Mr. ADAMS. Doesn't the Reed-Bulwinkle Act do that as far as railroads are concerned?

Secretary WEEKS. Will you answer that, Mr. Ray?

Mr. RAY. I think it does it in the entire field to a degree, of course. The opposite argument or point of view is that in a country such as ours you must have some ability to establish through rates and connecting rates and things of that character. The Reed-Bulwinkle Act also contained one provision which is supposed to guarantee freedom of independent action on the part of carriers. Mr. ADAMS. Judge Barnes, as you know, was here yesterday and he commented on the inability of individual carriers to break away from this joint ratemaking process that is authorized by the Reed-Bulwinkle Act.

Would you not say that it is true that if you want genuine competition among competing railroads you have to repeal the Reed-Bulwinkle Act, which permits them to collaborate, to collude, if you please?

Mr. RAY. I don't think we would be prepared to agree to that stated in that form. Actually, Professor Adams, the recommendations of Mr. Weeks' committee to some degree deal with this problem, because they are designed to eliminate or reduce the area in which protests of new rates can be knocked out. If a particular new or lower rate is advanced on some commodity or classification, there is less chance, I would say, that it would be knocked out by association action and more chance that it would result in competition.

Mr. ADAMS. Mr. Secretary, let me ask you this, if I may. Speaking about the free sector of the economy-that is, outside the field of transportation-would you say that a trade association ought to have the right to fix prices for the various companies in that industry?

Secretary WEEKS. No.

Mr. ADAMS. Would you allow a trade association to fix prices for its individual members even though under the association's bylaws any member is allowed to break away from the price fixed by the association?

Secretary WEEKS. I can't answer as to the legal aspect of that, but as a practical matter I certainly would be opposed to it. In a given industry, I want hard, tough, fighting competition and I don't want any part of a trade association mixing into prices. It never did in any trade association I was interested in or active in and I don't believe in it.

Mr. ADAMS. In other words, you do not get more competition by permitting competitors to play footsie with one another?

Secretary WEEKS. You are just as right as you can be.

Mr. ADAMS. Yet here you have a situation under the Reed-Bulwinkle Act where that sort of thing is authorized. Would you approve that sort of thing in the transportation field?

Secretary WEEKS. I am not prepared to comment on the Reed-Bulwinkle Act. I would say this: In this whole area, you start 30 years ago with a monopolistic situation because there was only one type of transportation on the land surface and none in the air. Now, as we see it, we have the possibility of effective competition but which does not exist today because the regulatory practices have not kept pace with the developments in the industry.

Mr. ADAMS. That is quite true. Would you go on to say that in order to permit greater play for these competitive forces you would not want to encourage price fixing in any form-price fixing or rate fixing, for the matter?

Secretary WEEKS. I don't believe in price fixing.

Mr. ADAMS. Or rate fixing?

Secretary WEEKS. Or rate fixing.

Mr. STULTS. In summary, then, you would say that to the extent that your recommendations sought more competition, you would also seek less exemption from the antitrust laws. That is, you would ask, to the extent that you free these people from supervision by the regulatory bodies, you then bring them under the purview of the antitrust agencies?

Secretary WEEKS. You are getting into the antitrust field. I would like my counsel to answer that question. Mr. Ray.

Mr. RAY. I think the philosophy of the Secretary's committee is that, given an opportunity within the regulatory framework, intense competition and fair competition will result. I think we believe that. I am sure we do, that such competition will take place to a significant degree despite the existence of the Reed-Bulwinkle Act. It seems to me that the discussion of the Reed-Bulwinkle Act in all of its broader applications as related to an industry which is a regulated industry and which always will have certain monopolistic elements as

long as you have a common carrier industry, goes way beyond the questions dealt with in the specific Cabinet Committee report.

Secretary WEEKS. May I make this general statement in response to what I think your questions intended to bring forth. Where you have, as I see it, an absolute monopoly, like maybe the telephone business or the gas business or whatnot, you do have an absolute requirement for regulation.

But here is the transportation business that was once a monopoly, but is not today. I would like to repeat that we are trying to introduce competition that can exist but which regulatory practices have not permitted.

Senator DUFF. In other words, as I understand it, you want to vitalize competition which has been devitalized by regulation. It fits a situation which formerly existed?

Secretary WEEKS. That is right. Also the other half of the problem is that this helps to strengthen the common carrier section of the industry. The further you go toward weakening it, the more you are hurting the shipper, the user of transportation. If you went to the end of eliminating common carriers, nobody would take traffic except where it would be very profitable and benficial to them and the public would suffer very greatly.

Senator DUFF. In certain instances, instead of regulation, there would certainly be a bidding for business which would have a greatly stimulating effect on the industry in certain areas; isn't that true?

Secretary WEEKS. I think so.

Mr. ADAMS. Mr. Secretary, a moment ago you were talking about local electricity companies and local gas companies. Would you say that they are natural monopolies, so to speak?

An electric company serving the city of Washington, for example?

Secretary WEEKS. Generally speaking, as a practical matter I would say they

were.

Mr. ADAMS. A natural monopoly of that sort is usually regulated by the Government as far as rates and related matters are concerned; is that right? Secretary WEEKS. Yes; usually by local government.

Mr. ADAMS. What is the reason why a natural monopoly is regulated? Secretary WEEKS. You generally franchise use of the public way to avoid waste through duplication; for example, by authorizing a gas company to put its mains through a municipality. It then has monopolistic advantages in its operation against which the public must be protected.

Mr. ADAMS. In other words, the company could charge excessively high rates unless it was regulated by the Government; is that correct?

Secretary WEEKS. I would think so.

Mr. ADAMS. And what is the reason why the Government grants such an exclusive franchise? Is it because competition in that type of industry would be uneconomic?

That is, costs would be too high if you had five competing electric companies serving the city of Washington; is that correct?

Secretary WEEKS. Yes, sir; that is definitely so.

If you put 5 gas mains for

5 companies under the same streets, it would cost the public a lot of money one way or another.

Mr. ADAMS. The very nature of the industry is such that it is economic to have only one company; is that correct?

Secretary WEEKS. Yes, sir.

Mr. ADAMS. Mr. Secretary, would you say that the trucking industry has the same economic characteristics as that local gas or electric company? Secretary WEEKS. No.

Mr. ADAMS. In what sense would you say that the economic characteristics of the trucking industry are different from this natural monopoly that we have just been discussing?

Secretary WEEKS. Well, it seems to me self-evident that it is different. The trucking industry is a part of transportation and has competition with other forms of transportation. There are lots of ways for a shipper to ship his mer. chandise and get his raw materials. I see no possible analogy there.

Mr. ADAMS. In other words, if we may use a concrete example, taking the route segment between New York and Chicago, the economics of the trucking industry are such that, if you need a thousand trucks operating on that line, it would be feasible to have 1 company own a thousand trucks or to have 2 companies owning 500 each or maybe have 500 companies owning 2 trucks each.

Would that be correct? There are no specific advantages to scale, in other words?

Secretary WEEKS. Well, naturally, you are getting into quite an area there, if I may say so. Mass production in industry enables people to have things sometimes that they would not have if it were not for mass production. Then we have antitrust laws that prevent crowding out competition. You have to draw a line there some place that gives the public, the consumer, the benefit of our ability in mass production technique and at the same time keeps alive the competition that drives the price down continually and gives him a better bargain. Mr. ADAMS. You would agree, then, that there are no technical or technological factors that would make trucking a big business industry in the same sense as the automobile industry? Perhaps it is feasible to have only 3 or 4 or 5 companies in automobiles but you would certainly say that from a technological point of view it is feasible to have a large number of companies in the trucking field, is that correct?

Secretary WEEKS. I think so; yes.

Mr. ADAMS. The trucking industry is certainly one where competition is perfectly feasible.

Secretary WEEKS. It seems so to me.

Mr. ADAMS. Competition among a large number of independent firms.

Is that correct?

Secretary WEEKS. Yes.

May I add there, that again I think you want to remember that you have to protect that common carrier truck.

Mr. ADAMS. Oh, yes.

But you would agree that in the trucking industry, no great aggregation of capital is required to get into the field as compared to automobiles, for example?

Secretary WEEKS. You mean the manufacture of automobiles, for example?

Mr. ADAMS. Yes.

Secretary WEEKS. No; although I take it some of these trucks cost money and you need plenty of capital to get into the business.

Mr. ADAMS. But nothing compared to the amount of capital required in steel and automobiles, is that correct?

Secretary WEEKS. I shouldn't think so.

Mr. ADAMS. Then can we agree that here is an industry that because of its economic characteristics is certainly suited to a regime of competition? Secretary WEEKS. I think it is.

Mr. ADAMS. Why then can we not rely on more competition within the trucking segment of the transportation industry rather than on more regulation to protect the public interest?

Secretary WEEKS. Our recommendations call for more competition, not only within the trucking industry but within all transportation industry.

Mr. ADAMS. In other words you would have no objection to more competition within the trucking industry, would you?

Secretary WEEKS. Not as long as you are protecting the common carrier and as long as you are not allowing them to indulge in discriminatory practices and failing to have their rates compensatory.

Mr. ADAMS. Mr. Secretary, would you advocate protecting a local grocery store from competition?

Secretary WEEKS. Certainly not.

Mr. ADAMS. You would not deny an enterprising young man the right to open a grocery store on the same block that has a store now in existence, would you? Secretary WEEKS. Certainly not.

Mr. ADAMS. All right.

What are the policy considerations, then, that prompt you to say that the common carrier in the trucking industry ought to be protected?

Why?

Secretary WEEKS. Because the common carrier in any transportation field is absolutely essential to the transportation system. You have to have published rates. You cannot have unduly discriminatory rates. You and I have to have the same rate if we employ the same service for the same commodity. And you have to have a carrier that has fixed schedules and regular routes. How you could possibly exist without a common carrier in the transportation field, I don't know.

Mr. ADAMS. Does a local grocery store have to publish its rates? How do buyers find out what the market price of a particular type of canned goods is?

Secretary WEEKS. You go and look on the can.

Mr. ADAMS. Exactly. In other words

Secretary WEEKS. But you can't look on the can in the contract carrier' rates because he does not publish them.

Mr. ADAMS. The American consumer is a lot smarter than a lot of bureaucrat think he is, wouldn't you agree to that?

Secretary WEEKS. What was that last?

Mr. ADAMS. Would you say that the American consumer is a great dea smarter than many people in Government and in the universities and over the country give him credit for being?

Wouldn't you say that is correct?

Secretary WEEKS. Yes, sir; I certainly would.

Mr. ADAMS. In other words you can let the consumer, by and large, use hi reason in determining who is giving him a good deal; is that right, let the consumer judge?

Secretary WEEKS. In business, yes; in merchandising of a product. But in the transportation area, the same thing would not apply.

Mr. ADAMS. Let me ask you this, Mr. Secretary. Why not? If there is a large number of truckers in the industry-and nobody has complained that the number of firms in trucking is inadequate-if you have a large number of firms in the trucking industry, does the consumer have ample choice among competing carriers?

Secretary WEEKS. Do you want to answer that?

The

Mr. ROTHSCHILD. To a degree, yes; but to a degree not, Mr. Adams. common carrier transport company must not only charge reasonable rates, but he also has a stated service obligation. He must make certain stops, certain towns, certain route coverage regardless of whether or not there is any freight there to be hauled and he has to do it generally on known schedules.

That is the protection that the small-business man has because he knows he can get that service when and as he needs it. If you had a totally unregulated transportation industry, the rails or the truckers or anybody else would be interested only in serving that part of the trade which was most profitable and they would bypass all the little fellows.

Mr. ADAMS. Mr. Secretary, isn't it true though that we have to rely wherever possible on the competitive market? If truckers want to operate only or profitable route segments-say between Chicago and New York-wouldn't the competitive market take care of things like that? The rates would go down the profitability of running that segment would go down. Then, lo and behold fewer truckers would want to travel between New York and Chicago. Isn't that right, Mr. Secretary?

Mr. ROTHSCHILD. Meanwhile a small town in Indiana might starve to death Secretary WEEKS. I can't agree with you. Your questioning seems to me to be leading up to complete deregulation, which I don't think is practical or would produce what I think you want to produce.

1

Mr. ADAMS. Mr. Secretary, I don't want to produce anything right now. just have the privilege granted by this committee to explore with the expert on transportation the problems of this industry and I just want to establish your thinking for the record. I have no personal views in the matter for the present purpose.

Secretary WEEKS. Then may I say this, that a common-carrier industry is fundamental to the whole picture and if you don't have trains and trucks, air planes, and shipping running on fixed schedules at fixed and published rates, which provide the shipper, whoever he may be, big or little, with a service that he must have, I think you would have chaos in the transportation industry.

Mr. STULTS. Mr. Secretary, I wonder if I might just ask you here, since both you and Mr. Rothschild mentioned the duties of the common carrier to serve unproductive points, why there are so many people hauling agricultural-exempt commodities at low rates, even though they may have to back right into a farmer's backyard, pick up 1 cow and take it to a collecting station or a hundred pounds of feed while no common carrier would be willing to go and pick up that 1 item at the farm.

It seems to me that in the segment of the trucking industry which is most competitive, the least regulated, there is probably the best service.

At least that is the testimony of every farmer who has appeared and every farm representative who has appeared before this committee.

Secretary WEEKS. That is why we have private and contract carriers. Mr. STULTS. And exempt carriers. These people are actually for-hire carriers and they are fortunate enough to have support in Congress to keep an agricultural exemption.

Secretary WEEKS. There is plenty of business in all those fields. We don't have anything against private carriers or contract carriers or exempt carriers although we did recommend that the Congress take a look at the list of exemptions which is constantly growing. We have no quarrel with private, contract, or exempt carriers. They have their place in the field, but we would like to have more precise definitions of what they can and should do.

Mr. STULTS. One other question. I wonder if you have made any study or if Mr. Rothschild's office has any figures to show how many loss points are regularly served by common carriers? We have this in the airline industry. The figures were given to us by the CAB. The ICC said they could not give us such figures for motor transport. I wondered if you had any?

Mr. ROTHSCHILD. They don't exist, Walter.

Mr. STULTS. They do not exist. How can you force a common carrier to stop in a town on his route, which you say is unprofitable and which is the reason you are protecting him from competition? How can we guarantee that he will stop in every small town on his route and pick up any size shipment?

Secretary WEEKS. One good example is in the air business where the CAB directs schedules to certain points, small and large.

Mr. STULTS. In the airline industry, I agree; but I wondered about the motorcarrier industry.

Secretary WEEKS. I think the same thing would apply in effect with the ICC. Would you want to answer that?

Mr. MARGOLIN. It would be within the discretion of the Interstate Commerce Commission to see whether that was done.

Mr. STULTS. Are you aware of any enforcement proceedings whereby the ICC has taken away a carrier certification because he has not served every shipper along every point in his route?

Mr. MARGOLIN. I am not aware of that but I know it is within the powers of the Commission to look into that.

Mr. STULTS. I am sure it is within their power. But this committee has had testimony that carriers certified to serve small towns do not actively serve them and will not solicit business in those areas.

Mr. ADAMS. Mr. Secretary, you would agree that regulation of this industry should be conducted in the interest of consumers; is that right?

Secretary WEEKS. Yes, sir.

Mr. ADAMS. In this case the shipper?

Secretary WEEKS. Yes.

Mr. ADAMS. And the shipper should have maximum freedom to choose?
Is that right?

Secretary WEEKS. I think so.

Mr. ADAMS. Freedom of choice is the watchword here?

Have many complaints, proportionately speaking, come to your attention concerning the operation of the exempt carriers for agriculture? Have many farmers as individuals or as groups complained about the performance of the exempt segment of the motor-carrier industry?

Secretary WEEKS. I can only say as to that, and I will confine my observation to the recommendation the Committee made which was to the effect that there have been tremendous enlargements in the scope of agricultural exemptions and we recommended that Congress look at that in the light of present conditions and see where they wanted the exemptions to start and where to stop.

The court decisions have considerably extended what we think may have been the original intent of Congress.

Now, as to who is complaining about it, I can't tell you offhand. I know there have been complaints.

Mr. ADAMS. Specifically, you don't recollect any farm organization, for example, complaining to the President's Cabinet Committee about the operation of the exemption?

Secretary WEEKS. I can't recollect whether that was so or not. The task committee that studied these things. Where their complaints came from I don't know, but they received complaints.

Mr. ADAMS. Mr. Secretary, has it been called to your attention that we had appear before this committee representatives from every single farm organiza78456-56-pt. 1—5