applying the charge. Of course, with every shipment, unless the shipper is capable of or desires to, there would be packing, particularly of dishes, glassware, mirrors, and material of that nature.

Mr. HINSHAW. That is something which is not part of the accessorial charges and is controlled by the Commission?

Mr. ROWAN. Yes, the charges are controlled by the Commission. Mr. HINSHAW. The charges are on an hourly basis, are they not? Mr. RowAN. No, they are on a unit basis.

Mr. HINSHAW. For instance, if you pack one barrel of dishes?

Mr. ROWAN. You are charged by the number of barrels packed or the number of cartons packed. It is all spelled out in the tariff; one size of carton a certain charge; a different size, a different charge.

Mr. HINSHAW. I gathered from statements previously made that you could make up for some of this differential discount, at least make up for the discount, in accessorial charges.

Mr. RowAN. What is alleged to happen there, the military prescribe certain minimum requirements of packing which are not necessarily the carrier's concept of the packing requirement which exists. So in following the military requirements many times, so the story has been told to me, there will result more packing charges than if the carrier followed his own concept of what type and amount of packing was necessary.

Then, too, if a carrier is so inclined he might employ two barrels where a more efficient or conscientious carrier would get it all into one barrel with the same degree of safety.

Mr. HINSHAW. I can undererstand that, having moved a couple of times.

I want to quote from the language of your statement on page 15 so that we will have that statement here in connection with the present statement:

It would seem to indicate that Government transportation officers, in their preoccupation with obtaining the cheapest transportation rate, are overlooking alleged practices of fraudulent weights and accessorial service charges. Moreover, from within the industry itself come recent charges that such practices exist.

In other words, when you say they are overlooking it, you mean they are purposely failing to seek it.

Mr. RowAN. It comes about in this manner, Mr. Hinshaw: The job is awarded on the lowest transportation rate without any prior investigation as to what the accessorial charges might be. In other words, the carrier who has the sharpest pencil gets the job, and that pencil is applied only to the transportation rate itself, not to these accessorial charges.

Mr. HINSHAW. Therefore, the accessorial charges like using two barrels instead of one, just come incidentally, I take it.

Mr. ROWAN. That is right. Now there is an investigation in progress within the military-I saw some letters to that effect-in which they are paying some attention to this, obviously, and they are writing carriers and calling their attention to the fact that their accessorial charges average out greater than some of their competition, but that is an after finding. That is not a finding at the time they decide to award the business.

Mr. HINSHAW. That is very interesting.

I should like to ask one question which may be answered in the course of your statement, and that is the proportion or percentage of the cost of transportation of goods that are handled by the Movers Conference under section 22 and the proportion which remains, which of course is handled under standard rates. For example, the Defense Establishment or the General Accounting Office may figure at some time that section 22, if repealed, will cost a certain amount more than the present charges. Of course, I doubt that it will cost them very much, but suppose they said it came out to 200 or 300 million dollars, then the percentage of goods moved for the Government under section 22 and the percentage moved under the standard rate would be an interesting figure.

Mr. ROWAN. I might answer in this way, Mr. Hinshaw: The average earnings of household goods carriers-I do have some testimony in that direction are crowding 100 percent. What I mean by that is that the Commission recognizes if a carrier can save 6 percent out of his revenue before taxes he is in a very, very good position. Most of our carriers today are crowding 100 percent, meaning they are making nothing.

On that basis, if they grant reductions, which they are doing daily, upwardly of 25 or 30 percent of their published tariff rate, you could hardly call that a savings to the Government, because the burden of it must fall on the taxpayer.

Then, too, I call your attention to the fact that in service to civilians and in service to Congress about the only effort required of a shipper is to pick up his telephone and call a mover, and that immediately sets all of the required service in motion. All Government departments that ship any amount of household goods at all maintain traffic departments, inspection departments, claim departments, and what have you. In other words, they assume an overhead that I firmly believe would not be necessary in a great many instances if they would follow private or commercial practices in engaging a moving service. There are duplications of what is available from the carrier itself.

Mr. HINSHAW. I believe you said in your statement that approximately one-sixth of the business of the Movers Conference carriers was Government business and the balance of course is private.

Mr. RowAN. That is a general figure. I call your attention to the fact that in certain localities where there are large military installations the relationship of military to civilian business can well be 50 or 60 percent.

Mr. HINSHAW. I get that all right, but I am talking about the onesixth and how much of it is section 22 and how much of it is standard rates.

Mr. ROWAN. Ninety percent of the one-sixth would be at the reduced

rate.

Mr. HINSHAW. Thank you.

Mr. HARRIS. Mr. Rowan, if you don't get to your statement you are not going to get through today.

Mr. ROWAN. Exhibit No. 10 identifies an order by the Pennsylvania Public Utility Commission in which it concludes that under the Public Utility Law of Pennsylvania there is no exemption of transportation for the Federal Government and that it is unlawful for a carrier

to transport for the Government at rates other than contained in its published tariff. In its opinion, the Pennsylvania Commission found it necessary to state acidly that a carrier

cannot be relieved of its obligation to comply with the law merely because a Government agency is the shipper.

Exhibit No. 11 presents another instance in which a State regulatory body has refused to overlook evasion and violation of its laws and regulations brought about by zealous Government transportation officers in pursuit of cheaper rates. In a letter addressed as recently as May 4, 1956, to all intrastate household-goods carriers, the Georgia Public Service Commission warns that it is not possible for any Georgia household-goods carrier to quote rates on the basis sought by the United States Armed Forces. Characterizing the bid invitation used by the Armed Forces as having many provisions not in compliance with the regulations of the commission and, in instances, entirely incorrect and containing statements contrary to the actual facts, the Georgia Commission admonishes that, although it desires to cooperate with Government installations in securing transportation at reasonable rates, the laws of Georgia provide it with the responsibility to prescribe and approve just and reasonable rates and charges for all services rendered by common carriers and no variation from filed and published tariffs is permitted unless it so orders.

Other centers of conflict between State regulatory bodies and the Federal transportation procurement officers include California, where the General Services Administration unsuccessfully sought to challenge cancellation by the California Public Utilities Commission of a Government reduced-rate provision.

In North Carolina, the utilities commission similarly has warned the carriers of that State that any variation from lawfully filed tariffs for the account of the armed services or any other shipper without formal filing and review will be interpreted as a violation of the law and regulations of that State, and, consequently, that they may not bid on the basis of invitations extended them by the Army and Marine Corps. Despite repeated advice of the commission's stand, invitations to bid continue to be circulated to the carriers. In one instance it has been said that rather than do business on the basis of the North Carolina tariffs, the Army would use their own facilities. And on at least one occasion, the commission found it necessary to advise four carriers that "show cause" orders would be issued relative to cancellation of their certificates if they performed under bids filed with Camp Le Jeune. In Texas, another pitched contest is underway concerning the propriety of reduced rates on Government intrastate movements under the laws and constitution of that State. A lower court decision against reduced-rate privileges of the Government agencies has been appealed. In an earlier but nontheless significant case involving the law of Kentucky, the United States Court of Claims, on May 4, 1954, in Huges Transportation, Inc. v. United States (121 F. Supp. 212), held that the General Services Administration could not enjoy a reduced rate which the contract carrier had failed to submit to the Kentucky Department of Motor Transportation for approval. The importance of the case rests in the decision that section 22 does not permit Federal

agencies to flaunt State laws in the field of intrastate transportation, and, in so holding, the court was sufficiently impressed to consider that: It would seem unthinkable that the Federal Government which is responsible for the enactment and enforcement of such regulatory statutes as the Interstate Commerce Act and the Motor Carrier Act *** should not be bound by the same statutory limitations on its right of contracts as other shippers and users when it acts by contract in its nonsovereign capacity * as a shipper in intrastate commerce.

If the competitive conditions permitted under section 22 have increased the burden of regulation and constrained the Interstate Commerce Commission in its efforts to curb and correct abuses, those States which preclude or make no provision for reduced rates to the Government have not evidenced similar constraint. Such States are free to take and have taken positive and affirmative measures to nip those abuses expected to be avoided by public regulation.

ABUSES CITED IN PUBLIC PRESS

One further example will be given of the pressure for cheaper rates. Exhibit No. 12 appeared in the Commercial Appeal, Memphis, Tenn., only a few mornings ago on May 10, 1956. The article carries the title, "Low Bids Get Jobs, Navy Tells Movers," and a subtitle, "Rates To Be Revealed." Ignoring that part of the article dealing with an alleged incident of conflict of interest on the part of a civilian household goods supervisor, there are at least 5 matters recited in this 1 article which deserve to be noted:

1. The statement that a rate war is responsible for a limited number of firms getting business from the Memphis Naval Air Station.

2. The statement that the Navy regulations require giving business to the carrier "affording the lowest overall cost to the Government." 3. The statement that with 41 movers competing for business, the lowest rates on file with the naval installations were kept secret. 4. The statement that between January 17, 1956, and April 21, 1956, the Memphis Naval Air Station received 19 notices of rate changes, most of them reductions.

5. The statement that five firms recently were penalized by the Memphis Naval Air Station by being "suspended" for periods from 30 days to indefinitely, for offenses which included "excessive transit time to San Diego," a complaint that packers were drinking wine on the job, and "failure to provide unpacking services at the destination."

The accretion of abuses existing at this one naval air station ought to be compared with the statement made to the members of this subcommittee by the witness for the Department of Defense, in which he said:

I have said over and over to the top officers of the Department that our rate level is too high. We are getting organized to do something about it (transcript, p. 157).

In fact, the tenor of this witness' testimony before this subcommittee was to the effect that the Department of Defense insists on making the final determination as to whether or not a rate is "compensatory" without interference from the Interstate Commerce Commission.

WHAT CONSTITUTES AN ABUSE?

The word "abuses" has been used in numerous instances in this presentation as a shorthand term to cover all of the host of conditions which have developed under the generative force of pressure of cheaper rates and unchecked disregard of restrictions. Many of these abuses, of course, represent downright misconduct on the part of wrongdoers, not only in doing things contrary to ordinary, common morality, but in doing things contrary to law and regulations.

But, as we have endeavored to demonstrate, these abuses go further than that. They have their roots in and are responsive to an even larger abuse. If any of the large business or industrial firms in this Nation were to throw their weight around as the agencies of the Federal Government have done, they long since would have been subject to prosecution under any number of laws. Yet no other economic force in this country is comparable in size and activity to the Federal Government, and, for that reason, no other force so completely overwhelms the individual. Nevertheless, the correctives available to check the abuses of economic power by big business or industrial firms are not applicable to the Federal Government when it acts in a similar role.

An observation by James Madison is entirely appropriate:

You must first enable the Government to control the governed; and in the next place oblige it to control itself (The Federalist, No. 51).

Is it any wonder then that members of a regulated industry suffer loss of confidence and freely characterize acts of the Federal Government as "despotic," "arbitrary," "tyrannical," "dictatorial," and a host of other such terms when, on the one hand, they are closely regulated and supervised by an expert, specialized body and, on the other hand, subjected to all the abuses inherent in uncontrolled exercise of great economic power?

EARNINGS AND FINANCIAL CONDITIONS IN THE MOVING INDUSTRY

The Government agencies opposed to elimination of the Government free of reduced rate privilege contend that the carriers would not extend services to the Government below a compensatory level. While it is true, as evidenced by some of the letters contained in exhibit No. 2, that some carriers will not expose themselves to the hazards of competing for Government traffic, it is also true that public regulation would not be necessary if self-regulation would suffice or private regulation were possible.

The Government witnesses then argue, with some propriety, that it is the carriers who are responsible for the chaotic and demoralized conditions which exist under section 22 since it is within their power to extend or withhold a reduced rate. Faced with a practical problem, the carriers are required to lower their rates in a race to get business where others could take it from them. As a result, Government traffic most frequently is handled at a tremendous loss. And very often the rates they charge elsewhere are not enough to make up for the losses sustained in handling the Government traffic.