Mr. ROTHSCHILD. Just as in the case of the long- and short-haul clause, the purpose of the amendment is to do away with the unnecessary burden of obtaining relief from the Commission prior to publication of the rates. We believe that the public interest is not being served by the requirement that carriers obtain prior approval before putting into effect rates of this character. We also believe that permitting carriers to charge greater than the aggregate of the intermediate rates under such circumstances would parallel the principles applied by the Commission in granting relief from the present prohibition.

Now, Mr. Chairman, I am through with mine for the moment, and Mr. Ray will go on at your convenience, and then I shall return. Mr. HARRIS. Very well.

The committee will now recess until 2 o'clock.

(Whereupon, at 12:10 a. m., a recess was taken until 2 p. m., this same day.)

AFTER RECESS

The committee reassembled, at 2 p. m., pursuant to the recess, Hon. Oren Harris (chairman of the subcommittee) presiding.

Mr. HARRIS. The committee will be in order. We regret the interruption which has caused some delay in getting the hearings under way again this afternoon.

When the committee recessed for the noon hour, Mr. Rothschild had just completed his portion of the presentation on behalf of the Department of Commerce. At this point, as we understand, Mr. Philip A. Ray, General Counsel, Department of Commerce, will take up where he left off.

Mr. Ray, you may proceed.

STATEMENT OF HON. PHILIP A. RAY, GENERAL COUNSEL, DEPARTMENT OF COMMERCE, WASHINGTON, D. C.

Mr. RAY. Mr. Chairman and gentlemen of the committee, as a part of the presentation of the Department of Commerce on the legislation implementing the proposals of the Presidential Advisory Committee on Transport Policy and Organization, I shall discuss the features of the legislation having to do with suspension, volume rates, private carriage, contract carriage, and bulk commodity exemptions.

In the order of the report of the Presidential Advisory Committee there remain then to be covered the freight forwarders associations, the passenger-train and other deficits, and the section-22 matters.

SUSPENSION

Section 15 (7) of the Interstate Commerce Act and similar provisions set out in parts II, III, and IV authorize the Commission to suspend the effectiveness of rates proposed by any regulated carrier. Such suspension may be effective for a maximum period of 7 months. As a matter of practice, suspensions are often voluntarily continued in effect by the carrier beyond the 7-month period where the Commission has not reached its decision.

A suspension may be ordered by the Commission acting on its own motion or as the result of a protest filed by a shipper or a competing carrier before the effective date of the proposed tariff change. The standards pursuant to which a rate may be suspended are quite broad, providing the Commission an unusual degree of latitude in their application. Where a proposed rate is suspended, the current rate continues in effect and the carrier then has the burden of justifying the new rate before the Commission. If this burden of proof is not sustained by the carrier, his rate proposal may not be allowed to go into effect.

In fixing rates, we begin with the basic premise that the carrier has the initiative in proposing rates. Transportation is a field in which conditions change rapidly and the details which go into basic price determinations are complex and variable. Management must be constantly aware of these complexities and ready to move quickly to meet changing requirements to protect markets and revenues. Carrier management is best qualified to make these judgments. Nevertheless under current statutory provisions, the exercise of this judgment can be and often is inhibited by regulatory authority acting at the behest of competitors. When the regulatory agency chooses to suspend, its action necessarily causes delay. Delay of this nature can and often does cause irretrievable loss of revenue and business. It is inevitable that where such broad power exists in the regulatory agency, the initiative presumed to rest with management loses much of its practical effectiveness.

Thus, because of the serious effect which exercise of the suspension power may have, we believe that it should be restricted so as to make it an extraordinary remedy. We have proposed in H. R. 6141 and H. R. 6142 (secs. 7 (c), 11 (f), 12 (c), 17 (e), 17 (g), and 21 (d)) changes to assure that the suspension remedy be exercised only after due deliberation and consistent with strict standards to protest those interests which require special consideration. Basically the changes suggested are:

(1) The power of suspension should be exercised only after determination by the Interstate Commerce Commission on the basis of factual information supplied by the protestant, or as the result of its own investigation (a) that proposed rates, or related matters, are probably unlawful and (b) that making the rate effective would result in injury to the complainant, and (c) that in the absence of suspension, the complainant could have no other adequate way of getting relief.

(2) Reduce the period of suspension to 3 months.

(3) Where objection to the rate comes from a competitive carrier, let that carrier sustain the burden of proving unlawfulness of the rate. As to (1) (a) above a party objecting to a rate proposal ought to be required at the very least to make a prima facie showing that the proposed rate is unlawful. This does not mean that the whole case against the proposed rate has to be made in advance. But, there should be a sufficient factual and legal showing made at least on paper, in advance of a suspension, to persuade the Commission that there is need for further hearing and investigation before the lawfulness of the particular rate can be presumed.

Secondly, as to (1) (b) above, we propose that the remedy of suspension be limited in its availability to those whose interests are sufficiently direct that they would be injured by the new rate. In this respect, it should be kept in mind that the interest of the carrier proposing the rate to have that rate go into effect promptly is quite substantial. His financial well-being the volume of his businessand his ability to continue in a severely competitive battle may all be involved. The challenge which would justify a suspension should therefore come from parties having an immediate and direct interest. As to (1) (c) above, it is based on the idea that the extraordinary remedy of suspension, which prevents a new rate from going into effect, should not be utilized if in the judgment of the Commission the protestant has available some ordinary remedy which will in all respects protect him. On the other hand, if another remedy would be unduly burdensome or not provide complete or timely relief under the circumstances, the Commission might well grant suspension.

In order to obtain suspension, the protestant will be required to pass all three of these preliminary tests.

The argument has been made that the suspension remedy is used. only sparingly under present rules and therefore there is no need for any change. This position is based on figures comparing the number of suspensions with the much greater total of rate changes which go into effect without challenge. This overlooks the fact that most unchallenged rates are of limited importance. The rates which are actually challenged are of relatively greater importance, and the proportion of these which are suspended is substantial.

The historic purpose of the suspension remedy was to protect the shipper. Today the remedy is more often invoked to protect the competing carriers from the rigors of price competition. In such cases, the result is to force the shipper to pay higher rates for the carriage of his goods and to deprive management of initiative which is vital to effective competition. Under the provisions of H. R. 6141 and H. R. 6142, this remedy could not be invoked in the first instance unless certain specific conditions were met. These conditions by and large are similar to the preliminary conditions which a litigant must meet in any court if he seeks the extraordinary judicial remedy of a temporary injunction.

Because the remedy of suspension is also special in character, we believe there is ample justification that similar rules prevail. This is not only important in the interests of equal justice, but vital in the interests of meeting the practical requirements of fast changing business operation.

With a reduction in the instances in which the suspension power may be exercised, the justification for the current long suspension period will no longer exist. Quick action is obligatory whenever the suspension power is exercised.

We propose also to limit the use of the suspension remedy as a competitive weapon. We recognize that there is competitive interest in maintaining lawful rates, and we do subscribe to the idea that that interest deserves special regulatory protection through the power of suspension. On the other hand, we believe that suspension should be an extraordinary remedy, not a perfunctory one. The burden of proving a suspended rate unlawful is therefore placed upon the com

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peting carrier when his objection brings about the suspension, just as in the case of any judicial proceeding involving a temporary injunction or restraining order.

VOLUME RATES

Section 15 (a) (4) as proposed would give effect to the recommendation of the cabinet committee to:

*** make lawful such volume rates as are based on cost differences which rates are established to meet competition.

The proposed section provides:

(4) The establishment, maintenance, publication, and application of rates or changes for individual shipments of property subject to incentive minimum weights or in volume which make due allowance for differences in the handling costs of a carrier subject to this act and which are established for the purpose of meeting competition of other modes of transportation shall not be construed or held to constitute unjust discrimination, or undue or unreasonable advantage, preference, or prejudice.

By permitting volume and incentive rates, we seek to recognize as a matter of law that which is true as a matter of economic fact, and which the Interstate Commerce Commission has already recognized. Because of basic equipment differences which exist in transportation, the large shipment has a choice not available to the small shipment. This often results in an advantage which is not necessarily equalized by restricting competition to forestall lower quantity rates where competition and cost savings dictate such lower charges.

To a considerable extent the usefulness and lawfulness of volume rates has already been accepted. For a long time the Interstate Commerce Commission refused to permit quantity rates. Nevertheless, it changed its position in Molasses from New Orleans, La., to Peoria (235 I. C. C. 485).

We find that there is nothing unlawful in the establishment of railroad rates on a quantity larger than a carload, when moving as a single shipment, where, as here, they are designed to meet competition from other modes of transport whose unit of transportation is not limited to single carloads, provided a just and reasonable relation in rates as between the larger and smaller quantities of the same traffic is maintained.

In support of its conclusion the Interstate Commerce Commission reviewed the history of volume rate authorizations pointing out:

Throughout the history of railroad transportation in the United States, common-carrier railroads have published rates on the basis of carload and less-than-carload quantities, and in some instances on an any-quantity basis. With few exceptions rates have not been published on single shipments larger than a carload. Classification rules provide for the use of 2 cars when a shipment cannot be loaded into 1 car. Trainload rates and rates applicable on lots such as 10 or 20 cars have been generally disapproved and held to be unlawful. The question of lawfulness of such a rate has been involved in relatively few cases and has not been presented in any case in recent years (235 I. C. C. 495). * * *

The Commission further said:

It will be observed from a review of the above cases that our refusal to sanction trainload, multiple-car, or quantity rates, when the quantities were greater than single carloads, was based upon a finding of unjust discrimination (using that term in a generic sense) in favor of large shippers. Unjust discrimination, however, is a question of fact. Economic, industrial, and trans

portation conditions have materially changed since these cases were decided. In none of the above cases dealing with rates on quantities larger than a carload was it shown that the traffic in question moved in cargo quantities by water, or that the traffic in question had been diverted from common-carrier railroad transportation to shippers by private barge transportation. The movement here involved is a plant-to-plant movement by a private barge which has been in successful operation for 2 or 3 years. What is here attempted is that the common-carrier railroads, whose sole business is transportation, seek to resume the transportation service which they formerly rendered, and which for the past 2 years has been performed largely by the shipper for itself.

It is well settled that differences in the quantities shipped as a single shipment may afford a fair and reasonable basis for differences in transportation rates. In railroad transportation, these differences are currently recognized as between-carload, less-than-carload, and any-quantity lots. In truck transportation, in addition to truckload and less-than-truckload rates there are so-called volume rates (235 I. C. C. 498). * * *

The Solvents Corp. is able to move molasses over the water route from New Orleans to Peoria in multiple bargeload quantities at a very low cost. This is a preference in favor of large shipments which exists and which is lawful. The record also shows clearly that the railroads can move molasses between the same points in multiple-carload quantities of not less than 1,800 tons at a materially lower cost per 100 pounds than they can move single carloads. The question at issue is whether it is lawful for them to make rates .which reflect this inherent advantage in volume shipments in order to compete more effectively and profitably with the existing water transportation. In my judgment it is lawful (235 I. C. C. 503).

The then Chairman of the Interstate Commerce Commission, Joseph B. Eastman, in his concurring opinion, said:

The Commission has never condemned as unlawful the customary discrimination in railroad rates which gives the shipper of carload quantities a preference over the shipper of less-than-carload quantities. In past decisions, however, it has voiced the view that it is unjust discrimination, and hence unlawful, to give the shipper of trainload or multiple-carload quantities a preference in rates over the shipper of single carloads. Apparently the basis for this view has been considerations of public policy rather than considerations directly related to transportation; that is to say, that such preference would tend to concentrate business in the hands of large concerns contrary to the public interest.

The fact is, however, that certain other forms of transportation which compete with the railroads can lawfully, and do, give the shipper of large quantities a decided advantage over the shipper of quantities equivalent to a railroad carload. This is true of pipeline transportation, by its very nature, and it is also true of water transportation, where the shipper who can fill a boat or a barge can normally have his commodities carried on much more favorable terms than the shipper of lesser quantities. In recent years, also, these opportunities for transportation advantage to the large shipper have increased continually and rapidly (235 I. C. C. 502–503).

Enactment of the provision dealing with volume and incentive rates would give statutory recognition to the practical situation which exists. Under this proposal, actual competition would have to exist and any volume differential would have to be cost-justified.

PRIVATE CARRIAGE

Section 10 (c) of the bill implements the recommendation of the Advisory Committee report relating to private carriage. It amends section 203 (a) (17) of the act so as to define the term "private carrier of property by motor vehicle" as meaning any person not included in the terms "common carrier by motor vehicle" or "contract carrier by motor vehicle" who transports in interstate or foreign commerce by motor vehicle property of which such person is the owner, lessee, or