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The primary consideration in the regulation of transportation has been the protection of the public interest. Congress has clearly set forth in the national transportation policy of the Transportation Act of 1940 that it is in the public interest to foster sound economic conditions in transportation and among the several carriers.

In the present statement of policy the Congress has directed that the act be so administered as

to encourage the establishment and maintenance of reasonable charges for transportation services without *** unfair or destructive competitive practices * * * all to the end of developing, coordinating, and preserving a national transportation system by water, highway, and rail, as well as other means, adequate to meet the needs of the commerce of the United States, of the postal service, and of the national defense.

Unless Congress decides that conditions have so changed that the present definition of the public interest is no longer valid and that some restraints on competition are no longer necessary, we feel that it is unwise to make any fundamental changes either in the national transportation policy or in the present ratemaking powers of the Commission as proposed by H. R. 6141.

The most effective means of protecting the public against disruptive practices and the carriers against destructive competition which would lead to deterioration of transportation service is the present power of the Commission to fix minimum reasonable rates at a point higher than the out-of-pocket costs of rendering the service if the circumstances so require. This is so because every section of the act is administered in the light of the declared policy of Congress to prevent unfair or destructive competitive practices.

Although a minimum reasonable rate is not defined in this bill, the Advisory Committee report suggests that rates are unreasonably low only if they are not compensatory, that is, when they fail to cover the "direct ascertainable cost of producing the service to which the rates apply." In our opinion rates which cover only direct ascertainable costs are in many instances below a reasonable minimum level. We know from experience that rate reductions tend to spread to other areas and to related classes of traffic and eventually result in rates that destroy the carriers' ability to expand, improve and innovate.

In fact, as rates approach the noncompensatory level in the competitive scramble, the quality and quantity of service necessarily deteriorates to the detriment of the public. Public transportation under private ownership cannot long continue without a profit. The eventual result would be a demand for either subsidization or Government ownership.

When an industry is not affected with the public interest breakneck competition hurts nobody but the investors in the business. However, when the national economy depends on the service it is just as important to restrain excessive competition as it is to restrain monopoly. There is plenty of competition in transportation today-in fact the carriers themselves claim there is too much. Shippers have a choice of service not only between carriers in the same form, but where available, between carriers in different forms of transportation at reasonable rates. Yet in spite of this competition, or perhaps because of it, there has been great improvement in the techniques of transportation in recent years. Never before have so many enjoyed such good transportation service by an efficient system of public transportation under private ownership.

This is so because Congress has protected all segments of transportation against unfair and destructive competitive practices.

This bill would impose upon the Commission the obligation to maintain a sound and vigorous system of transportation without the power to restrain the excesses which history shows would defeat the accomplishment of this objective.

A detailed analysis and discussion of the various sections of H. R. 6141 is contained in the appendix to the Commission's letter of December 22, 1955, commenting on the bill. Therefore, I shall not take up the subcommittee's time to review what is stated therein. Also, in the interest of saving time, I shall not undertake a review of the comments which have been submitted by the Commission or its legislative committee on the other proposed measures under consideration. Mr. HARRIS. Thank you very much, Mr. Arpaia.

The letters referred to will be included in the record along with your statement.

Does that complete the statement you have to make?

Mr. ARPAIA. Yes, Mr. Chairman.

Mr. HARRIS. Mr. Dolliver, any questions?

Mr. DOLLIVER. No questions.

Mr. HARRIS. Mr. Hinshaw?

Mr. HINSHAW. Mr. Chairman, I want to reiterate my question as to whether or not the Commissioners are unanimous in their approach to this subject, and if not, are there any differences in opinion that the individual Commissioner wishes to express?

Mr. ARPAIA. Well, I can report, as presently constituted, the Commission is unanimous in its views as contained in this report, except that Commissioner Mitchell, when that letter was voted on in December, had a reservation. Commissioner Elliott, who also had some reservatitons, is no longer a member of the Commission. I assume Commissioner Mitchell-he is away until later this morning-and he is expected back today, and I presume that he would now be of the same mind.

Now, here is what his opinion was at the time. The Commissioner agrees on the major features that have been expressed in the letter, but Commissioner Mitchell did not agree with the recommendations of the Commission in regard to section 7 (c). That is the one that cuts the suspension period to 3 months. He says he knows of no reason why these cases should be delayed. He favored section 7 (c) as proposed. Then he did not agree with the statement that we do not favor the enactment of the proposed section 15 (a) (4).

He also said, "I am in favor of the abolishment of section 22." This is Commissioner Mitchell who is now expressing his views as of last December. He says, "I am in favor of the abolishment of section 22. I know of no good reason why the Government shipments should be accorded lower rates than those of other shippers."

Now, with that one Commissioner's views on those particular points, the letters and the analysis represent the opinion, the unanimous opinion of the present Commission.

Mr. HINSHAW. Mr. Commissioner and Mr. Chairman, the members of the committee, with their manifold duties and other committee work, I presume have not had an opportunity to study this report of the Interstate Commerce Commission. I certainly have not and I

certainly do not know what sections they approve and what sections they disapprove in H. R. 6141, nor what parts of the other bills they may approve or disapprove.

Mr. HARRIS. I might say that I have had occasion, I suppose you might say, to thumb through it and it seems to me that there are very few sections that they approve of, and it might expedite matters if the Commissioner would just briefly tell us what sections they approve of, and then we will know that the rest of it is disapproved of.

Mr. ARPAIA. Well, essentially, I think this is the situation: There are some of these proposed sections where we have some comment although we do not disapprove of basic objectives, that is, the redefinition of private carrier and redefinition of contract carriers, and things of that kind. We do not agree, however, that the policy or the declaration of policy, the national transportation policy, as defined in the act should be changed substantially.

The key objection to this whole thing, in our opinion, is the proposed elimination of the words "unfair and destructive competitive practices" from the present declaration of policy.

In the second place, we feel that with the lack of guideposts as to the definition of a minimum reasonable rate, or rather to put it the other way, with the standard that has been expressed in the report, that any rate which is compensatory-let me put it in the negative only a noncompensatory rate is lower than minimum reasonable rate, you have a restriction which together with the lack of power to prevent unfair and destructive competitive practices would lead to the very conditions which existed first in 1887 when the railroads were exclusively the transportation agency and in 1934, or 1935, when the motor carriers were operating under chaotic, unsatisfactory, and unstable conditions.

Mr. HINSHAW. I take it that the Commission is not in agreement with the bill where it attempts to amend paragraph 4 of section 1 of the Interstate Commerce Act?

Mr. ARPAIA. We, ourselves, propose an amendment to section 4 (1). That is the letter to which I referred. That is

Mr. HINSHAW. Paragraph 4 of section 1.

Mr. ARPAIA. Well, that is H. R. 6208 you referred to. You are talking now about the long-and-short haul.

Mr. HINSHAW. I am talking about H. R. 6141, the present bill before us, and lines 18 and 19 of page 3 specifically, where the bill would propose to establish what is called just and reasonable minimum charges and just and reasonable maximum charges as a substitute for just and reasonable rates.

Mr. ARPAIA. That is the one that takes away the power to fix a I precise rate, and we feel that that is unnecessarily restrictive even though the Commission actually does not use that power very frequently.

There are times when it uses it, necessarily.

Mr. HINSHAW. I think that the zone of reasonableness can be understood and can be defined, and can be found by the Commission, but it is difficult for me to see how a just and reasonable and minimum, and a just and reasonable maximum can be established.

Mr. ARPAIA. We do it, and it has been done, and a just and reasonable minimum charge is one which under the circumstances that exist

should be fixed at a point at times when it bears enough to cover the out-of-pocket cost; and at other times at a point higher than that, depending upon the type of traffic; the regularity of movements; the competitive situation, the entire background of related rates and things of that kind. When we fix rates, as a result of either an investigation and suspension proceeding or a complaint, we very seldom fix a precise rate. We either say a rate shall be no lower than a certain amount, that is, a rate lower than such an amount will be less than a minimum rate, or a rate higher than a certain amount will be above a maximum rate. Seldom do we fix a precise rate.

It depends upon the situation which is prevalent at the time. Mr. HINSHAW. Am I wrong in assuming that class rates are established in part on the basis of what the traffic will bear? That is, what the merchandise is worth in the transportation of the merchandise, or some other basis for the establishment of class rates.

Mr. ARPAIA. Although there are, under exceptional circumstances, commodity rates that are higher than class rates, and justifiably soclass rates are generally a ceiling intended to cover a movement which is not regular or which may be less than carload, to a point where there is no regular movement. Class rates are based on mileage blocks. It is a sort of a catchall to take care of every type of movement which might arise and those class rates are fixed as maximum reasonable rates. Commodity rates cover movements from point to point on a specific commodity.

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Mr. HINSHAW. It has been a long time since I have had occasion to examine a tariff book, but in those days, it seems to me, you had to decide what you wanted to ship and then look up in the book to see what class applied at that particular item. Something like an electric motor or storage battery had a higher classification than some other things.

Mr. ARPAIA. Oh, yes.

Mr. HINSHAW. That is what I refer to.

Mr. ARPAIA. That is right.

Mr. HINSHAW. That is what I refer to in referring to what the traffic would bear.

Mr. ARPAIA. It depends on the value of the commodity, the susceptibility to damage, density, and other characteristics of the commodity

all such factors.

Mr. HINSHAW. I believe that silk takes a much higher rate than almost anything.

Mr. ARPAIA. Yes; you have higher rates on things more valuable and more susceptible to damage and which do not load as heavily as to density and things of that nature.

Mr. HINSHAW. Now, therefore, that is an element in certain ratemaking

Mr. ARPAIA. That is right.

Mr. HINSHAW. I think that is all, Mr. Chairman, except that I have not been able to see just yet why the whole Commission does not agree with Commissioner Mitchell on section 22.

Mr. ARPAIA. Well, our view on section 22 is not too different. Frankly, our view is that, except in times of emergency or war, Government traffic should move on the same basis as industrial or other traffic; but we would not abolish the privilege of special rates com

pletely. We have taken the position that the Government should pay the same rates as everybody else, except where there is an emergency or a war. I think it might be said that we feel that way because it might impede the national defense to have the Government bound by that type of public tariff, sir.

Mr. HINSHAW. I have not understood, Mr. Arpaia, why it is that the Government does that very thing which the Interstate Commerce Commission itself is attempting to prevent, and that is the use of the so-called-what some people call the fly-by-night transportation agencies, and to take whatever rate they are willing to haul it at.

Mr. ARPAIA. Yes; they continue to do that and have

Mr. HINSHAW. Yes; especially at the Army posts when they want to transfer a sergeant from, say, the east to the west coast, or from the North to the South.

Mr. ARPAIA. Incidentally, the Commission is unanimous in its opinion for abolishing section 22 quotations for Government on household goods. All of the Commission feels that way.

Mr. HINSHAW. I am glad to hear that. I trust that in these papers someplace

Mr. ARPAIA. Yes, sir.

Mr. HINSHAW (continuing). That we may refer to it and refresh our understanding of the situation in due course.

Mr. HARRIS. Will the gentleman yield?

Mr. HINSHAW. Yes.

Mr. HARRIS. Why do you take the position that you would not favor continuation of the procedure of the past in connection with handling household goods, and say that you would want to continue the authority with reference to other phases of the transportation of goods?

Mr. ARPAIA. In the case of household goods, the situation is probably so bad that some quotations have been as low as 25 to 50 percent of the published rates, and there is tremendous competition that has brought those rates down very low, and, of course, the average person who moves household goods will have to make it up. And you see household goods move for the inexperienced shipper, the average householder, who has not had too much experience with moving traffic. It is very difficult and a very trying thing, and those rates are high, and are going up because of the tremendous burden due to many movements of household goods for Government personnel at extremely low rates, as Congressman Hinshaw has pointed out.

Mr. HARRIS. Is not that, however, just picking out a single commodity or a single type of movement and saying that because of that, and because of disagreement with that precise movement, we are going to take a different attitude? Does not that indicate that the policy or the principle involved may not be altogether sound and that we should try to approach it from the standpoint of policy or principle instead of approaching it from the standpoint of an individual commodity as the conditions might present themselves, when it develops?

Mr. ARPAIA. The situation is the same with reference to everything else, except that you have practically no household goods moving in time of war. It is not any different than it is in time of peace-wherein time of war, there are unusual types of movements that have to be made. Under those circumstances, we feel that perhaps the Government should have the protection of special rates.

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78456-56-pt. 1—20

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