Mr. DOLLIVER. In enforcing and carrying out the inhibition against discriminatory rates, have intermediate points between large terminals, been protected in your knowledge and experience? Dr. FREDERICK. They have, so far as I can recall it. Mr. DOLLIVER. Could you supply us with some specific examples of that? Dr. FREDERICK. I will have to look them up and give them to you. Mr. DOLLIVER. Would that be possible, Mr. Chairman? Mr. HARRIS. I am sure it would be, the doctor says he can do it. We will be glad to have it. Mr. DOLLIVER. I would appreciate that very much for this record. I believe it is quite important in that particular segment. Dr. FREDERICK. I will send it in. Mr. DOLLIVER. Thank you, Mr. Chairman. Thank you, Dr. Frederick. That is all. Mr. HARRIS. Dr. Frederick, I, too, want to say that I am glad to have this discussion as to the history of the Interstate Commerce. Act, the progressive development of the program as we enjoy it in this country today. However, the conditions that existed at that time which brought on the original action of the Congress in 1887 certainly do not in any way exist today. Dr. FREDERICK. In a sense, Mr. Chairman, I agree with you heartily. However, there is one thing, and that is that we must remember that the act of 1887 was brought about partly because of competition within a mode of transportation, within the railroad industry, which was possible because of their power to make discriminatory rates and for duct rate wars, no control over the rate situation by any regulatory body. Today, with our Interstate Commerce Commission having the control that it does, the condition is different. But we could, if these bills were passed as they now read, revert to a situation which, at least as far as competition within the modes of transportation is concerned, and intercarrier competition, would put us back very close to where we were in 1887. Mr. HARRIS. That is an amazing statement, to me, from the description that we have had from the proponent of this legislation, which, as you know, is the Department of Commerce, Secretary Weeks himself. In fact, we have to assume from what he said that it was the administration proposal. It is very difficult for me to conceive that the administration, as represented by Secretary of Commerce Mr. Weeks, would go back or permit things that happened prior to 1887, with reference to rebates, discrimination, and all the other abuses that you have described as of that time. I gather from your statement here that you feel that the trucking industry is somewhat handicapped with reference to a competition position as common carriers. Dr. FREDERICK. They would be, sir, under the proposed legislation. Mr. HARRIS. Do you think that they have any undue advantages under the present situation? Dr. FREDERICK. Under the present laws? Mr. HARRIS. Yes. Dr. FREDERICK. No; I do not think so. Mr. HARRIS. How do you account for the fact that beginning with 1939 and through the years since, and particularly since the war, there has been the tremendous increase in the common-carrier movement for motortrucks as compared with the other modes of transportation? Dr. FREDERICK. I very largely lay that to a service situation. I think that industry and business, during the period that you mentioned, has been made to order for the type of transportation agency which was able to give a more personalized, faster service, one which fitted better into individual systems of distribution, and that that in very large part accounts for some of this movement of traffic from one carrier to another. Mr. HARRIS. Then you do not agree with the allegation that has been made that the policies which now prevail and the administration of the Interstate Commerce Commission have, in many instances, prevented one type of transportation from competing in a particular movement over another type of transportation? Dr. FREDERICK. No, sir; not as far as particular movements are concerned. Mr. HARRIS. I gathered from your discussion that the trucking industry is portrayed as the small segment or small industry of this Nation as compared with the railroad industry, and it is handicapped because of the natural conditions that exist, when you explain the average operating ratio for rails, 79 percent, and that of the trucking industry, 96 percent. I know you went ahead and explained and gave illustrations of that, but it is not altogether clear to me just what that is in actuality. May I ask you to elaborate on it a little further! Dr. FREDERICK. Yes, sir. What that means is that once the railroads get started, once they get into operation, from the point of view of the dollars which they take in which are used in running the railroads, they are in a much better position than are the trucks, for example. The trucks have a greater proportion of their total income or earnings taken up by the cost of running their business. Therefore, that puts them in a vulnerable position. But I hope I did not give the impression that I considered them to be a small, weak element in the transportation picture. Like any other business, if you have costs which you cannot avoid, and yet have to price your product somewhat competitively, you reach a point, as I indicate, where perhaps you have 100 percent of your income taken up in the running of your business, and then you are just in business for the fun of it. Then if you exceed that, pretty soon you go out of business. Mr. HARRIS. I did get the impression that you indicated that they were handicapped because they were a small operating group. However, I did want to inquire if there are not about 10 million vehicles in the United States registered as trucks. Would you say that would be a fair figure? Dr. FREDERICK. I think that is a fair figure, but they are not all operated by the common carriers, by any means. Mr. HARRIS. What percentage of those 10 million are operated by the common carriers? Dr. FREDERICK. I would not be able to give you the figure offhand. I would not want to guess. That is a figure that I can supply. Mr. HARRIS. Could you supply that for us? Dr. FREDERICK. Yes. Mr. HARRIS. It would be a substantial percentage, I suppose. Mr. HARRIS. How many common carriers have a permit to operate? Dr. FREDERICK. I do not know offhand. Mr. HALE. Would you yield, Mr. Chairman? Mr. HARRIS. Yes. Mr. HALE. I think it would be interesting if we could have the fire of the common carriers and then the contract carriers and then the people who use trucks to haul their own commodities. Dr. FREDERICK. I am sure I can give you the common figure. I am not sure I can give you the contract figure because they go in and out of business so rapidly. They may be a contract carrier this afternoon and a common carrier tomorrow morning. I may be able togve you a private figure. Mr. HALE. The private carriers are very numerous, are they not? Mr. HARRIS. You may supply that information just as you can, and we will be glad to have it. Dr. FREDERICK. Yes. Mr. HARRIS. Would you say there were relatively few companies that were engaged in this common-carrier trucking business, or would you say it would run into a large number? Dr. FREDERICK. It would run into a very large number, because there are a great many who are really small operators, and then, of course, there are a number who are not. Mr. HARRIS. But the number who would actually be affected by Something like this are relatively few of those who operate rather large fleets; is that true? Dr. FREDERICK. Everybody who operated as a common carrier would be affected, Mr. Chairman, but those who would be affected most are, of course, the largest carriers, and probably those that are most important to the motor-carrier industry from the point of view of the national interest. Mr. HARRIS. How many do we have of the so-called real large operators in the common-carrier trucking field? Dr. FREDERICK. That is another figure I could not give you offhand. Mr. HARRIS. Perhaps Mr. Pinkney can give that to us. Mr. PINKNEY. I was just going to volunteer that tomorrow or whenever I appear. I will try to get these figures for you. Mr. HARRIS. Very well. Thank you very much, Doctor, we are very glad to have your testimony before us. Again I want to compliment you for a fine state ment. Dr. FREDERICK. Thank you, Mr. Chairman. Mr. HARRIS. The committee will adjourn until 10 o'clock tomorrow torning, at which time Mr. Pinkney will be the first witness. Following Mr. Pinkney we will have Mr. Leighty representing the railroad brotherhood. Before we do adjourn, however, I have a request from our colleague, Mr. John J. Rhodes, of Arizona, to insert a letter in the record on this subject from Mr. Lewis E. Haas, the general manager of the Chamber of Commerce of Phoenix, Ariz. It will be received for the record at this point. (Letter referred to follows:) Congressman JOHN J. RHODES, PHOENIX CHAMBER OF COMMERCE, Phoenix, Ariz., January 19, 1956. House Office Building, Washington, D. C. DEAR JOHN: There is now pending in the Congress Senate bill 1920 and House bill 6141. Both of these bills, if enacted, would permit the railroads to publish new rates before any hearing is held and would eliminate the fourth section of the Interstate Commerce Act, which establishes the long- and short-haul rule. The Phoenix Chamber of Commerce is strenuously opposed to the enactment of either of these bills. As you know, Arizona and the other States of the intermountain area have just won a signal victory in the form of an interim order promulgated by the ICC between last Christmas and New Year. It has the effect of reducing railroad class rates into and out of Arizona, effective June 1, 1956, by between 16 and 29 percent. Arizona's participation in this case before the ICC was waged by the Phoenix Chamber of Commerce over a 3-year period on behalf of all Arizona. In another action, and not through legislation in Congress, the railroads are now attempting to secure a 7-percent overall increase in rail rates for the entire Nation. These two bills are part of the rails campaign to increase rates willynilly. Should they be enacted, it would be a strenuous blow to all of the shippers of Arizona. The fourth section of the ICC Act has been the main bulwark for many years, holding back discriminatory freight rates in the West. Should it be abrogated, the result from western shippers' point of view would be calamitous. We urge you to do everything in your power to prevent enactment of this type of legislation, because otherwise the efforts of all western shippers to secure fair and equitable freight rates would be set back immeasurably. Won't you please oppose this type of legislation to the end? Sincerely, LEWIS E. HAAS, General Manager. Mr. HARRIS. The committee will now adjourn until 10 o'clock tomorrow morning. (The following statement was submitted for the record:) SUPPLEMENTARY STATEMENT BY JERVIS LANGDON, JR. ON BEHALF OF THE AssoCIATION OF AMERICAN RAILROADS ON AMNIBUS TRANSPORTATION BILLS, H. R 6141 AND H. R. 6142; H. R. 6208 AND OTHERS This supplementary statement was prepared by Jervis Langdon, Jr., and is presented on behalf of the Association of American Railroads. It follows the main statements as submitted on behalf of the same organization at hearings before the subcommittee on May 8, 1956, and bears particularly upon the testimony given by Messrs. Turney and Aitchison, as witnesses for the American Trucking Associations, at hearings before the subcommittee on May 9-10, 1956. The American Trucking Associations, Inc., hereinafter referred to as ATA, attacks the proposed legislation on four fronts. Their spokesmen, witnesses Turney and Aitchison, argue: First. The "fair share" test (which would be abolished under a principal recommendation of the Cabinet Committee) is not applied by the ICC when it passes upon the rates of one form of transportation in competition with another form. Second. The "fair share" test has been embraced by the railroads; accordingly, they are now precluded from questioning it. Third. The proposed legislation would open the door to discrimination against (1) small communities and small shippers and (2) so-called noncompetitive traffic. Fourth. By taking traffic away from the trucks as the result of reduced rates, the railroads would only worsen their net revenue position. Before answering these arguments, it is helpful to understand obvious ATA motives. In competing with railroads, a first objective on the part of motor carriers is to confine the competition to competition in service. A closely related objective is to continue the "value of the service" theory of ratemaking. As explained ly their witness Turney: *Under the rate adjustment initiated by the railroads many years ago prior to regulation and approved and continued by the commission under regulation, there is in effect today throughout the United States what is known as "value of the service" rate adjustment. In essence, this means rates upon high-valued products, such as manufactured products, are relatively greater per ton, per car, per car-mile or per ton-mile than the rate upon primary or raw products, such as those of agiculture, animals, mines, and forests (Tr. 840).* "The present-day rate strcture is the rate structure built by the railroads as mod.bed by regulation. Competition between the railroads and the motor carrers under that rate adjustment is and properly should be upon the basis of the service which each offers" (Tr. 851). The motor carriers extoll the virtues of competition in service and say: "For the past 50 years, we have relied as a nation upon service competition in transportation as the best means of insuring technical advances, innovations, ail service improvements" (Tr. 828). And they decry any proposal that the competition be extended to competition n rates. They say further: "It is now contended that we must abandon our reliance upon service competition as a promoter of development and progress in transportation, and that we should unleash the competitive forces in pricing or ratemaking and remove 2h of the power of the Interstate Commerce Commission to prevent competitive rate reductions. *** If all carriers and all modes of transportation were of relatively the same economic strength, and if all carriers had available to them captive or noncompetitive traffic from which they could recover the loss in revenue resulting from these competitive rate reductions, the suggested peney would be less disastrous to the concept of a sound National transportatom system including all modes of transportation" (Tr. 828-829). Translated into its simplest terms, what the motor carriers want is a contiruance of high railroad rates upon “high valued products." They view with alarm competition in price because, as they admit, truck cost are higher (Tr. 846) From the ATA's point of view, the only proper basis for competition is an aspect of competition at which motor carriers profess to excel and which is generally free from regulatory restraints (Tr. 850). If the competi*ve traffic goes by truck because of faster 36-hour service, for instance, the ATA regards that as fair competition, and the ICC is of course powerless to equalize ove petitive opportunities by requiring slower service to match the railroad whedule. However, if the same traffic can be diverted to the rails by a reduct in rate (at once compensatory and nondiscriminatory), that is "unfair" eumpet.tion according to the ATA, and the ICC should equalize competitive oportunities by suspending the rail reduction and finding it to be unlawful. in summary, ATA wants to confine the competition to what is generally the therent motor carrier advantage of faster and more flexible service and to disallow as an unfair competitive practice any use of what is often the inberent advantage of the railroads, i. e., a lower cost level which can be reflected in a lower rate. We proceed to separate consideration of the four arguments advanced by the ATA witnesses. First ATA seeks only to confuse the issue by asserting that the ICC does at apply the "fair share" test. In dealing with this attack, it is first important to understand what is meant by the fair share" test. As employed in the railroad presentation (see p. 121 of printed record of September 1955 hearings), that term means "the so-called 'fair share' rest, that is to say, the effect of the rates on the competing mode." When in the motor carriers' opposing presentation it is denied that this test ex.sts or is applied by the ICC, it is difficult to follow their reasoning. On the one hand, the truckers repudiate "umbrella" ratemaking and recoil at the suggestion that the ICC “apportions" traffic among competing modes. In the words of their witness Turney: "There never has been an order such as that which has been hammered at this committee that the Commission has attempted to hold an umbrella over the * References are to unrevised transcript, omnibus transportation bills, May 9-10, 1956. |
