It is, therefore, the fact that even if legislation were passed restricted in application to shipments of nonmembers sold on an f. o. b. destination or delivered-price basis, it would be almost as destructive of the great benefits of consolidation and pooling of freight to small businesses operating in the manner I have described as if by legislative fiat all such arrangements were outlawed by unrestricted language. Any change in the exemption provision now might lead to elimination of all bona fide consolidation and pooling The history of the regulated freight forwarders shows that once any legislation in the nature of section 19 of H. R. 6141 and H. R. 6142 is passed, these proponents would advance every argument in the books to put shipper associations out of business, despite their pious protestations to the contrary now. For example, one of the Commission's holdings in the Pacific Coast Wholesalers' Association case was that handling by associations of freight consigned to members was service "for the general public" within the meaning of part IV of the act. In its decision on reconsideration in that case (269 I. C. C. 504, at page 513) the Commission said: "It is insisted in respondents' behalf that the association does not serve the general public. The association serves not only its 38 members but also that part of the public from which those members purchase their supplies. While the shippers thus referred to are not all the public, it is to be remembered that no man serves all of the public. Terminal Taxicab v. District of Columbia (241 U. S. 252). In our opinion the facts stated warrant the conclusion that the association's service is held out to and performed for the general public" (269 I. C. C. 504, 513). Significance of the foregoing, it seems to us, is heightened by the paragraph immediately following it on pages 513-514 of 269 ICC in which it is asserted that it followed that the association also assumed responsibility for transportation in its service. (A further test of its common carrier status.) Although the Memphis Freight Bureau would emphatically deny the validity of both these propositions, there is a real danger that if any change is made in section 402 (c) at this time, such arguments might again be urged upon the Commission, and every shipper association, composed of receivers, investigated or threatened to death because of forwarder pressure based on such arguments. In actuality, it would appear to us that no shipper or shipper group composed of receivers could claim exempt status if such a ruling as the foregoing prevailed. Heavy increases in freight rates and minimum charges per shipment on less carload and less truckload traffic has caused the formation of shipper (or receiver) consolidating groups rather than looseness in the wording of the exemption in section 102 (c) It has been the pyramiding increases in freight rates, particularly on less than carload-less than truckload shipments, and especially the fantastic increases in minimum charges per shipment on small shipments and penalty charges on small shipments which have become effective in the past 10 years since World War II, that has spurred the formation of many shipper or receiver freight consolidating groups during recent years and this is particularly so in the last 5 or 6 years. The freight forwarders have followed the rail and truck lines and applied these increases on their traffic too. While the freight forwarders like to make it appear that "loopholes" in the exemption have been responsible for growth in the number of these associations in recent years, nevertheless the real spur has been the increases in rates and charges for handling small shipments and all less carload shipments against the cost of consolidating them into carloads for carload movement, plus the much faster service now available to a consolidating group on their cars of mixed merchandise. Speaking of small shipments I can remember when the general rail overall minimum charge on a single shipment was 50 cents, published in the rail classification. Today a 10 pound shipment of wearing apparel or dry goods, for example, from New York to Memphis by rail costs $4.77, including tax and would take 15 days or more to move in 1. c. 1. rail freight service. Ten such shipments totaling 100 pounds from 10 different shippers, even to a single consignee on the same day would cost $47.69. This is also the cost by freight forwarder. By truck the same 10-pound shipment, or any 10-pound shipment of any kind, from New York to Memphis costs $5.21 and usually takes about 5 to 8 days. These are minimum charges per shipment. Ten such shipments by truck from 10 different shippers to a single consignee even on the same date, if shipped separately, costs a total of $52.12, including Federal tax. These same 10 shipments handled in a consolidated carload would cost only a little more than $3 for all 10 shipments or a little over 30 cents apiece from New York to Memphis and would take only 3 days in transit. The above comparison is based on small shipments weighing under 100 pounds and subject to minimum charges per shipment. On larger shipments, those weighing over 100 pounds each, the savings is, of course, not so great but there is a substantial savings. Also it is a fact that all the retail stores, including the large department stores, do receive regularly numerous small shipments under 100 pounds which would be subject to the described minimum charges. GROWTH OF REGULATED FORWARDER INDUSTRY SINCE 1943 AND 1949 The freight forwarding industry hasn't suffered but on the contrary has shown steady growth, particularly in the past 6 years since 1949 (the year just preceding the Supreme Court decision), and last year, 1955, was their biggest year. Take a look at appendix A-1 attached, which we prepared from ICC reports and data authority for which is shown thereon. It covers the 60 large forwarders reporting annual revenue of $100,000 or more. The forwarder spokesmen talk of growth of shipper associations and the damage or loss of traffic they are causing the forwarder industry since the Supreme Court decision in February 1950. They make it sound as though these shipper associations threaten their very existence. But look how they have been doing: Appendix A-1 shows that in the 6 years since 1949 (through 1955), their transportation revenue has increased from $240 millions to $402 millions, their net income before taxes from $2.8 to $7.4 millions, net income after taxes from $1.8 to $4.7 millions, their total number of shipments increased from 17 millions to 25.3 millions and total tons from 3.6 to 4.7 millions. These figures, percentagewise, reflect increases since 1949 in transportation revenue of 67.7 percent, in net income both before and after income tax of 166 percent, in number of shipments 49.4 percent, and in number of tons 31.1 percent. These increases took place since the Supreme Court decision. The lower table on appendix A-1 shows the whopping increases in 1955 over 1954 such as 10.7 percent in transportation revenue, 16.3 percent in net income before tax, 28.3 percent increase in net income after tax, 9.5 percent increase in number of shipments and 10.9 percent increase in tons handled. There is little wonder these forwarders are now sponsoring legislation, which is pending before you in these hearings in H. R. 9771, to enable them to buy out and take over control of underlying carriers. Incidentally we are greatly op posed to this bill H. R. 9771, as well as the two other pending forwarder bills, i. e., H. R. 9772 and 9548, but our opposition will be covered by Mr. C. B. Culpepper of the Atlanta Freight Bureau, speaking for the Southern Traffic League. of which we are members, and others. He also spoke for us against companion Senate bills S. 3365, S. 3366 and S. 3367 at a recent Senate subcommittee hearing before Senator Smathers. Appendix A-1 attached should certainly prove the freight forwarders are not being hurt but on the contrary are growing fat and rich and now want to own the "whole hog" by taking over underlying railroads, truck lines, etc. These fat earnings in 1955 of over $7.4 millions before taxes and $4.7 millions after taxes, were produced from what ICC statistics show represented assets approximating $50 millions and net investment of less than $5 million according to 1954 figures which is the latest year for which these asset and investment figures are available. We have obtained and inserted, as the first line of figures in Appendix A-1, the returns of these freight forwarders for 1943, the first year of regulation, for the purpose of having the Appendix also reveal the growth of the forwarder industry since the first year after part IV of the act, regulating forwarders, was enacted. It will be noted that except for transportation revenues the various other items were about the same in 1943 as in 1949, thus the increases for 1955 over 1943 are about the same as we have shown over 1949. As for transportation revenue, however, it was only $189 millions in 1943 compared to $240 millions in 1949 and $402 millions in 1955 or an increase over 1943 of $213 millions or 112.7 percent. SUMMARY To summarize the position of the Memphis Freight Bureau and its members, who constitute an important segment of the economy of our vital and rapidly expanding area of the country, we oppose enactment of section 19 of H. R. 6141 and 6142 and S-1920 or any similar legislation by the Congress, for the following reasons: 1. The operation of the consolidating associations under section 402 (c) of the Interstate Commerce Act is in the public interest because it enables the member small business units to reap the advantages of the economies and good service of carload operations between certain key points as they could in no other way, resulting in better and lower cost distribution over broad areas. 2. The history of recent freight forwarder legislation shows that this particular proposal has been presented to the Congress twice before, but has never been passed or given favorable consideration by any committee of either house. 3. The Supreme Court decision in Pacific Coast Wholesalers Association case (338 U. S. 689) is used by the proponents as a reason for urging enactment of new legislation, but analysis is of that decision shows that it dealt only with shipments sold f. o. b. destination, whereas the proposed section 19 is completely unlimited in its scope. 4. Even if proposed legislation were restricted, like the Pacific Coast Wholesalers Association court case, to f. o. b. destination traffic, it would be destructive of associations of receivers, such as Memphis Freight Bureau, because of practical operating conditions, which make separate treatment of such traffic for transportation purposes impossible in most instances. 5. The railroad industry does not support the proposed legislation. ( (Witness J. Carter Fort, Sept. 1955 hearings, p. 108). Going even further, Mr. Harry C. Barron, chairman and counsel of the executive committee, Western Traffic Association, speaking for western railroads in opposing Senate bills S. 3365, S. 3366 and S. 3367 before Senator Smathers' subcommittee hearing on those bills April 9-10, 1956, said at that hearing in connection with his opposition to S. 3365 and its effect on shipper associations, and we quote: "This traffic is important to the western railroads and we oppose the proposed repeal of section (D) as proposed in S. 3365. We likewise oppose legislation that would jeopardize the continuation of bona fide nonprofit groups of shippers in the consolidation and distribution of their own freight." 6. The freight forwarder industry does not need additional legislative protection. Our Appendix A-1 shows the 60 large forwarders that account for 95 percent of the revenues had an increase in transportation revenues in 1955 of 10.7 percent over 1954 and 67.7 percent over 1949; an increase in net income after tax in 1955 of 28.3 percent over 1954 and 166 percent over 1949; in net income before tax of 16.3 percent over 1954 and 166.7 percent over 1949; number of shipments increased 9.5 percent over 1954 and 49.4 percent over 1949; tonnage increased in 1955 10.9 percent over 1954 and 31.1 percent over 1949. 1949 was the year before the Supreme Court decision in the Pacific Coast Wholesalers case. It also shows they had net income in 1955 of $7.4 millions before tax and $4.7 millions after tax produced from what ICC reports show was assets in 1954 of $50 millions and investment of less than $5 millions. In fact the forwarders are doing so well they are now sponsoring legislation to permit them to buy and take over control of the underlying carriers, in H. R. 9771 which is scheduled for this hearing before your committee. We strongly oppose that bill but our opposition will be covered in the statement of Mr. C. B. Culpepper of the Atlanta Freight Bureau, for the Southern Traffic League and others. 7. Legislation such as proposed section 19 would, if enacted, mean the potential destruction of the section 402 (c) exemption because of the serious lack of specific limitations therein on the Commission's discretionary powers and because of the proposal's complete incompatibility with the practical operating practices of consolidating associations. The forwarder's proposed amendment of section 410 of the act contained in H. R. 9772, which is also before the subcommittee in these hearings (and on which the opposition of Memphis Freight Bureau is being presented by Mr. Culpepper), would if enacted further secure the exclusion of consolidating associations from the field by making new permits difficult or impossible to obtain once the exemption is lifted. 8. We are opposed to any change in the present section 402 (c) and certainly no legislation should be approved or even considered, which by any stretch could be interpreted as permitting the terms of sale of individual shipments to be determinative of the applicability of the exemption. This principle, already declared by the courts in the Pacific Coast Wholesalers Association case, is absolutely vital to the proper protection of our type of operation, i. e., an association of receivers. APPENDIX A To statement of C. A. Mitchell, in behalf of Memphis Freight Bureau in opposition to section 19 of House bills H. R. 6141 and 6142 and Senate bill S. 1920, being a verbatim copy of United States Supreme Court decision in the Pacific Coast Wholesalers' Ass'n case (U. S. v. Pacific Coast Wholesalers, 338 U. S. 689), decided February 6, 1950 SYLLABUS UNITED STATES ET AL. . PACIFIC COAST WHOLESALERS' ASSOCIATION ET AL. No. 113. Appeal from the United States District Court for the Southern District of California.' Argued January 10, 1950, decided February 6, 1950 An association of wholesale automobile parts dealers organized and operated in good faith on a nonprofit basis, for the purpose of effecting savings in freight charges for its members by securing the benefits of carload, truckload, or other volume rates, held exempt under section 402 (c) (1) of the Interstate Commerce Act from regulation by the Interstate Commerce Commission as a freight forwarder (pp. 690–691). (a) The basis of the shipments-whether f. o. b. destination (or delivered price) or f. o. b. origin-is not determinative (p. 691). (81 F. Supp. 991, affirmed. ) A three-judge district court set aside and enjoined enforcement of an order of the Interstate Commerce Commission requiring the appellee in No. 113 to discontinue operations as a freight forwarder without a permit from the Commission (81 F. Supp. 991). On appeal to this court, affirmed (p. 691). J. Roger Wollenberg argued the cause for the United States and the Interstate Commerce Commission, appellants in No. 113. With him on the brief were Solicitor General Perlman, Assistant Attorney General Bergson, and Daniel W. Knowlton. H. L. Underwood was also of counsel. Harry C. Ames argued the cause and filed a brief for the Freight Forwarders Institute, appellant in No. 114. Hugh Gordon and Wyman C. Knapp were on a brief for the Pacific Coast Wholesalers' Association et al., appelles. Per Curriam: OPINION OF THE COURT The appellee, Pacific Coast Wholesalers' Association, was formed by seven Los Angeles auto parts dealers in 1935; incorporated under California law as a nonprofit corporation in 1943; and had forty-one members and issued freight bills exceeding one million dollars in annual value in 1945. The issue presented is whether this association, with respect to the shipments here involved, is subject to regulation by the Interstate Commerce Commission as a freight forwarder or stands in exempt status under § 402 (c) (1) of the Interstate Commerce Act. This section reads as follows: "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, The Interstate Commerce Commission, in 1945, considered the status of the appellee in its first decision in this matter. At that time, it concluded that "It has been established in this proceeding that the traffic handled is for members of the association, that the association was founded and has been operated, in good faith, for the purpose of effecting savings in freight charges for its members 1 Together with No. 114, Freight Forwarders Institute v. Pacific Coast Wholesalers” Association et al., also on appeal from the same court. TRANSPORTATION POLICY by securing the benefits of carload, truckload, or other volume rates, and that A decree of the three-judge district court set aside the Commission's order as There is nothing in the language of the Act or the legislative history to suggest Affirmed. Mr. Justice Douglas took no part in the consideration or decision of this case. APPENDIX A-1 Revenues and traffic of freight forwarders, years 1943 and 1949–55 FREIGHT FORWARDER RETURNS FOR YEARS 1955 AND 1954 The summary table of returns below is taken from page 11 of the I. C. C. |