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and preserve the inherent advantages of, and foster sound economic conditions in, such transportation * * * develop and preserve a highway transportation system properly adapted to the needs of the commerce of the United States and of the national defense. * The Congress went further and, in formulating a ratemaking rule for motor carriers, instructed the Commission in the exercise of its power to fix just and reasonable rates, to "give due consideration, among other factors, to the inherent advantages of transportation by such carriers, to the effect of rates upon the movement of traffic by such carriers. * * *"? And finally the Congress added the following proviso to the antipreference section in the Motor Carrier Act :
"Provided, however, That this paragraph shall not be construced to apply to discriminations, prejudice, or disadvantage to the traffic of any other carrier of whatever description."
So much for the legislative intent that neither the rates of water carriers nor the rates of motor carriers should be regulated in the interest of the railroads and the specific provisions which were included, both in the Motor Carrier Act of 1935 and the Transportation Act of 1940, to effectuate that purpose.
We come next to the point, How did the Congress intend that railroad rates should be regulated? Did it intend that they should be regulated in the interest of either the water carriers or the motor carriers, or did it intend that they should be treated in exactly the same way as it had provided for the rates of these competing forms of transportation?
The answer is clear.
In 1940 the same national transportation policy was made applicable to the regulation of the railroads as to the regulation of the motor carriers and the water carriers, and the Congress, in providing "for fair and impartial regulation of all modes of transportation subject to the provisions" of the Interstate Commerce Act, called upon the Commission so to administer it was to recognize and preserve the inherent advantages of each ; * **" Moreover, in 1940 the same proviso as had originally been made to the antipreference provisions of the Motor Carrier Act of 1935 was made to the comparable provisions for railroads (sec. 3 (1)) and water carriers (sec. 305 (c)). And finally, the ratemaking rule for railroad rates (sec. 15a) was made subject to the same amendment as provided for the comparable provisions governing motor-carrier and water-carrier rates, and the Commission was instructed, in the exercise of its power to prescribe just and reasonable rates, to consider, among other factors, "the effect of rates on the movement of traffic" but only “by the carrier or carriers for which the rates are prescribed."
That railroad rates were not to be regulated in the interest of water carriers or motor carriers-any more than water-carrier rates or motor-carrier rates were to be regulated in the interest of the railroads—is made clearer when statements made during the course of the debate in the Congress are recalled.
In its report on S. 2009 (which later became the Transportation Act of 1940) the Senate committee said (S. Rept. 433, 76th Cong., 1st sess., May 16, 1939, at pp. 2, 3):
“The ratemaking rule has been amended to expressly provide adequate safeguards for the public, and at the same time the Commission is directed in prescribing a rate to consider its effect on the movement of traffic only by the particular type of carrier for which the rate is prescribed. That is, in prescribing a rate for water carriers the Commission will not consider the effect of that rate on the movement of traffic by either rail or motor carriers * *
"For many years it has been the view of keen students of the transportation problem that there has been no consistent national policy with respect thereto. One reason urged in support of that view is that while the principal haulers of traffic and passengers, the railroads, have long been strictly regulated-as have, since 1935, motortrucks and buses engaged in interstate transportation-other forms of transportation are developed at public expense and without supervisory regulation. The net result of such a policy is inequality between various forms of transportation. * It may be safely said that neither the strictly
• Sec. 202 (a), Motor Carrier Act of 1935.
7 Sec. 216 (1), Motor Carrier Act of 1935. Emphasis ours. At that time, the ratemaking rule which governed the railroads (sec. 15a) provided that in the exercise of the Commission's power to prescribe just and reasonable rates it "shall give due consideration, among other factors, to the effect of rates on the movement of traffic." The addition of the phrase "by the carrier or carriers for which the rates are prescribed" came later with the Transportation Act of 1940.
8 Sec. 216 (d), Motor Carrier Act of 1935. A similar proviso was added to sec. 3. (1), which is the antipreference governing the railroads in the Transportation Act of 1940.
regulated railroads nor the motor-carrier operators favor the elimination of all regulation. Consequently the remaining remedy is to so extend regulation to competing forms of transportation, other than air, which only recently was placed under the Civil Aeronautics Authority, and retaining to each such lawful advantages as are inherent therein, so as to, as nearly as possible, equalize them and put them on a common footing, at least from a regulation standpoint. This is not for the purpose of favoring one form of transportation over another or seeking to put any form of transportation out of business; it is, as stated, simply to put them all on a common basis or common starting point in their sharp struggle for business. S. 2009 seeks to do this also. If one or more forms of transportation cannot survive under equality of regulation, they are not entitled to survive. This is not railroad philosophy; it is transportation philosophy. The problem is not a railroad problem, but is, as the Interstate Commerce Commission has said, a transportation problem."
In the course of the Senate debate the following colloquy took place between Senator Austin and Senator Wheeler, chairman of the Senate Committee on Interstate Commerce and manager of the bill:
"Mr. Austin. So, if there is one type of common carrier which has a natural facility or a natural advantage over another, the bill does not require, indeed, I understand it not to permit, the extinguishment of the natural advantage in competition for the benefit of the competitor which has not the advantage. Am I correct in that interpretation?
"Mr. WHEELER. The Senator is entirely correct, and I thank him for his statement. In the ratemaking provision, and in three different places in the bill, we wrote in such a provision specifically so as to protect them” (84 Congressional Record 5883).
The following further statements made during the course of the debate in the Senate are enlightening:
"Mr. TRUMAN. Mr. President, the reason the discussion always gets back to the railroads is that the railroads handle about 67 percent of all the traffic. In 1926 they handled 75 percent of all the traffic. The present condition of the railroads is due to a great many things which are not necessary to be considered at this time. The railroads are aboslutely essential to the welfare of the country, and they should not be discriminated against any more than any other method of transportation should be discriminated against. The object of the pending bill is to try to put all methods of transportation on an equal basis. If it will not do that we shall have failed in our effort.
"Mr. PEPPER. Mr. President, I really meant to say when I spoke a moment ago, if the Senator will further yield, that when the Senator referred to the various means of transportation being equal
"Mr. TRUMAN. Equal before the law.
"Mr. PEPPER. If that is what the Senator meant by the expression he used, Very well. "Mr. TRUMAN. Yes; that is exactly what it means. (84 Congressional Record
“Mr. WHEELER. I say to the Senator, as I said a moment ago, when this legis. lation is enacted it will be found to be beneficial because we are stating that it is the policy of the Congress of the United States that the Interstate Commerce Commission shall treat each and every one of these forms of transportation upon an equal basis ; and no language could be written into law that more clearly directs that that should be done than we have done in the Interstate Commerce Committee (84 Congressional Record 6073).
"Mr. WHEELER. it is not a question of helping the railroads; and I think it onght to be clear that the bill is not introduced primarily with the idea that it will help the railroads. The statement has been made repeatedly that the object of the bill is to help the railroads. The object of the bill is to help the railroads insofar as we can correct some undesirable practices and speed up the work of the Interstate Commerce Commission. The bill seeks to give equality to the railroads in the same respect in which we give equality to everybody else. I do not think the Senator from North Carolina, who is noted for his fairness, can say to the American people that we want the railroads in a straitjacket with reference to their rates, but that the water carriers, their competitors, should be free. If the Senator takes that position, then I say there is only one thing we ought to do. If we are not to regulate the water
carriers, if we are to let them resort to any practice they wish to follow, including rebates and everything else, then let us say to the railroads of the country, 'We will repeal the law regarding the regulation of your rates. Let us turn them loose ; let us go back to the law of the jungle and let the best man win. Who would suffer in the long run? It would be the shippers of the country, the farmers, and the miners, about whom the Senator is now speaking" (84 Congressional Record 6135).
In introducing the bill to the House, Congressman Wolverton, one of the bill's managers, declared :
"The one and only thought that dominated the committee was to formulate legislation that would be helpful to all forms of transportation and in the public interest * * * Nothing could more clearly set forth the fundamental purpose of this legislation and the desire to preserve the inherent advantages of every form of transportation than the declaration of this committee in the bill as to what should be our national policy in this important matter. Permit me to read from the bill. (Congressman Wolverton here read the declaration of policy.)
“That declaration of policy is the foundation upon which this bill has been drawn. In no particular does any provision of this bill deviate from it in the slightest degree. Each provision and all of them taken together do nothing other than make that declaration effective as a national policy. With the administration of the act in accordance with the spirit and intent of the act no unfair or unjust advantage can be gained by one means of transportation over another" (84 Congressional Record 9769).
Finally, the conference committee agreed to a bill in the form in which it was enacted. It contained of course the national transportation policy; the amendment to the ratemaking rules for each form of regulated transportation under which the Commission could only consider the effect of rates on the movement of traffic “by the carrier or carriers for which the rates are prescribed"; and the proviso to the antipreference provisions in each part of the act. But this bill, as we have seen, did not contain the Miller-Wadsworth amendment. This amendment, it will be recalled, would have required the Commission to accept reasonably compensatory rates as proposed by any form of transportation, and it was turned down only for the reason, as expressed in the Commission's report, that it was “not necessary in order that the public at large may enjoy the benefit and economy afforded by each type of transportation.” (Please see pp. A-3 to A-4. supra.) In reporting the bill, the conference committee agreed. It said (86 Congressional Record 10172):
"The conferees are unanimously in harmony in the viewpoint that the inherent advantages of each type of carrier should be preserved for the benefit of the Nation. Legitimate regulation must look to the protection of the economic advantage of each type of carrier against destructive competition of the other. No carriers should be required to charge unreasonable rates for the benefit or purpose of compelling diversion of traffic to a competitor. [Emphasis ours.)
Thus did the Congress make it clear that since water rates and truck rates were not to be regulated in the interest of the railroads, railroad rates were not to be regulated in the interests of either the water carriers or the trucks. At no point in the long legislative history was there the slightest indication that, for the protection of a competing form of transportation, another form would be denied the right to establish reasonably compensatory and nondiscriminatory rates and thus, in effect, be forced to hold a rate umbrella. According to the Congress, the public was just as much entitled to competitive railroad rates as to competitive water and truck rates.
At first, this congressional intent was apparent in decisions of the Commission.
An early and authoritative decision was Seatrain Lines, Inc. v. Akron, C. & Y. Ry. (243 I. C. C. 199 (1940)). There, break-bulk water carriers, as well as certain all-rail routes, sought to prevent a lower level of rates on the part of Seatrain on the ground that, with its superior service, Seatrain would take all of the business. The Commission, however, allowed the lower Seatrain rates. It pointed out that the opposition came from "fear that their own interests (those of the protesting water carriers) may suffer through a diversion of traffic from competing carriers to Seatrain in the event the latter secures the basis of rates it here seeks," and it emphasized that higher rates "would * * * require Seatrain to charge somewhat more than the traffic will bear" (243 I, C. C, at pp. 211–212). A further reason for upholding lower Seatrain rates was the fact that, in 1940, the ratemaking rules of the Interstate Commerce Act had been modified "* * * so as to require us, in the exercise of our authority to prescribe just and reasonable rates, to give due consideration, among other factors, to the
effect of rates upon the movement of traffic by the carrier or carriers for which the rates are prescribed" (243 I. C. C. at p. 214).
The modification which, as we have seen, consisted of the insertion of the italicized phrase into each of the ratemaking rules, was regarded by the Commission “as of particular interest," and it held that its “meaning, supported also by the legislative history, seems to be that no carrier should be required to maintain rates which would be unreasonable, judged by other standards, for the purpose of protecting the traffic of a competitor" (243 I. C. C. at p. 214).
Later, after World War II, the Commission included this language from the cited report in its decision in New Automobiles in Interstate Commerce (259 I. C. C. 475 (1945)) and described it as setting forth “our views respecting the policy of the law subsequent to the Transportation Act of 1940" (259 I. C. C. at p. 537). The Commission again held (259 I. C. C. at p. 538):
"As Congress enacted separately stated ratemaking rules for each transport agency, it obviously intended that the rates of each such agency should be determined by us in each case according to the facts and circumstances attending the movement of the traffic by that agency. In other words, there appears no warrant for believing that rail rates, for example, should be held up to a particular level to preserve a motor-rate structure, or vice versa.”
This decision is of more than usual importance because the Commission there recognized "occasional deviations” in past proceedings and undertook to speak authoritatively as to "our views respecting the policy of the law subsequent to the Transportation Act of 1949” (259 I. C. C. at p. 537).
Barge transportation has been similarly treated. In the Mechling case the Commission had approved a somewhat higher level of rail rates to apply to the further movement of grain which arrived at Chicago by barge than on grain which arrived at the same point by either rail or lake vessel, and in doing so the Commission was influenced in part by the effect of the ex-barge rates on the grain-rate structure as a whole, including the all-rail rates. It sought, in short, a rate level on the ex-barge traffic which would give it a "fair opportunity to move in competition with lake-rail and all-rail traffic."10 But the Supreme Court reversed and, pointing to the same provisions of the Transportation Act of 1940 as involved in the congressional debates above referred to, held that they “flatly forbid the Commission to approve the barge rates or barge-rail rates which do not preserve intact the inherent advantages of cheaper water transportation but discriminate against water carriers and the goods they transport. *** It is therefore not within the province of the Commission to adjust rates, either to equalize the transportation cost of barge shippers who do not have access to barge service or to protect the traffic of railroads from barge competition. For Congress left the Commission no discretionary power to approve any type of rates which would reduce the inherent advantage of barge transportation in whole or in part" (330 U. S. at pp. 577, 579).
From the foregoing, the net result of H. R. 6141 is apparent.
It is that the Congress is presently being asked to set the ICC back on the course originally charted for its control of competitive ratemaking and to allow railroad rates to be judged in the light of railroad conditions, truck rates to be judged in the light of truck conditions, and water-carrier rates to be judged in the light of water-carrier conditions. This the ICC has in fact done in a few cases such as those cited above. But the great majority of its decisions on this subject have gone the other way and sought, through the fixing of rate differentials, to produce artificial competitive balance between competing forms of transportation, irrespective of their economic characteristics. The ICC itself has recognized "deviations" in its treatment of this subject---deviations which would be reversible error under the proposed legislation (in the form of the three "shall nots").
(Whereupon, at 12:45 p. m., the committee recessed, to reconvene at 10 à. m. Friday, May 11, 1956.)
Interstate Commerce Commission v. Mechling, 330 U. S. 567.