Under the proposed amendment to the fourth section, the carrier would determine in the first instance whether there is "actual competition of another carrier or carriers" and whether the rate it established is "not less than a just and reasonable minimum charge." The administration of the long-and-short-haul clause, for all practical purposes, would pass from the Commission to the carriers. Under other proposals the Commission would be powerless to suspend the rate longer than 3 months, a period insufficient to complete a complaint proceeding against the rate-cutting competitor. În addition, the proposed section 15a (1) in cases of this type, would preclude the Commission from considering the effect of such charge on the traffic of any other mode, the relation of such charge to the charge of any other mode, or whether such charge is lower than necessary to meet the competition of any other mode. It appears that the purpose of the recurring expression "other mode," is to disarm the Commission in the case of competition between railroads and other types of transportation agencies, but not in the case of competitive efforts against each other (R. 483-484).

Careful consideration should be given to the structure of the socalled competitive rates on both sides. The rate of the water carrier between its ports must be a completely compensatory rate, reflecting in full the cost of operation, the investment in equipment, taxes, and a profit. On the other hand, the rates which rail carriers usually propose to meet water carrier competition, are depressed rates, covering only the "direct ascertainable cost of producing the service," or, in other words, bare out-of-pocket costs. They are able to draw upon noncompetitive traffic to recoup revenue lost at the ports.

Prior to the amendment of the act on June 18, 1910, rail carriers exercised the initiative in connection with the long-and-short haul clause, as explained by the Commission in its decision in Administration of Fourth-Section (87 ICC 564, 566), resulted in shifting the initiative in these cases from the carriers to the Commission. The proposed amendment would emasculate section 4, and would revive the unsatisfactory situation which existed prior to 1910. As the Commission has pointed out in this respect, even under the proposed amendment the statute would contain a prohibition against departures from the general rule, but it would be for the courts and juries to determine whether conditions justifying the exceptions actually existed. The determination by the courts of questions concerning transportation charges has been held undesirable throughout the history of transportation regulation (R. 484-486).

(SUPPLEMENTAL STATEMENT)

With respect to the wording of the proposed amendment making fourth section relief self-operating over a circuitous route, to meet the rate or rates legally established between competitive points over the more direct routes, the language should be clarified to indicate that "direct routes" refers to those of carriers of the same type as the one benefiting by the relief. "Direct route" should be defined as the shortest tariff route between the points. To effect the clarification, the following language is suggested as a substitute:

And provided further, That any such carrier or carriers operating over a circuitous line or route may, subject only to the standards of lawfulness set forth in

other provisions of this part or part III and without further authorization, meet the charges of another carrier or carriers of the same type operating a direct line or route, to or from the competitive points. As used in this proviso the term "direct route" shall be construed to mean the shortest tariff route from and to such points.

The proposed elimination of the so-called reasonably compensatory rule is not necessarily an incident to the suggested change in the circuity provisions. The elements considered in determining whether rates are "reasonably compensatory," announced by the Commission in Transcontinental Cases of 1922 (74 I. C. C. 48), have been of great aid to water carriers in resisting cutthroat competition. We very much fear that if Congress takes positive steps to drop the "reasonably compensatory" proviso from the act, such action will be construed as an intention on its part to get rid of the definition of competitive rates so carefully set forth (in the cited case), and which has been adhered to ever since (R. 1679-1681).

WATERWAYS FREIGHT BUREAU

(W. Y. Wildman)

The present long-and-short-haul clause of section 4 has been a deterrent to rail lines in publishing water-competitive rates. Under the proposals, the only requirement would be that the rate to the more distant point be not less than a reasonable minimum. Presumably, rails would take the position that any rate yielding more per car-mile than the system average operating expenses would exceed a reasonable minimum level. Nearly every rate would meet that test, and the rails in effect, would be free to violate section 4 at will in meeting water competition. Furthermore, the railroads would not have to make corresponding reductions in rates to intermediate points, which would thus be disadvantaged (R. 976-978).

With respect to H. R. 6208, which would permit circuitous railroad routes to meet the rates of direct railroad routes, the Bureau fears that car-mile earnings over circuitous routes would be used for comparisons in hammering down other rates.

The Bureau agrees that H. R. 6208 would facilitate tariff simplification, but believes that certain safeguards in the present act would be eliminated. Specifically, the requirement that rates to or from more distant points must be "reasonably compensatory" would be eliminated. There would be no objection if this were eliminated only in respect of circuity, but when the grounds for relief are market or other carrier competition, its removal would eliminate an important safeguard to water carriers against unfair competitive practices. Secondly, it is feared that low earnings over the circuitous routes would be used as criteria to measure minimum reasonable rates on the same or other commodities, particularly over direct routes.

To meet these objections and still permit automatic relief based solely on circuity it is suggested that between the 2 provisos of present section 4 (1), the following 2 additional provisos be added (R. 979– 980):

And provided further, That any carrier or carriers operating over a circuitous line or route may, subject only to standards of lawfulness, set forth in other provisions of this part or part III and without further authorization by the Commission, meet the charges of such carrier or carriers operating over a more

direct line or route, to or from the competitive points: And provided further, That rates established over circuitous routes, pursuant to this proviso, shall not be considered a criteria in the determination by the Commission of reasonable minimum rates of any kind or description whatsoever:

WEYERHAEUSER TIMBER CO.

(George H. Shafer)

The proposal to amend section 4 by removing the requirement that carriers must obtain prior approval for charging greater than the aggregate of intermediate rates, and for charging less for longer than for shorter distances over the same line or route in the same direction, under certain conditions, when necessary to meet actual competition, is supported. This is controversial and substantial opposition always appears, but H. R. 6208, regarding circuitous routes, is an excellent start at solving the problem (R. 453).

Additional comments

H. R. 6141:

A. E. Staley Manufacturing Co., T. C. Burwell (R. 1272). National Association of Mutual Savings Banks, R. Stuart Rauch, Jr. (R. 1128).

American Association of Port Authorities, Charles R. Seal (R. 993-994).

American Merchant Marine Institute, Inc., Alvin Shapiro (R. 1620).

Burlington (Iowa) Shippers' Association, Inc., F. L. Partridge (R. 781).

California Grape and Fruit Tree League, E. Alan Mills (R. 1125).

Fargo (N. Dak.), Chamber of Commerce, J. I. Finsness (R. 999– 1000).

Inland Empire Waterways Association, Herbert G. West (R. 1706).

Montana Citizens Freight Rate Association, Lee Metcalf (R. 825).

National Council of Farmer Cooperatives (R. 1687-1688). National Retail Dry Goods Association, Robert H. Smith (R. 1004).

North Atlantic Ports Association, Inc., Charles R. Seal (R. 993994).

North Atlantic Ports Conference, A. C. Welsh (R. 996). Pacific American Steamship Association, Ralph B. Dewey (R. 1001).

Upper Mississippi Waterway Association, Inc., A. C. Mills (R. 1615).

H. R. 6208:

Assistant Comptroller General of the United States, Frank H. Weitzel (R. 35).

Bureau of the Budget, Percy Rappaport (R. 36).

Grand Rapids (Mich.) Chamber of Commerce, C. E. Elerick (R. 1718).

National Association of Railroad and Utilities Commissioners, Austin L. Roberts (R. 515-516).

VI. SUSPENSION OF PROPOSED RATES

Provisions of Interstate Commerce Act

Section 15 (7) of the Interstate Commerce Act authorizes the Commission, either upon complaint or upon its own initiative without complaint, to enter upon a hearing concerning the unlawfulness of any new individual or joint rate, fare, or charge, or any regulation or practice affecting any rate, fare, or charge stated in a schedule filed with it by any common carrier subject to part I of the act (relating to the regulation of railroads, certain water carriers, oil pipelines, and express and sleeping-car companies). Pending such hearing and decision thereon, the Commission may from time to time suspend the operation of the schedule and defer the use of such rate, fare, charge, et cetera, for a period no longer than 7 months beyond the time when it would otherwise go into effect. The proposed change of rate, fare, charge, et cetera, goes into effect at the end of the suspension period if the proceeding is not concluded and an order made within such period. At any hearing involving a change in a rate, fare, charge, et cetera, the burden of proof is upon the carrier to show that the proposed rate is just and reasonable.

Sections 216 (g), 218 (c), 307 (g), 307 (i), and 406 (e) of the act give the Commission comparable authority with respect to new rates, classifications, regulations, or practices filed by common and contract carriers by motor vehicle, common and contract carriers by water, and freight forwarders.

Amendments proposed by H. R. 6141 and H. R. 6142

Section 7 (c) of H. R. 6141 and H. R. 6142 would amend section 15 (7) of the act so as to authorize the Commission to suspend and defer the use of such rate, fare, charge, et cetera, only if it determines on the basis of factual information furnished by the complainant, or as a result of its own investigation, that the proposed rate would probably be unlawful, that it would result in injury to the complainant, and that remedies available to the complainant would, in the absence of suspension, be inadequate. Also, the suspension period would be shortened from 7 to 3 months. At any hearing involving the new rate, the burden of proof would be shifted from the carrier filing the rate to the complainant when the latter was also a carrier.

Sections 11 (f), 12 (c), 17 (e), 17 (g), and 21 (d) of H. R. 6141 and H. R. 6142 would similarly amend sections 216 (g), 218 (c), 307 (g), 307 (i), and 406 (e) relating to new rates, fares, charges, et cetera, filed by common and contract carriers by motor vehicle, common and contract carriers by water, and freight forwarders. Purpose of amendments

The purpose of the amendments is to provide for exercise of the Commission's power to suspend rates only in instances where it makes certain determinations on the basis of showings of fact; shorten the suspension period; and shift the burden of proof from the carrier proposing the rate to a carrier protestant.

Testimony

DEPARTMENT OF COMMERCE

(Sinclair Weeks, Secretary; Philip A. Ray, General Counsel)

In fixing rates, it is a basic premise that the carrier has the initiative in proposing rates. Because transportation is a field in which conditions change rapidly and because the details which go into basic price determinations are complex, management must be in a position to move quickly to protect markets and revenues. Delays caused by agency action suspending rates can and often do cause irretrievable loss of revenue and business. Thus, where the broad power of suspension exists in the regulatory agency, management initiative in ratemaking loses much of its practical effectiveness (p. 186).

Since the remedy of suspension is special in character, similar to the extraordinary judicial remedy of temporary injunction, special rules should govern its invocation. The remedy is now used most often to protect competing carriers from the rigors of price competition. This departure from the historical purpose of the remedy to protect the shipper acts to force higher rates upon the shipper and deprive management of initiative vital to effective competition. The Department proposes to limit the use of suspension as a competitive weapon and restrict it to use as a means for maintaining lawful rates. Because the nature of the remedy is extraordinary the Department believes that special conditions should govern its use.

The argument that the suspension remedy is used sparingly under the present rules overlooks the fact that the vast majority of unchallenged rates are of limited importance. The more important rates are most often challenged and the proportion of these which are actually suspended is substantial. New legislation is needed to limit. the use of this remedy. Limiting use of the remedy of suspension will also remove the justification for the current long suspension period. When the suspension power is exercised the regulatory agency should be obliged to act quickly (p. 187).

To achieve these results the Department proposes three simple tests for screening requests for suspensions, a shorter suspension period, and a shift in the burden of proof if the protestant is also a carrier.

Clearly it is in the public interest to have some rules to govern the type of cases in which this drastic injunctive remedy can be invoked. First, the protestant ought to be able to adduce on paper some facts showing the rate to be probably unlawful. If he is not able, then the public interest would seem to lie in the direction of letting the rate go into effect and relegating the protestant to some other and more conventional remedy.

Second, the protestant ought to be able to show that he is an interested party, that is, one who will be "injured" in the legal sense if the rate is unlawful. It seems that the public interest is not served by permitting associations to invoke the remedy as a battleground for rate uniformity or otherwise. The ratemaking associations, who are the principal parties filing protests and petitions for suspension, are hardly in a position to show that a reduced rate will in fact result in injury to them. They are simply the organization through which the carriers meet and decide as a group what they think the rates should be. A carrier, on the other hand, who files a reduced or an increased rate has a lot at stake when he takes such action.