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In 1954 the railroads proposed a reduced rate of 36 cents on tinplate moving from Fairfield, Ala., to New Orleans to meet the competition of (1) the Warrior & Gulf Navigation Co., a contract barge-line carrier, at an aggregate cost of 35.965 cents (later adjusted to 36.715 cents) and (2) trucks with rates ranging from 45 cents to 48 cents. The traffic, formerly all-rail, was moving in part over the barge route, and also in important volume by truck. The railroads showed that their car-mile revenues under the 36-cent rate would be 4 to 5 times their average car-mile expenses, and the ICC said that "at least over the more direct routes, the proposed rate would be reasonably compensatory." But the ICC found the 36-cent rate "lower than necessary to afford the carriers concerned a fair opportunity to compete for this traffic" and held that a higher 40cent rate would be "competitively fair."
Mr. TURNEY. They did not hold that, Mr. Chairman, in order to put an umbrella.
I assume this was a water carrier. I am not positive. But they held that because tinplate ordinarily falls within the iron and steel classification. Iron and steel takes a relatively high classification insofar as contribution to the overhead burden is concerned.
What they held there was that the reduction in the contribution of tinplate to the overhead contribution which the railroads proposed was lower than necessary. They were not protecting the water carrier. They were protecting other commodities against an unwarranted diffusion of revenues which were used to offset the burden of transportation, which, as I have said, amounts to 331/3 percent of the total cost.
Mr. HARRIS. I assume the same general principle would be involved in the other illustrations?
Mr. TURNEY. No. One of the other cases just never happened. That was the petroleum case.
Mr. HARRIS. Judge, we will be glad if you will keep your seat there. You look so familiar where you are. We would like to have you
there with the witness.
Mr. TURNEY. I need some help so perhaps you better stay, if you will.
Mr. AITCHISON. Thank you. * I at one time had before me Mr. Jacob Aaronson, the chief counsel of the New York Central, and I said to him, seeing a witness that he was producing was going to read a statement, “Shall I administer the oath this way: 'You do solemnly swear that you will well and truly read the statement which has been prepared for you by your counsel ?'”
He looked at me and he said, "I had a notion when I told you that story I should not have said it."
I had not expected to get into this case, personal reasons will not permit it, but I want to talk about that particular case.
This Southwestern Tank Truck case is the one I have reference to.
It was decided by a division of the Commission, division 3. It is so curious that this decision should have been made the lead-off case in Mr. Fort's note, that we are warranted to taking it as a check on the accuracy of the citations.
I am reading from page nine of my statement. The complaint was by an association of operators of motor carrier tank-trucks;
The products involved were petroleum and liquefied petroleum gas. The motor carriers assailed the rail rates as below minimum rates, as not mak. ing proper contribution to railroad revenues under section 15a, as being inconsistent with the national transportation policy, and with the preservation of a national transportation system adequate for the needs of commerce and national defense.
The report of the division shows there was a perfect wealth of material before the Commission; it was a long report, and it showed there was statistical material, cost studies, an analysis and discussion of the cost studies, rate history for both sides, rate proposals by both carriers, and traffic flow studies. The advantages and disadvantages of both systems of transportation were developed, and the Division stated its view that the truck service was of greater value to the shipping public than rail service.
Thus in the case and in the decision were all of the normal elements of a rate case. The cost of service was developed, the worth or value of the shippers, and all that was all before the division. The record discussed the need for both rail and motor service, and the inability of motor service to continue if the competitive points took the rail rates. The rails had lately received a 15-percent increase in commodities generally, and they had not taken it on these commodities. That was the gist of the complaint: that is what the case eventually turned on.
The division found for both parties; that is, it dismissed the complaint as to rail rates for distances over 300 miles, found they were not shown to be unreasonable. But for the shorter distances, it prescribed a scale of minimum rates, and required the latest general increase to be applied to the short distance rates.
I was not on the division, so I am free to talk about the case. The words "fair share” that have been harped on, and this case was cited as the lead-off case in note 8, do not appear in the report at all. The words which did appear and come the closest to the expression is “if the railroads are to have a fair opportunity to share in the traffic.” And I think those words are very different.
Mr. IIARRIS. What part are you reading from?
If the case should be considered as an authority for the “fair share" theory, and it is not, the record is clear that the railroads themselves lead the Commission into that trap. But the Commission avoided it.
I had the curiosity to go to the docket and look it over. In the brief at page 10 appear words which I quote literally, and with the underscoring exactly as it is. That is on page 9 of my statement. There was an impressive list of rail counsel, 10 of them, who signed this. Some of them are very good friends of mine. They said, "The rail carrie: have sustained substantial diversions of petroleum traffic, justifying readjustment of their rates to regain their fair share thereof." That is in their initial brief. The gentlemen whose names were on the brief appear at the bottom of page 9 of my satement.
The argument continues in the brief with another statement which indicates that the fair share they claim is not alone of this particular traffic, which had not taken the 15-percent increase, but of all available traffic.
I was brought up in Iowa, and took a course in legal ethics. One of the principles impressed upon me was that when I made a statement to a tribunal I certified on my honor as counsel that the point was worthy of consideration, and, in my judgment, was well taken.
These 10 gentlemen, when they asked livision 3 to find that the rails were entitled to a fair share of that traffic, certified on their honor, as members of the bar of the Commission, that the Commission was legally entitled to consider and determine that question, and if the Commission had so determined the question, none of them should question it, because the Commission would have been simply deciding an issue which had been tendered by them as counsel for the railroads.
In point of fact, the decision ought never to have been cited at all, because it was not a decision. It is not authority for anything except the fact that it was made, and not the conclusion of it. It never became effective.
The railroads petitioned for reconsideration, and under the Commission's rules of practice that petition was referred to the Division which had decided the case. The Division reopened the case for further consideration on the record as made. They extended the effective date of the order, and the order did not become effective. Finally, in the process of time, the railroads got around to asking for more revenue in another case, and they decided to take the 15-percent increase. Whereupon, Mr. Nuel D. Belknap, counsel for the complainants in the case, wrote a letter to the Division which requested that his complaint be dismissed. The Division dismissed it, and the case automatically, as well as the issues which had preceded it, became moot. Under the decision of the United States Supreme Court in the Anchor Coal Co. case, the question undoubtedly was moot.
I have cited some more of the cases along the same line, but that is sufficient, I think, for that case that the chairman asked about.
Mr. HARRIS. Thank you very much, Judge, for the explanation in response to the question.
That being true, Mr. Turney, it is not clear to me, and I know it is not your fault but it is mine, why you oppose the recommendations which have been referred to as the three "shall-nots."
I might say here that I, too, am sorry, as all of us are, that we were interrupted by a call of the House. We understood that you had a lengthy statement. To have recessed for that period of time probably would have prevented you from completing your statement this afternoon.
Mr. TURNEY. I appreciate that, Mr. Chairman.
Mr. HARRIS. The few pages that I did not hear I tried to run over since I have returned.
In other words, my question is this: If it is true that the Commission does not administer the act to consider the effect the rate would have on the other mode of transportation, and, as has been alleged here by other witnesses, if they are fearful that they do, when you say they do not—and in this matter it could be clarified—what would be your objection? Why should they have it even though they do not
Mr. TURNEY. In the first place, if the chairman please, I said they had not used it. But I also stated at page 20 that in my opinion it was vital that they continue to have that power if the national transportation policy is to continue to impose upon the Commission the duty to avoid unfair or destructive competitive practices and to develop, coordinate, and preserve a national transportation system by water, highway, and rail.
They never have had to use it. But the day may come when it may have to be used in order to carry out that mandate. That is No. 1.
The second reason is this: In view of what has been said, if you should make this amendment, and it is quite lengthy, it would be con
strued by the Commission and perhaps by the court as a mandate that in no case can they prescribe a minimum rate which is higher than a compensatory rate. When you do that, then you take away their power to preserve equipoise between, for illustration, manufactured and nonmanufactured articles.
Take steel, for instance. Steel contributes in official territory-and I think this figure is approximately correct-about 35 percent of the total transportation burden. Because of its heavy loading characteristics, the steel rates are relatively high compared, for instance, with coal. But if the rail carriers were permitted to cut the rates on steel products to an out-of-pocket basis, they would automatically dispossess themselves of 35 percent of the revenues necessary to carry the burden of transportation.
If you put this in the act, it is almost certain that that is the way it wil be construed.
My answer is this, that every dog is entitled to one bite. The Commission has never used that power at all, certainly never arbitrarily, but the day may come when it will be necessary to use it. It should not be taken away, particularly under the circumstances of the misrepresentations that have been made here with regard to the manner in which it works.
Mr. HARRIS. I think I would want to ask the Interstate Commerce Commission some more questions along that line to satisfy my own thinking.
Thank you very much.
Why would it not be an eminently fair solution to this whole problem to take the railroad passenger deficit and allocate it equitably between the railroads and the trucks?
Mr. TURNEY. My answer to that, sir, is that the railway passenger deficit is the creature, largely, of railway inertia and lack of management initiative.
Mr. HALE. Then why do you not contribute some management to the railroads?
Mr. TURNEY. I got out of that some years ago, sir.
Mr. DOLLIVER, Is it not also due to the fact that we have had a great revolution over the last generation in private passenger automobile transportation ?
Mr. TURNEY. Certainly.
Mr. TURNEY. The reason I say management is this, that they have not cut their cloth to meet these reductions. They have remained highly competitive with one another. They have run competitive trains; they have these mausoleums for stations which are enormously costly. We do not live in the transportation age where passenger traffic produced what it did before the 1920's. We are in the automobile age. Their suit should be cut to the cloth that they have.
Mr. Hale. The railroads have had to adjust to enormous economic changes, such as you have described.
When I go to drive in the country in Maine, every now and then I pass a little railway station standing almost idle which looks as if it had been stranded there.
You cannot say that that is inertia and lack of management on the part of the railways, it seems to me. It is unfortunate that the rail. roads are living in a period of great economic change.
The trucks arrived on the scene much more recently have not had these adjustments to make.
Mr. TURNEY. The buses have had to make them and they are making them.
The same thing that hit the rail passanger service hit the buses. They have had these rail passenger deficits for 30 years.
Mr. HALE. Honestly, and I am quite serious about this, it seems to me that a great part of the transportation difficulty of the United States today is this question of passenger deficit of the railroads. If something constructive could be done about that, everybody would be happier.
Mr. TURNEY. I may be so bold as to agree with you 100 percent. There is a proceeding now pending before the Commission which was initiated, at least in part, by one of my clients, and that is the National Coal Association, asking for a thorough investigation of the whole question of the passenger deficit, because of the tremendous impact upon freight rates which it has.
I agree with you that it is a tremendously serious problem.
Mr. Hale. As far as I am concerned, it is no answer to say that passengers have to fly or go by bus or go by their own automobiles, or walk, because a lot of people still like to ride in railway cars, railway sleepers, and so on.
Mr. TURNEY. Right; and they should pay for it.
Mr. HALE. The whole subject presents an interesting parallel with the mass transit in the District of Columbia, with which we have been very agonizingly concerned.
Mr. TURNEY. Yes.
Mr. Flynt. Mr. Turney, I want to join my colleagues in thanking you for your extensive and enlightening contribution to these hearings. However, I want to tell you as I told previous witnesses who have appeared, that while I may not agree with everything that you said, I am nevertheless grateful for what you have brought to us.
I want you to go further about the Commission being entitled to one bite.
Who is that a bite out of ?
Mr. TURNEY. It would have to be a bite which meant that they had abused the power. They have never abused that power.
Mr. Flynt. What I am getting at, in all seriousness, is would it be a bite out of one of two competitive modes of transportation, or out of the public interest!
Mr. TURNEY. In my view, that is almost synonomous. I think that anything that is harmful in a substantial degree to the railroads or to the motor carriers is harmful to our national transportation system and to the public interest.
Mr. Flynt. I believe Judge Aitchison used the expression that the Interstate Commerce Commission has never used the phrase "fair share” as establishing a rule. Is that to say that you do not think they will do it in the future? And if they will not, is there any objection to the hazard that would naturally follow the elimination of certain of these practices?