Mr. Hale?

Mr. HALE. I would like to say, along the lines of what Mr. Hinshaw was saying, that this whole concept of maximum and minimum rates gave the committee a great deal of trouble in the hearings last September, as I think the Secretary will remember. I anticipate that we shall continue to have trouble, because it is to me a very difficult concept. If there is anything that can be said now that will throw any particular further light on that matter, I think we would be glad to have it.

Secretary WEEKS. After the sessions last September, we submitted quite a memorandum on the question raised, attempting to answer the points that were raised at that time.

Mr. HALE. Is that memorandum in the printed hearings of last September?

Secretary WEEKS. It is. Yes, sir.

Mr. HALE. I am glad to be reminded of that.

Secretary WEEKS. We would be glad to see that the committee is. supplied with copies. It is on page 50 of the printed report, a memorandum on changes in minimum-maximum rate controls proposed by the Presidential Advisory Committee.

Mr. HALE. I think I had better read that memorandum, because I don't think I read it at the time.

Secretary WEEKS. There is a chart attached at the end of the memorandum.

Mr. HALE. The only other thing I want to say is that I have been troubled for a long time by the problem of passenger-carrying by railroads. If we can do anything in this legislation which will help the railroads to carry passengers, without losing so much money, I would be deeply interested. I think it would be a most constructive thing.

Secretary WEEKS. That is a very difficult problem, Mr. Congressman. I think the ICC has started studies and some of the State regulatory bodies have.

Mr. HALE. As the Secretary may know, this committee has been struggling with the problem of carrying passengers through the streets of Washington, which is also a very difficult problem. The business of passenger-carrying is still quite necessary, but unfortunately not profitable.

Secretary WEEKS. The advent of the automobile and the airplane has complicated it some. It is a real headache, that one, I am sure. Mr. HALE. I still like to go to Maine by night train, or even to New York by day train. And I wish I could feel that I could be something besides an object of charity from the railroad company when I did it. That is all.

Mr. WILLIAMS. Mr. Dolliver?

Mr. DOLLIVER. Mr. Secretary, I think the objective that the Presidential Advisory Committee on Transports Policy and Organization has is a very fine objective, that is, to provide better transportation to the American public. It is only fair to say, however, that already we have the best transportation system in the world. But that does not defer us from trying to improve it.

I think without any question there is no like area in the entire world that has the fine and adequate transportation that is in the continental boundaries of the United States, by all forms of transport.

Having said that, I am wondering about some of the provisions that are proposed in the bill which is before us, which carries out the provisions of the recommendations of the Advisory Committee. For example, I am considerably troubled by the provisions eliminating the long-and-short-haul clause in the present Interstate Commerce Act. Would you care to comment on that?

Secretary WEEKS. Well, as a practical matter, the way it operates today, your water and rail carriers are subject to the provisions, and the truckers are not. The way it operates today, I think of some 1,400 decisions rendered in the year ending October 31, 1955, only 77 were denied.

Mr. DOLLIVER. Yes; I remember that, in your statement.

Secretary WEEKS. And we feel that where it is necessary to meet competition, and where the resultant rate is, according to the decision of the ICC, a just and reasonable rate not discriminatory, any carrier should have, without going through the process of getting special permits, which normally have been granted, the right to compete on that basis.

Mr. DOLLIVER. Despite that fact that there is so small a percentage of decisions adverse or in compliance, perhaps, with the long-andshort-haul clause, even though 77 perhaps had some impact upon the particular community involved, would that not be true?

Secretary WEEKS. Well, the 77 might. Under the proposed procedure, let's say, you waive the present provisions under the long-andshort-haul clause, and there were still 77 that might not have been granted as under the present procedure. Well, those 77 would be susceptible to the suspension treatment that we asked for in the proposal. So that I think all concerned should be protected.

Mr. DOLLIVER. I am sure that you recognize the geographical background of my concern about this matter. I come from the central United States, the Mississippi Valley, and Midwest, and we are utterly dependent upon rail transportation and truck transportation. We virtually have no water competition. And the water competition, for example, between the coasts conceivably could put us at a very great disadvantage trafficwise, either by truck or by rail. So I am sure you understand my concern about that.

Mr. WILLIAMS. Mr. Flynt had some questions, and I have a few questions that I would like to ask. The bells have rung for a quorum, so we will recess until 2 o'clock.

(Whereupon, at 12: 20 p. m., a recess was taken until 2 p. m.)

AFTERNOON SESSION

(The committee reconvened at 2 p. m.)

Mr. WILLIAMS. The committee will come to order, please.
At the time we recessed, I believe Mr. Dolliver had the floor.

But before you proceed, Mr. Dolliver, let me express to the Secretary on behalf of the committee our appreciation for his coming back before us this afternoon and permitting us to continue our interrogation. We will try to wind this up as soon as possible. Mr. Secretary, and let you get back to the important duties of your office.

Mr. Dolliver?

Mr. DOLLIVER. We were discussing the long- and short-haul provision of the present act and the recommendation that as I understand would eliminate it in the pending legislation; is that correct, sir?

STATEMENTS OF HON. SINCLAIR WEEKS, HON. LOUIS S. ROTHSCHILD, PHILIP A. RAY, AND EARL B. SMITH-Resumed

Secretary WEEKS. We recommend that the rail and water carriers operate under the recommended proposals, without having to obtain specific permits for variance of the rates on long and short haul, provided that whatever rate is established is always subject to having been set because of competition, and to the requirement that it is not below a just and reasonable minimum charge, and is not unduly discriminatory. Under the setup, the same remedies that would apply on any rate apply here-the remedy of suspension, and of review by the Interstate Commerce Commission. So for all practical purposes, you are eliminating the provision that they must go and get a special permit to change the rate under this long- and short-haul section.

Mr. DOLLIVER. You used the word "nondiscriminatory." When you use the term "nondiscriminatory," do you mean it is not discriminatory as between individual shippers?

Secretary WEEKS. Well, I use "nondiscriminatory," under the statute today, or as proposed, as meaning that you cannot discriminate between shippers or classes of shippers; that you must come under the general rule pertaining to the common carriers, that you operate with published rates and published schedules and without undue discrimination.

Mr. DOLLIVER. Does the term "nondiscriminatory" apply as between localities, or communities, as well as between shippers or classes of shippers?

Secretary WEEKS. I would say that it applies between localities, except where, for example, you are bringing a shipment from Seattle to Chicago. Under this provision, if you want to meet water rates, or what not, to meet competition you could discriminate insofar as giving a better rate on the long haul than, say, from Spokane to Chicago. But the "discriminatory" feature, in my view, simply goes to the matter of discrimination in the sense that you shall not treat this fellow any differently than that fellow, and you shall not treat communities that are similarly situated any different, or classes of shipper. Mr. DOLLIVER. It would seem to me, Mr. Secretary, by what you said, that the community of Spokane would be discriminated against; where you say that water competition would permit a cheaper rate from Seattle to Chicago than from Spokane to Chicago. It is certainly conceivable to me that you would discriminate very seriously against Spokane.

Secretary WEEKS. Well, there is the wording "undue discrimination." Obviously, where there is a shipment that is going from Seattle to Chicago, and which has two ways to go, if a carrier wants to meet the competition he will have to meet it by price, service considered. That price, however, may be lower than the rate applicable from an intermediate point. Now, today, as far as the record goes, the Commission allows that.

I would not call it discrimination. Can I ask Mr. Ray to comment on the "discriminatory" feature?

Mr. DOLLIVER. Yes; indeed.

Mr. RAY. What we have tried to do here is make a procedural change merely, not a substantive change at all. Because the Commission has granted section 4 departures where it has found these factors to be present, where the rate would not be below a reasonable minimum and it would be put in to meet actual competition. That is in the statute now. But the way it works now, you must go to the Commission in the first instance and ask whether they agree. And in most cases, as the records show, they do agree.

Instead of that, the carrier would at its peril put the rate in. And if it wasn't a situation in which the Commission would under present law have granted relief, then all the remedies of reparation and everything else would continue to prevail.

So the point I am trying to make is that it is not a substantive change; it is a procedural one.

Mr. DOLLIVER. Will you call my attention to the language in the proposed legislation, so that it will be in the record, where there is the indication that it is only a procedural change, rather than a substantive change?

Mr. RAY. Yes. Section 4 as amended in this respect would read as follows:

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, 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.

And as I say, that point (a) and point (b) there, are the tests by which the Commission now determines whether or not to grant the license upon application.

Mr. DOLLIVER. In other words, you claim, under those particular sections which you have just read, that there is no substantive but only a procedural change as far as the long and short-haul clause is concerned.

Mr. RAY. Yes, sir.

Mr. DOLLIVER. Now let's look at a little different segment of this bill, on which you have expressed yourself, Mr. Secretary. That is with respect to lower rates for bulk shipments. I believe there is something in this proposed legislation that would permit the carrier, whether it be railroad or other carrier, to charge a lower rate for a large shipment than for a small shipment.

I would take that to mean, probably-and if I am in error on this, please correct me--that if, for example, a trainload of lumber, let us say, was shipped from the west coast to the Middle West, it would get a better rate than the carload lot rate. Would that be a proper interpretation of what you are talking about?

Mr. RAY. Yes, indeed.

Secretary WEEKS. Yes. Today the principle, which seems to me to be established, applies where you have a quantity discount, so to speak, as for example between a carload and a less-than-carload råte.

Under this recommendation on volume shipments, you simply extend the present practice to enable a railroad, for example, on a number of carloads, in one haul, to give a better rate than they might on one carload. It is a principle that is well established in business, to give quantity discounts. And as I say, it has come into the transportation business to the extent of allowing different rates on carloads than on less than carloads.

Mr. DOLLIVER. I wonder what this bill would do in a situation of this kind. We will say that in my section of the country there is a large chain of lumber stores that can afford to bring their lumber in by the trainload lot from the Northwest, where we get most of our lumber. How is the fellow that has only one lumber store and can only bring in a carload at a time going to compete with this big lumber combine? What happens to him? He is put out of business, is he not?

Secretary WEEKS. I do not think so; any more than a man manufacturing a certain article that sells in considerable quantity to one store may give a quantity discount, as opposed to a somewhat higher price on smaller lots.

Mr. DOLLIVER. Of course, the manufacturer has some control over his costs and his processes of manufacture. And there are certain. shortcuts. But the cost of transportation of an article, like lumber, is a fixed cost, which he cannot escape. Am I not right about that? Secretary WEEKS. No, I don't think so.

Mr. DOLLIVER. Well, why? Why not?

Secretary WEEKS. Perhaps he can control his cost to a lesser degree than the manufacturer. But there is a great variance in costs, it seems to me, as between segments of transportation and different companies in the same line of the transportation business.

Mr. DOLLIVER. Alluding again to the chain group of lumber stores and the individual lumber store, how can the individual lumber store overcome that competitive disadvantage to which he is put if you submit lower rates for bulk shipments? How can he overcome that?

Mr. RAY. Could I answer that?

Mr. DOLLIVER. Yes.

Mr. RAY. I wanted to state that here again also the proposal of this bill is especially a recognition of the present court decisions. It is substantially a codification of thme. And again, in the statute, this is not an unlimited right. There must be two ingredients, for in order for there to be a differential in any multiple carlot, it would have to meet actual competition, and the rate would otherwise have to be lawful, compensatory, and so forth. And secondly, the difference would have to be cost justified to the carrier. In other words, it couldn't simply charge a lesser amount for a larger quantity without a showing of cost justification. And this is substantially what we do under the Robinson-Patman Act today, which is our antidiscrimination statute in the general field—to permit quantity discounts, but to insist that they be no lower than to meet competition, and that they be also cost-related.

Secretary WEEKS. It must be specified here that this must be to meet competition, and he has not less than the just and reasonable minimum rate. It is a standard practice in the country, to offer volume discounts. And it is the practice today, as I say, as between carload and less-than-carload lots.