Gasoline from San Francisco Bay Points to Ogden, Utah, 198 I. C. C. 683). The new section 15a imposes upon us the same ultimate responsibilities as did the old (Emergency Freight Charges, 1935, supra, p. 26). In Florida v. United States (292 U. S. 1), the Supreme Court had this to say with respect to the new 15a:

"The new act discloses no intention to weaken national control for essential national purposes over the railway system of the country. It was rather designed to aid that control in the light of the depressed economic conditions of the railways."

Thus, if we have the power to set aside managerial discretion where the latter seeks to impose an undue burden upon carriers generally by an unwarranted reduction in rates, we must have the same power where it is sought to effect a like result by maintaining an unwarrantedly high level of rates. The same principle is applicable to both. This does not mean that the act does not leave the carriers "free to make special rates looking to the increase of their business” (Interstate Commerce Commission v. Chicago G. W. Ry. Co., (209 U. C. 108, 119), but it does mean that where, in our judgment, rates or fares have become a menace to the accomplishment of the aim sought by the statute, namely, "the need in the public interest, of adequate and efficient railway transportation service at the lowest cost consistent with the furnishing of such service," we have the power, and it is our duty, to intervene.

We believe that carrier self-interest tempered by the dictates of competitive enterprise is capable of producing a sounder rate structure than that which can be imposed by a regulatory agency required to exercise judgments in areas normally reserved to managerial discretion. We recognize the need for restraint to avoid discriminatory practices, such as below cost pricing.

It should be noted that there is no intention to deny the Commission the freedom to consider any factors now specifically required to be taken into consideration by the rule of ratemaking, save for those specifically barred by the new section 15a. It would seem clear that repeal of the rule, which is in the nature of a declaratory statute, simply removes the requirement that they be considered but does not prohibit the consideration of these or any other pertinent factors unless expressly barred.

The new standards as set out in section 8 of H. R. 6141 and 6142 have as principal purposes, to assure that dynamic competition will have a basic role in the determination of rates as between competing transportation enterprises and that the ICC shall be relieved of its function of regulating rates so as to coordinate competition between various transport media. Thus under proposed section 15a (1), the ICC shall not be permitted to disturb competitive rates for considerations growing out of:

*** the effect of such charge on the traffic to any other mode of transportation; or the relation of such charge to the charge of any other mode of transportation; or whether such charge is lower than necessary to meet the competition of any other mode of transportation.

Under existing regulatory criteria, regulated carriers have been prevented from putting into effect compensatory rates because of the effect such rates might have upon competing media. We believe this to be an unsound regulatory practice which results in inhibiting the movement of traffic by the most economical form of transport available. Such artificial barriers are economically unsound and lead to higher cost to the shipper. The consumer and shipper benefit most when traffic is allowed to move by the most efficient and lowest cost medium. This is not possible where rates are kept high because of the effect which lower rates might, in the opinion of the regulatory

agency, have upon competing media. In proposing this change we. are again mindful of the dissenting opinion of Judge Fee in Scandrett v. United States (32 Fed. Supp. 995), previously cited. Judge Fee's remarks bear repeating in this connection.

The Interstate Commerce Commission have in this case departed from the traditional role of conservators of the interests of the public at large, by refusing to permit rail carriers to reduce rates on petroleum products from Portland, Oreg., to the area near Spokane, Wash., even though the Commission found such proposed rates were "compensatory considering all costs." Thereby, the Commission not only interfered with the managerial discretion of the rail carriers, but also frustrated a fundamental policy established by the Congress that the lowest rates should prevail where consistent with the proper service.

We believe that enactment of this section will go a long way in restoring the principle that in the absence of discrimination, the lowest rates should prevail where consistent with proper service.

Some question has been raised to this recommendation upon the ground that competitive ratemaking, if permitted, would result in higher rates upon noncompetitive traffic. We do not believe this will be the case. În proposed section 15a, paragraph (2), the Commission is directed to:

** take into consideration the extent and effect of competition with respect to the service to which the charges apply to the end that carriers will be prevented from imposing excessive or unreasonable charges on traffic which is noncompetitive.

The new section 15a also provides that just and reasonable maximum charges shall not be reduced below "the full cost of performing the services to which they apply exclusive of losses in other services. This provision is intended to protect the carriers against being required to perform services at a rate less than the costs applicable to the service to be performed. This would avoid situations such as that in Baltimore & Ohio Railroad v. United States (345 U. S. 146). In that case the Supreme Court upheld an ICC rate order, even though the rates were fixed at levels below cost. In a dissenting opinion in that case, it was said:

Can a confiscatory rate be a "reasonable" rate under the statutory and constitutional system within which the Commission operates? It is incredible to me that Congress used "reasonable" in such an odd and unsual sense. * * * We agree and accordingly recommend this revision of the act to remove any doubt on this score.

Section 15a (3) as proposed would give legislative recognition to the actual fact that differences do exist as between various modes of transportation. This provision would extend to other forms of transportation the same rule now applied in section 305 (c) to water carriers alone. Enactment of this provision would equalize the regulatory relationship as between various modes of transportation to the end that advantages inherent to the particular modes of transport are not blocked by regulatory inhibitions.

LONG AND SHORT-HAUL CLAUSE

Section 4 of the bill implements the recommendation of the Advisory Committee report relating to long- and short-haul rate adjustments by removing the procedural requirement that—

rail or water common carriers obtain prior approval *** for charging less for longer than for shorter distances over the same line or route in the came direction, the shorter being included in the longer, if necessary to meet actual competition and the charge is not less than a minimum reasonable rate.

While continuing the prohibition of violations of the long- and short-haul clause, the amendment would discontinue the requirement for licensing of such departures when they were "necessary to meet actual competition" and were "not less than a just and reasonable minimum charge." These provisos were incorporated into the amendment to preclude any doubt that the new section 4 could be so applied as to weaken and circumvent the other regulatory provisions of the Interstate Commerce Act. While the amendment does eliminate the special licensing requirement for section 4 departures, it is in no way intended to accord such rates any privileged treatment as to the actual determination of their lawfulness by the Commission.

Section 4 as presently constituted interferes with the freedom of railroads and water common carriers to fix competitive rates. Motor common carriers are not subject to the long- and short-haul prohibi

With the exception of instances where a departure from the long- and short-haul prohibition of section 4 is involved, the railroads and water carriers under the law have the duty and right to initiate, publish, and file reasonable rates with the Interstate Commerce Commission without first obtaining its consent. There is no valid reason why this should not be done in every instance. Under the present long- and short-haul clause much time, effort, expense, and delay are involved in makingg an application to the Commission for permission to file a tariff. The purpose of the amendment is to relieve the rail and water carriers of this burdensome procedure in the presence of competition.

Section 4 now provides:

It shall be unlawful * * * to charge any greater compensation in the aggregate * * * for a shorter than for a longer distance over the same line or route in the same direction, the shorter being included within the longer distance *

The section also provides that rail and water carriers can apply to the Commission for relief from these prohibitions and authorizes the Commission to license long- and short-haul departures "in special cases" provided that the proposed rate is "reasonably compensatory for the service performed" and the relief is not sought "on account of merely potential water competition not actually in existence."

The justification for continuing the special licensing procedure presently required for long- and short-haul adjustments in competitive situations is questionable, for thhe Commission issued only 77 denial orders in response to the 1,421 applications that were filed for long- and short-haul relief during the year ending October 31, 1955. Of 267 petitions filed for the modification of outstanding orders under the section, only 18 were denied during the same period. Any purported regulatry benefit derived from his special procedure would seem to be diminished by the following stipulation wihch in included in every fourth section order in which relief is granted:

The Commission does not hereby approve any rates filed under this authority, all such rates being subject to complaint, investigation, and correction if in conflict with any provision of the Interstate Act. [Italic supplied.]

Here is an example of a competitive situation under the present section:

A motor or a water carrier reduces its rate on a commodity moving between a point A and point B which results in a diversion of traffic from a competing carrier. If the affected carriers decides that it could retain or regain this traffic by a rate reduction, it must-under the present section 4-choose between either making other reductions on this same commodity for the points it serves intermediate to A and B, or applying to the Commission for special relief. If the affected carrier chooses the former course he is arbitrarily obliged to curtail his earnings. If the carrier chooses the latter course, it must go through the usual procedure of getting the prior approval of the Commission and, as indicated before, such rates would still be subjected to complaint, investigation, and correction.

Applying the proposed revision to the preceding competitive situation, the affected carrier could set a new rate "not less than a just and reasonable minimum charge"-to meet competition, but without having to make reductions on the same commodity at the intermediate points between A and B and without obtaining prior approval from the Commission. In other words, rail and water carriers would have the right of initiating long- and short-haul departures by filing with the Commission in exactly the same way as all other rates are filed. The suspension procedure would give competiting carriers, and interested shippers and localities adequate protection prior to application of the rates and section 3 remains unchanged for protection against unjust discrimination.

In its 1955 report, the Commission recommended that

Section 4 (1) be amended so as to eliminate the necessity of securing prior approval of the Commission for the publication of rates over circuitous routes equivalent to the going rates over direct routes when, in the managerial discretion of the carriers, such rates are necessary because of competitive factors.

In its statement of justification for their proposed changes, the Commission said:

The proposed amendment is specifically designed to make the fourth section self-operating with respect to the right of a circuitous route to meet the rate or rates legally established between competitive points over the more direct routes. No further authorization from the Commission would be required other than the standards laid down by other sections of the act. As an incident of this suggested change we are proposing to remove from section 4 the reasonably compensatory provision. This, in our opinion, would eliminate from section 4 all of the unnecessary refinements of the long- and short-haul principle, would terminate our responsibility with respect to fourth-section departures over circuitous routes, and would limit our jurisdiction to authorizations of relief over direct routes, upon application and after investigation, where special justification for such relief is shown.

Experience has demonstrated that the public interest is not being served by the imposition of the restrictions in question, and the history of their administration has proved them to be excessively burdensome to all concerned. Together they have resulted in disproportionate expenditures of time, labor, and funds by both the carriers and the Commission in comparison with the relatively small benefits derived. Almost all of the dissatisfaction with section 4, which has been expressed periodically by carriers and shippers alike, appears to stem from the same burdensome provisions. [Italic supplied.]

While the Commission recommends that any such amendment regarding departures be limited to those instances involving cricuitous routes, the logical conclusion from its own reasoning, as expressed above, is that any such amendment should apply to all long- and shorthaul situations in furtherance of the public interest.

There would seem to be little, if any, possibility of a return to the conditions which led to the enactment of the fourth section. The Commission's minimum rate power could be employed to correct any unreasonably low rates. Intermediate points would be amply protected against unreasonably high or unjustly discriminatory rates by the Commission's maximum rate authority and authority to deal with the section 3 violations. Moreover, intermediate points have additional protection from the ready availability of competing carriers who would move into the field upon the invitation of high rates.

Section 4 of the bill also amends section 4 (1) of the act so as to delete the prohibition against a rail or water common carrier charging "any greater compensation as a through rate than the aggregate of the intermediate rates." Although no provision is made for granting relief from this provision of the section, the Supreme Court has held that the Commission has such power (Patterson v. L. and N. Railroad, 269 U. S. 1).

The recommendation of the Advisory Committee report was intended to eliminate the necessity for obtaining prior approval for charging greater compensation as a through rate than the aggregate of the intermediate rates. It was also intended that rail and water common carriers should continue to be prohibited from charging more as a through rate than the aggregate of the intermediate rates except in those instances where any or all of the single factor rates used to make up the aggregate of intermediate rates were established by the carrier to meet competition.

Since the bills, by inadvertence, do not accomplish the last-mentioned objective we are suggesting that section 4 of the bill amend section 4 (1) of the act so as to accomplish this. We have prepared an amendment in this respect which I should like to have inserted in the record at this point. I would be glad to read it if you want it read.

Mr. HARRIS. You may insert it in the record if you like so we will have it for our consideration in view of the fact that you have already explained the purpose of the amendment.

(The document referred to is as follows:)

PROPOSED SUBSTITUTE FOR SECTION 4 OF H. R. 6141 AMENDING SECTION 4 (1) of THE INTERSTATE COMMERCE ACT

Section 4, paragraph (1) of section 4 of the Interstate Commerce Act, as amended, is amended to read as follows:

"(1) It shall be unlawful for any common carrier subject to this part or part III to charge or receive any greater compensation in the aggregate for the transportation of passengers, or of like kind of property, for a shorter than for a longer distance over the same line or route in the same direction, the shorter being included within the longer distance, or to charge any greater compensation as a through rate than the aggregate of the intermediate rates subject to the provisions of this part or part III except in cases where any or all of the single factor rates used to make up the aggregate-of-intermediates rate has been established by the carrier to meet competition, but this shall not be construed as authorizing any common carrier within the terms of this part or part III to charge or receive as great compensation for a shorter as for a longer distance: Provided, however, That such common carrier may charge less for longer than for shorter distances for the transportation of passengers or property if the charge established to or from the more distant point (a) is necessary to meet actual competition of another carrier or carriers, and (b) is not less than a just and reasonable minimum charge."