime.
These points I have just enumerated are interrelated, for without sharing adequately in our peacetime prosperity, common carrier cannot provide the vital reservoir of transport capacity that might be needed in time of war nor can they continue to provide the public with essential service under all conditions in accordance with traditional common carrier responsibilities.
One year has now elapsed since the Advisory Committee released its report. During that period, interested persons throughout the country have studied the report and have discussed and debated it both in private and in public. Many such persons have come to an informed opinion on the relative merits of its recommendations. The Department has been encouraged by the favorable comment from many objective students of transportation, from business and industrial groups, and others who use transportation in the conduct of their business affairs, and from many representatives of the general public who recognize the beneficial effect of these recommendations would have on the public welfare of the Nation.
Candor requires me to say that several of these sources have questioned specific sections of the report and disagreed with certain recommended policies. The disagreements deal, however, with individual features, rather than the general aim and content of the report. Particularly impressive is the almost universal acceptance and realization of the importance of the common carrier industry to our national economy, its importance to the welfare of the people, and its necessity as an adjunct of our national defense.
Adverse criticism of the report and implementing legislation have come mostly from certain of the carriers. Some have rejected the entire report and all the legislation even though they have in the past supported a number of parallel recommendations. These carriers apparently believe that the regulatory policy should be employed to maintain the present level of their charges rather than to allow competition, within reasonable bounds, to provide the public with the most efficient and economical transportation service. Inasmuch as the Congress has provided a regulatory policy which in certain respects grants special privileges to interstate carriers, there can be no vested interest in these provisions which is senior to that of the public interest. Many independent analysts, including some who do not agree entirely with the Advisory Committee's report have commented unfavorably on these somewhat intemperate claims.
THE MEANING OF PERVASIVE COMPETITION IN TRANSPORTATION
The Advisory Committee based its recommendations for revision of transportation regulatory policy upon the clear evidence that the transportation industry operates today in the general atmosphere of pervasive competition. The term “pervasive” was selected to describe existing conditions in the transportation market after due consideration of the trends in buying and selling of transportation service and in recognition of the ideas and theories which economists have developed about market behavior under various conditions of competition.
The adjective “pervasive" is derived from the verb, “pervade," which one dictionary defines as “to pass, flow, or spread through, to permeate, hence to be diffused throughout.” Applied to transportation, it signifies that in every community there exists actual or potential competition that affects the movement of almost every passenger and commodity. Pervasive competition does not mean necessarily that competition exists in the same degree everywhere, but that it is an effective influence everywhere. In some markets and segments of the economy, it may be more effective than in others. And, as I shall later note, there has been a historic trend for transport competition to become more widespread and effective.
The advisory committee's concept of pervasive competion accords with the thinking of leading economists who have recognized that every industry displays varying degrees of relative competition or monopoly. One economist has described healthy competitive markets as having "workable competition."
The Advisory Committee in describing the growth of the competitive influences in transportation commented:
Paradoxically, the underlying concept of this regulation (the Government's intensified regulation of transportation) has continued to be based on the historic assumption that transportation is monopolistic, despite the fact that the power of individual transportation enterprises to exercise monopoly control has been rapidly eliminated by the growth of pervasive competition.