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thought that the essential function of the regulatory body can be

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very infrequently exercised, has been one factor to some extent in Cising some kind of a management function on what exactly the late should be. Since most of these matters arise where the competitor attacks a rate as being too low and seeks a higher minimum rate, it is

• Mr. Ray. Yes; if it is nondiscriminatory.

Mr. HINSHAW. A compensatory rate? * Mr. Ray. If it is not discriminatory; yes. However, I should add that there is quite a difference of opinion among courts and economists as to what we mean when we are saying, here, "compensatory," whether it means fully compensatory, or out of pocket plus some contribution to the overhead, or just what "compensatory” means. We realize that Congress has never since 1920 had a statutory definition of what, from a profit point of view, is a lawful rate.

Mr. HINSHAW. No. I think the Congress has relied upon the deci-sions of the courts in that matter. And I cannot fight the case, al-though I should be able to fight the decision, but they have relied generally upon the courts to interpret the language of the Congress, when it said that a rate shall be just and reasonable. But I do not think that any decision has been made as to what a just and reasonable maximum rate and a just and reasonable minimum rate were.

Mr. Ray. Well, there has been a great deal of litigation in both of those fields.

Mr. Hinshaw. Can you cite a court decision which states what those Words mean?

Mr. Ray. What a just and reasonable minimum and a just and reasonable maximum means?

Mr. HINSHAW. Yes. Vr. Ray. Well, I think we have cited a number of them here. The lecision referred to in connection with the minimum rate is to the effect that there is nothing unconstitutional in the ICC making a determination that a rate which is not compensatory should remain in effect and should not be raised. That is on the minimum side.

Mr. HINSHAW. That is not quite to the point. I am talking about the court determination of the meaning of the language.

Mr. Ray. There has been no single court decision which endeavors to state exactly what the words “just and reasonable” minimum mean. But in countless situations the ICC's adjustment of what is or is not a reasonable minimum under the statute has been challenged in the courts. And sometimes it has been upheld, and sometimes it has not

Mr. Flynt. Mr. Ray, I want to go back to your answer to my last question. See if I understood you correctly. You said that, under the law as proposed in H. R. 6141, the carrier would still file a precise rate.

Mr. Ray. That is correct.
Mr. Flest. That is the law now?
Mr. Rar. That is right, sir.

In: Flynt. All right. Why then is it even necessary or desirable include these lines 17 through 19, to which I have referred at least

Mr. Ray. The reason or philosophy behind that change is that the Commission's precise ratemaking power, while little exercised and

been upheld.

wice before?

served by merely providing that he shall determine what they shall not go

below or what would be an unreasonable minimum; not to substitute their judgment to the extent of saying, “Somewhere within this area exactly what rate the carrier ought to file and publish.”

But at all times, of course, there will be before the Commission and in the published tariffs, for attack by anyone, a precise rate. It won't be a band of rates there, which the carrier can choose and select between. Each change and each precise rate will have to be advanced, published, with a 30-day waiting period, just as in the present law.

Mr. FLYNT. All right, sir. In that connection, here is what I am concerned with at this particular moment: If this should go into law and supersede existing law on the subject-and I think we are all in agreement that this is a new departure in the phraseology of transportation law; it is something I have not seen before; I

may

have missed it, but I have never seen anything precisely like this before. Suppose this should become law, and carrier A filed a rate for, say, gravel. Let's just pick a commodity out of the air. We will say gravel; between points X and Y, to be not less than $6 per ton and not more than $7 per ton.

Mr. Ray. Could I interrupt you right there? They could not file such a rate. They have got to file a precise rate.

Mr. FLYNT. Then, of course, the Interstate Commerce Commission, I presume, would then say what you just said.

Then suppose they go to a court and the court says, "No; that is exactly what this act permitted them to do. Because prior to the enactment of H. R. 6141 they had to file precise rates.” But this permits them to file rates and make charges, because the phraseology of this legislation is a little bit different. Several lines up it says that they shall establish reasonable through routes and fares and rates, charges, classifications, regulations, and practices. Then it goes on down and it comes to this possibly all-inclusive clause, maybe an omnibus clause, which says "shall result in charges”-and, of course, that is what the shipper is interested in and what the competitive carrier is interested in—“which are not less than such and such a figure and not more than such and such a figure."

Mr. Ray. I now see what is concerning you. I myself don't think that it would present a problem, because, of course, this minimummaximum concept has been in the statute in section 13 (4), as I pointed out this morning. And if you read this language, it says it shall be the duty of every common carrier subject to this part to furnish transportation, and so forth, and to establish rates.

The subsequent language would not, I am confident, permit the carrier to establish something that was not going to be below or be above. It would have to establish

the actual rate on which the traffic was going to move. And I think that subsequently, if the committee should feel that the language needed some clarification, it would not present any problem.

Mr. FLYNT. And you might want to answer this one too, Mr. Ray: Would any 'rate so filed result in charges which would be uniform throughout the country?

Mr. Ray. Yes. As between shippers in a competitive relationship. In other words, your whole section 3, the discrimination features, is absolutely unchanged by this bill.

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Mr. Flynt. And this provision to which you refer would completely eliminate the possibility of charging considerably less rates, and charging less in dollars and cents per ton-mile, in one section of the country, or in one area, than in another.

Mr. Ray. It wouldn't make any change in the present outline of discrimination between areas, between shippers, between localities, or anything of that character.

Mr. HARRIS. Would the gentleman yield at that point?
Mr. FLYNT. Yes, sir.

Mr. HARRIS. Mr. Ray, I have heard it said that the proposals in the legislation here would be contrary to the case commonly referred to as the Southern Governors Rate Case. Could you state categorically that this proposed legislation would have no effect on that situation?

Mr. Ray. That is my opinion, yes. Because those matters were reached under the provisions of sections 2 and 3, the preference, prejudice, and discrimination features, and they are not changed in this proposal in any respect.

Mr. HARRIS. In other words, in your opinion this would not disrupt or in any way affect the final results in that Southern Governors Rate case.

Mr. Ray. That is correct.

Mr. FLYNT. Mr. Rothschild, since this comes from your statement, I think you might want to answer this question. In subparagraph (2), on page 19 of your statement: to encourage and promote full competition between modes of transportation *** Now, is that the place where you said for us to add "and between different carriers within the same mode ?"

Mr. ROTHSCHILD. Yes, sir. Just after the word "modes." Mr. Flynt. All right, sir. I wonder if the effect of this particular addition that you had in there means carriers serving one section of the country and carriers serving in other sections of the country, or carriers serving substantially the same points.

Mr. ROTHSCHILD. I believe its principal application would be as to carriers serving the same points.

Mr. FLYNT. All right, sir. Assuming that to be the case, if we reach the point of encouraging and promoting full competition not only between modes of transportation but also between different carriers within the same mode, would that not open the door to going back to the same cutthroat rate setting that we had prior to 1887?

Mr. ROTHSCHILD. I do not think so. In fact, I am pretty positive on that. Because we still have all of the safeguards of section 3 which provide against discrimination, and they would still continue to be applied in cases such as you are referring to.

Mr. Flynt. But if the Congress should enact this legislation and specifically say in it that it is hereby declared to be the national transportation policy of the Congress in making what is perhaps the greatest departure from existing law in the field of transportation in nearly 70 years, and permit it to encourage and promote full competition, not only between modes of transportation but between and ainong carriers within the same mode, it will just be a question of a battle for survival between the carriers that can go down to the lowest point in transportation of certain commodities, and then, after they have eliminated their rivals over a dog-eat-dog basis, they can go back and set it wherever they want to.

Mr. ROTHSCHILI). I think we referred to that in the statements, too, Mr. Flynt. With as much competition as there is today in the field of transportation--and this competition, throughout these documents, has been called pervasive—it is unlikely if not impossible that anyone could drive out competition and then raise rates to such a point as to recoup some previously established losses. Because at that point new competition comes into play.

Mr. Flynt. I think, Br. Rothschild, that we are in accord, and that is what the situation is now. I think we are also in accord that that is the way we want it to continue to be. But if Congress should declare the policy of the legislative branch of the United States Government to be such as to encourage and promote this "dynamic competition” which has been referred to, and encourage and promote, if an objection should be filed—and I am sure that there will be some filed—the courts and the Commission would have no alternative but to say possibly something like this: “That is exactly what the Congress intended when they declared it to be the policy of the Congress with regard to transportation."

Mr. ROTHSCHILD. Well, it is the intention of the Congress, I take it, Mr. Flynt, that the public, the people who buy transportation and who pay for it, shall get the best transportation at the lowest cost possible. And if one carrier in a particular field is much more efficient than another one, and by reason of his efficiency can offer the same or even better service at a lower price, it seems to me that the public should have the advantage of that situation.

Mr. FLYNT. Well, of course, I think all of us would like to see that exact situation and condition prevail. But that is exactly the condition which could not prevail, and we might never be able to restore it if as a result of this full competition certain carriers should be eliminated from the transportation industry.

Mr. ROTHSCHILD. We think that is not a possibility. First of all, you have the antidiscrimination features, which would not permit this unbridled rate war of which you seem to be apprehensive. But beyond that, if that did happen in spite of those antidiscrimination features, and if rates were raised, new competition would just come in in a cascade.

Secretary WEEKS. Could I comment on that? We go on the theory, which was the theory for many years, that the rate regulation was designed to protect the shipper and the general public from being overcharged or gouged, or whatnot. And from that setup there developed a theory of a division of the traffic on the part of the ICC. New modes of transportation came into being, and as they became established, the ICC then began to look at a rate as not whether it was fair and reasonable to the customer, but how it was going to affect the business of another mode of transportation.

Now, this theory, Mr. Congressman, that this will result in a certain type of transportation cutting rates and driving another type out of business, in my opinion, is just moonshine. It just couldn't possibly happen. If it could happen, under the proposed legislation, then the proposed legislation ought to be rewritten so that it could not happen.

But I say that the objective should be to give the shipper the best rate available, service considerations being considered all the time.

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Now, if one mode of transportation can carry something a long distance cheaper than another mode of transportation, why should not the shipper get the benefit of that lower rate! There is plenty of busi

ness to go around. I mentioned this morning the circumferential i highway around Boston. There are thousands and millions of dollars'

worth of business being generated, and that will be generated by this highway development that is coming in this country, that must got to the trucking interests. A trucking operator provides real service, especially to a small merchant or user of a product. He can help him keep his inventories down. He can give door-to-door delivery. He can give schedules that may be better, and so forth. And he has, I think, two strikes on any other mode of transportation most of the time.

Now, to me it is just impossible that what has been suggested might happen. If it could happen under any legislation I ever had anything to do with proposing, I would want to change it. Because I think there is plenty of business to go around, and more coming all the time.

Mr. FLYNT. Mr. Rothschild, I have one more question to ask you, sir. This is in connection with the change you suggested. I think you directed the change on page 19. In reading your statement I find a section on page 38, which begins on page 37, about the new standards as set out in section 8 of H. R. 6141, which

have as principal purposes, to assure that dynamic competition will have a basic í role in the determination of rates as between competing transportation enter

prises 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 ofand here is where I want to see if this change goes* * * the effect of such charge on the traffic of any other mode of transportation.

Now, I wonder if you mean, by your reference on page 19, to ini cluding certain other things, to also include there, on page 38, at the

end of the word "transportation,” striking out the semicolon, and saying “mode of transportation or between different carriers within the same mode."

Mr. ROTHSCHILD. I think we will want to do that, Mr. Flynt.
Mr. FLYNT. You did not so suggest yesterday,
Mr. ROTHSCHILD. We just didn't catch up with it.

Mr. FLYNT. Then you do think you will want to add that at that point, too.

I have no further questions.
Mr. WILLIAMS. Mr. Hinshaw?
Mr. HINSHAW. I want to ask Mr. Smith some questions.

Mr. WILLIAMS. At this point, do any of the members have any further questions that they would like to direct to the Secretary?

Mr. Priest?

I thought we would go ahead and make it possible for him to leave if he so desires.

The CHAIRMAN. I have only one quetsion of a general character to ask of the Secretary, which should not take more than a moment or two of the committee's time.

Since the overall hearing we had last fall, Mr. Secretary, the Interstate Commerce Commission has submitted its report on the pro

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