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rates of a competing carrier or has attempted to fix the rates of one carrier by the needs of another" (Tr. 83.5).
The same witness Turney expressed as his "judgment and made after a cu scientious study of all the decisions I could find on the subjert" that the “Ifterstate ('ommerce Commission does not, as has been alleged by representatives of the railroad industry, consider the economic effect of another mode of transportation in determining what a particular rate should be" (Tr. 872).
And again :
“So far as I know, and I have no exception to this, I have never known the Commission to attempt to allocate a fair share or an unfair share, or any kind of a share. If they did, I think it would be illegal under the preseut art" (Tr. 886-886).
But on the other hand, the ATA says that it is “very different" when. by fivng rate differentials, the ICC gives a competing form of transportation a "fair opams tunity to share" in the traffic, or permits "all carriers an equal opportunity to compete for available traffic," or requires higher than compensatory rates un particularly desirable classes of traffic,” or disallows “rates at a lower level than that at which they compete on even terms * * * (Tr. 812, 813, 815, 877). Again in the words of their witness Turney :
“The use of 'fair share' in ('ommission cases, and this I think, will be shown by Commissioner Aitchison's analysis, has been either a recitation of statements made in the record, generally by witnesses for the railroads, attempting to justify rate reductions, or as a shorthand expression for the longer phrase 'a fair opp tunity for the carrier to compete for the traffic.' The latter phrase very nearly expresses the Commission's concept of the objective of regulation of interaged: y competition.
"The courts were called upon as early as 1940 to overrule the same fallacious and misleading argument which is now pressed upon this committee. In Sandre 11 v. The United States, which I observed witnesses for the (commerce Department have quoted freely from, the dissenting opinion, the three-judge cuurt later affirmed per curiam by the Supreme Court, said :
"Petitioners urge that it is not the function of the ('ommission to appwortio the traffic. We do not understand that the Commission did or intends to *'ap portion'” the traffic. It merely equalized, by differentials, the prospects or op portunities for procuring traffic.'
**It is ditficult to see anything so reprehensible about the application of the principle that rate regulations should be such that all carriers have a fair 09***tunity to compete for traflic.
"Certainly I believe no carrier can fairly contend that it should be given more than a fair opportunity to compete for traffic. It has never been the policy of the Commission to attempt to allocate traffic among competing modes or to detep mine what is for particular modes a 'fair share' of a particular traffic. Rather it has concerned itself uniformly with the maintenance of conditions orhus could permit all carriers an equal opportunity to compete for arailable trafie
"This has frequently meant, as Commissioner Aitchison points out, the potablishment of rate differentials which would overcome service disadvantages of the railroads or the water carriers, and thus permit the shipper to choose ang competing modes freely (Tr. 814–816). [Italies supplied. }
Thus do the motor carriers distinguish between (1) "umbrella" ratemaking and the apportionment of traffic under the fair-share rulea practice which they disavow and insist is not indulged in by the ICC-and (2) the giving to competing forms of transportation of "fair opportunities to share" in the truth through the establishment of rate differentials--a practice which they fondly embrace and say "very nearly expresses the Commission's concept of the objects tive of regulation of interagency competition" (Tr. 812).
No one has ever said that the ICC apportions traffic in terms, and the railroads do not say so now. But the railroads do assert that the differentials which the ICC imposes through its control of minimum rates have the undeniable effect of apportioning traffic. If a proposed compensatory and nondiseriminatory rate promises to attract traffic to the railroad, and the ICC disallows it on the ground that it may adversely affert a competing form, this may not be apportionment as such. But apportionment or no, the ICC derision is certainly a guaranty that the traffic will continue to move by the competing form.
It makes no difference how it is expressed. The point remains that the 100 does in fact take into account "the effect of the rates on the competing mode.“ and that is what an important recommendation of the Cabinet Committee is
aimed at. The ICC should not concern itself with producing artificial competitive balances and "equal opportunities to compete” between the different forms of transportation, each with its own distinct and unequal cost and service characteristics. Any such attempt is economically unsound and, as found in the Cabinet Committee report, contrary to the public interest. The ICC should regulate railroad rates in the light of railroad conditions; and truck rates in the light of truck conditions—just as it is required under the existing law to regulate water-carrier rates in the light of water-carrier conditions.
The complete emptiness of the ATA's case in opposition to the proposed legislation (in the form of the three "shall nots") is well illustrated when its witnesses try to discredit the examples of ICC "umbrella" ratemaking cited in the railroad presentation. (a) The Tinplate case
In the May 8 presentation of the railroads to this subcommittee, the first example of “umbrella" ratemaking by the ICC was Tinplate from Fairfield, Ala., to New Orleans. There, it will be recalled, the ICC at the insistence of competing forms of transportation, disallowed a proposed 36-cent rail rate over the direct routes for the reason that it was "lower than necessary to afford the carriers concerned a fair opportunity to compete for this traffic,” and it specified a rate Do lower than 10 cents as "competitively fair." 3 This action was taken despite the fact that the 36-cent rate was found to be reasonably compensatory (producing car-mile revenues 3 or 4 times the railroads' average expenses), and there was not a word of opposition from any shipper or other interest representing the public (the only shipper evidence being in support of the 36-cent rate)."
How does the ATA deal with this example? In answer to a question from Chairman Harris, its witness, Turney, said:
**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 on 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 33 and a third percent of the total cost" (Tr. 873).
It so happens that the Commission's report in this case contains not one word about the relatively high classification of tinplate as an iron and steel product or any other mention of the value of the service theory of ratemaking. Mr. Turney made a bad guess.
But suppose Mr. Turney's guess has been good, and the ICC had in fact supported its rejection of the 36-cent rate on the ground that, under the value of the service theory of ratemaking, tinplate should take a higher rate." According to the ATA, this would take the case out of the admittedly forbidden category of "umbrella" ratemaking and validate it as an exercise of the ICC's power to fix minimum rates. Its witness Turney, referring to decisions of the ICC, said:
"Finally, they hold that carriers should not be permitted by competitive rate cutting to rednce the charges upon particularly desirable classes of traffic to the lowest possible compensatory level.
“Their reason for this holding, contrary to what has been stated in this record, is because of resulting increases in the burden to be borne by other traffic and the destructive effect of such rate cutting upon the adequacy and financial sumindness of the national transportation system” (Tr. 812). [Italics supplied.)
While the motor carriers agree that “umbrella" rates should not be prescribed as such, they argue that the ICC can properly require rates on the same "umbrella” level under the guise of supporting the value of the service theory of rateinaking. Take the tinplate involved in the cited case. The railroads,
3294 I. C. C. 597 (1955). * Id. at 403-404. • Id. at 399, 400. • The ice has used the value of the service theory of ratemaking as a ground for disallowing competitive rate reductions on high-value traffic. See, for example, Alcoholio Liquore in oficial Territory, 283 I. C. C. 219 (1951), at 223, 229.
handling practically none of the traffic, propose a 36-cent rate which promises to produce car-mile revenues 4 or 5 times more than average expenses, is unquestionably compensatory, and free from discrimination. The protests come, not from any shipping interest, but from the competing forms of transportation which diverted the business in the first place and they say: Tinplate, being of high value, should take a high rate because of the value of the service, and if the railroads name a reduced rate, they will necessarily burden other rail commodities of lower value. These motor carrier competitors thus make it appear that they are wholly disinterested in the effect which the 36-cent rate might have on their traffic, and that the only motive of such competitors is to preserve railroad revenues and lighten the burden on other railroad traffic.
How a higher 40-cent rail rate which moves practically no tinplate can provide greater relief to the burden on other railroad traffic than a compensatory 36-cent rate which would move tinplate by rail is a detail that the ATA witnesses do not discuss. Their real concern, as we have seen, is in the preservation of a ratemaking theory which permits them to handle the high-valued commodities despite their higher costs, and they seek to preserve the practice by having rail rates frozen, in specific instances, at levels higher than the traffic will bear to move by rail.
The specious character of the motor-carrier arguments is thus exposed. In the name of preserving the value of the service theory of ratemaking, they really seek protection against compensatory (and nondiscriminatory) rail rates which (they believe) would adversely affect them. The proposed legislation would terminate this type of uneconomic protection for every form of transportation, and the trucks-wanting a continuance of the protection-are opposed. Their witness Turney explained:
"In view of what has been said, if you should make this amendment, and it is quite lengthy, it would be construed by the Commission and perhaps by the court as a mandate 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 will be construed" (Tr 880–881).
According to this testimony, the railroads in deference to the high value of manufactured iron and steel products should increase their rates, and then the trucks could handle all of this valuable traffic (thus decreasing, according to the ATA witnesses, the burden on other railroad commodities). (6) Southwestern Petroleum case
Another ICC decision cited in support of the railroad position is the Southwestern Petroleum case. In that proceeding competing petroleum motor carriers assailed as unreasonably low compensatory railroad rates which had been voluntarily established “after extensive investigations," and the ICC upholding the complaint in large part, ordered an increase because the “assailed scale appears to be unduly low in view of the competitive situation." : Witness Turney testified that this case “never happened” (Tr. 874), and Witness Aitchison said that:
"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" (Tr, 878).
What these ATA witnesses apparently mean is that after the Commission's report there was a technical dismissal of the complaint because, as stated in the Commission's order:
** * * complainants have filed a petition for vacation of the said order of January 22, 1952, in which they state that the rates assailed by the complaint, as increased pursuant to the authority granted in Er parte 175 * * provide
« Southwestern Tank Truck Carriers Committee et al. v. Abilene and Southern Ry. Co. et al., 284 I. C. C. 75 (1952).
7 Id. at 78, 85.
substantially the same relief as complainants would obtain if the order of division 3 were made effective, and request dismissal of their complaint. (Italic supplied.) *
Thus did the increases which provided "substantially the same relief" to the truckers as required in the Southwestern Petroleum case actually go into effect, and in no sense and in no way did the Commission take back a single word from the findings in its report. Witness Aitchison says that following the dismissal of the complaint as described above:
*Thereupon the case became moot, and thereafter stood as if it had never been decided, without being a precedent."
It witness Aitchison is correct, why is it that the ICC continues to cite the Southwestern Petroleum case, as a precedent and in connection with the very same point which is made in the railroad presentation? About 6 months after the decision “stood as if it had never been decided, without being a precedent," it was referred to by Division 2 (Commissioners Alldredge, Splawn, and Elliot) in the following terms: o
“Upon complaint of tank-truck carriers, Division 3 found those rates (on gasoline and light oils) less than minimum reasonable rates to the extent that they were below a prescribed minimum scale, graded upward from 6 cents for 20 miles to 23.5 cents at 200 miles and ending with 34 cents at 300 miles. Southwestern Tank Truck Carriers Committee v. A. & S. Ry. (284 I. C. C. 75)."
Almost 2 years after the decision “stood as if it had never been decided, without being a precedent," it was referred to by Division 2 (Commissioners Alldredge, Arpaia, and Freas) as follows: 10
"A competitive-rate reduction which is harmful to all the carriers affected is contrary to the national transportation policy of fostering, among other things, sound economic conditions in transportation and among the several carriers, Morgan Foruarding Co., Pick Up and Storage (258 I. C. C. 771, 775); of preserving the inherent advantages of each mode of transportation subject to the act; and of encouraging the maintenance of charges without destructive competition, See Southwestern Tank Truck Carriers Committee v. A. & S. Ry. (284 I. C. C. 75)."
In addition, the Southwestern Petroleum case will be found cited at 6 different places in the 1953 supplement to Interstate Commerce Acts Annotated-once under the national transportation policy, 4 times in connection with the standards for reasonableness under section 1 (5), and once under the ratemaking rule in part II of the act." Whether the ATA likes it or not, this case stands on the books as a precedent and it is a precedent for the type of ICC action which the railroads believe should be curbed.
Witness Aitchison, discussing this decision on its merits, would leave the impression that, in ordering an increase in these railroad rates upon the complaint of competing truckers, the ICC did no more than to discharge its normal function of prescribing reasonable rates. He points to the scope of the evidence before the ICO and to the nature of the complaint wherein, as he says:
"The motor carriers assailed the rail rates as below minimum rates, as not making 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."
That competing truckers should be so deeply concerned that railroad rates make a "proper contribution to railroad revenues" will mislead no one. The truth is that the motor carriers-and only the motor carriers—wanted the rail rates increased, and for only one reason: The lower and compensatory rail rates promised to be competitively successful. And the motor carriers, basing their arguments on the national transportation policy, persuaded the ICC to increase the rates despite the fact that they were reasonably compensatory (producing *car-mile revenues * * * substantially higher than the average for all carload traffic") and despite the further fact that the competitive position of the railroads has deteriorated to the point where they were hauling only 12 percent of the production (while "the products transported by the 13 complainant motor carriers increased from 184,607 to 4,590,247 tons").12 Even witness
Order dated December 16, 1952, in docket 30694, cited in note 6, supra.
Petroleum from Colorado and Wyoming to Western Trunkline Territory, 289 I. C. C. 459 (1952), at 462-463.
10 Commodities from Los Angeles to Chicago, 293 I. C. C. 578 (1954), at 582. 11 Interstate Commerce Acts Annotated, vol. 16, at 12516, 12534, 12538, 12560, 12576. » Note 6, supra, at 82.
Aitchison said that the "crux of the complaint" was the alleged "inability of motor service to continue" under the competitive rail rates, and the ICC report refers to the motor carriers' needs for higher rates. 13
Whether what the ICC did in that case, and has done in a great many other cases, is called “umbrella” ratemaking, or regarded as the apportionment of traffic among competing modes, or the creating of “equal opportunities to conpete,” is of no consequence. For the fact remains that compensatory and nondiscriminatory railroad rates-voluntarily established to meet compelling truck competition-were there increased by the ICC, and the compelling reason for the required increase was that the rates threatened to be effective competition against the motor carriers. There was some slight mention of the revenue effect upon the railroads of the reduced rates, but the ICC made no suggestion that higher rail rates would be a sound management decision for the long terin."
To say, as the ATA does, that the ICC, in its control of competitive ratemaking, does not apply the "fair share" test in the sense defined by the railroads (that is to say, the effect of the rates on the competing mode") is good proof that, in studying the cases, its witnesses ignore the substance for the form. Witness Aitchison looked for the words "fair share" in ICC reports on the subject of competitive ratemaking. He found a great many which included those words, and a great many which did not. But use or nonuse of these words is unimportant. Whatever the language used in the ICC reports, the inquiry is, did the ICC pass on the competitive rates in the light of their effect on the competing mode? If it did-and it usually did-the ICC used what the Cabinet Committee believes to be a faulty standard. It is ICC use of this faulty standard for a mode of transportation which the proposed legislation supported by the railroads would stop.
Second. While the "fair share” test has necessarily been employed by the railroads, they are not now precluded from criticizing it.
In defending the reduced rail rates under motor carrier attack in the Southwestern Petroleum case,15 the railroads sought to justify them not only as reasonably compensatory (a position which the ICC upheld) but also as required "to regain their (railroads') fair share" of the traffic. At the time of the litigation the railroad portion, it will be recalled, was 12 percent, and the complaining truckers' movement had increased from 184,607 to 4,590,247 tons in a period of 9 years.
It is perfectly true that railroads have urged that reduced rates—which they have proven to be reasonably compensatory-would not result in their obtaining more than a "fair share" of the traffic." The railroads have taken notice of the Commission's decisions relating to "fair share." In the Southwestern Petroleum case, for example, the railroads were defending competitive rates. How else could the railroads, with 12 percent of the traffic, expect to get a favorable decision giving them an opportunity—as specified in many ICC decisions—"to retrieve some of the traffic" 18 or "attract only a portion of this traffic,' or "regain any of it," 20 or “regain a fair share," or "obtain a fair share," or "to share in the traffic." 23
To imply, as witness Aitchison does, that the railroads are now estopped from attacking a standard for reasonable minimum rates as involved in intermode competition—a standard which he claims the ICC never uses (it "wisely avoided the trap") -—is so much nonsense. The standard is shown by experience and found by the Cabinet Committee to be an uneconomic and faulty one, and the Congress, in the public interest, should bring its use to an end. In the meantime, however, the ICC will doubtless continue to apply it, and the railroads will do their very best to have such application work to their advantage, in those instances where it does.
13 Appendix C, at 8, included in witness Turney's Statement Respecting Ratemaking Provisions. Also, note 6, supra, at 84.
14 Yote 6, supra, at 85.
18 Malt Liquors and Containers Between New Jersey, Maryland, and the District of Columbia, 294 I. C. C. 420, 422 (1955).
19 Oleomargarine, Cincinnati and Columbus to Eart. 294 I. C. C. 349, 354 (1955). 99 Iron, or Steel Wire, Buffalo, N. Y., to Kitchener, Ont., 294 I. C. C. 515, 517 (1955). 21 Emery Transportation Co. v. Baltimore of 0. R. Co., 292 I. C. C. 346, 348 (1954). 22 Drugs, Mediciner, etc., in Official Territory, 284 I. C. C. 33, 37 (1951). 23 Cigarette Paper-New Jersey to Louisville, Ky., 294 I. C. C. 596, 598. 24 Note 13, supra, at 9.