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I think that I can make myself a little bit clearer on this situation if I go back and delve into the history which I have in my statement. We have heard a great many statements here made with respect to the efforts to reduce rates. At the turn of the century, the railroads in this country were highly competitive, extremely competitive. In the act of 1906, the Hepburn Act, the carrier agreements were solidified because of the 30-day requirement for a change in rates.
The effect of that was to bring about efforts to increase rates and in 1914 the Interstate Commerce Commision gave the railroads their first general increase, and that was in the territory lying east of the Mississippi River and north of the Ohio and Potomac Rivers.
I should like to call your attention to the general adjustment of rates in that territory. Rates on manufactured products were generally tied in with the first-class rate. The first-class rate in 1914 between Chicago and New York was 75 cents per hundred pounds, and that generally reflected the level of rates in that territory.
Beginning with that first 5 percent increase in rates in 1914, successive increases followed one after another until today the first-class rate between Chicago and New York is $3.96. That is a net increase of 428 percent.
In that time, the Department of Labor shows us in their wholesale commodity price index a 1944 index of 44.6, and an April 1956 index of 113.7, a net increase of 155 percent. That is the reason that shippers today are looking around and going into private carriage to the extent that they are.
I know our members prefer generally to use common carrier transportation wherever it is possible to do so. This has caused shippers very generally to try to negotiate with common carriers and we felt that when the Congress passed section 5 (a), which was generally known as the Bulwinkle bill, that the sixth paragraph of that would protect them in their negotiations with the carriers.
That section reads: The Commission shall not approach under this section any agreement which establishes a procedure for the determination of any matter through the joint consideration unless it finds that under the agreement there is accorded to each party the free and unrestrained right to take independent action either before or after any determination arrived at through such procedure.
What we find is this, Mr. Chairman: We find a negotiation is carried on between a shipper and a motor carrier and an agreement is made to establish a rate. Then the Bureau publishes that rate and proceeds to ask for a suspension.
Then the Commission suspends the rate and very frequently that rate is ordered canceled. The thing that has worried us a great deal are the statements that are made from time to time by Commissioners in dealing with these subjects.
There is going on now before the ICC here in Washington a very extensive investigation into the matter of released rates that has aroused nationwide interest. Hearings will be held not only in Washington, but Atlanta, Ga.; Dallas, Tex.; Los Angeles, Calif.; and Chicago, Illi.
Here is an odd situation that we find ourselves in. The railroads and motor carriers both have proposed released rates on the basis of $ per pound; that is, that they want to avoid the assumption of liabil
ity beyond $3 per pound unless the shippers are willing to pay a substantial amount for the additional risk.
We find that the present chairman of the Interstate Commerce Commission, in a statement made and which appears in the Michigan Law Review, a very definite advocacy of that basis of liability, except that at that time, and in the issue which it is the June 1953 issue the chairman proposed to put the limit at 25 cents per pound.
He concluded his observation in that presentation with this statement:
Unfortunately, therefore, there is no foreseeable prospect that the problem will be dealt with authoritatively until and unless the Commission takes the initiative and issues the requisite permissions and orders to the rail and highway carriers pursuant to an ex parte proceeding.
That is just what we have, an ex parte proceeding, but we have the definite view of the Chairman of the Commission that he is in favor of that.
Numerous other statements have appeared from time to time which have caused much worry on our part. We find that in a presentation by a member of the Interstate Commerce Commission before the Middie Atlantic Conference at Bedford Springs, Pa., July 12, 1954, some rather unusual statements. Here is one. I dislike to take things out of context, but the time is so brief that I can't go into it further:
With consternation, I have noted that some shippers frequently sit back and complacently force a motor carrier to lower and lower rates by the simple but nonetheless sadistic device of dangling the tantalizing bait of volume freight before his eyes.
Then again :
The practice by shippers of consistently driving shylock bargains in rates is shortsighted economy and those carriers who aid and abet in the perpetuation of this practice by indiscriminately publishing reduced rates are just as guilty as the shippers themselves.
This apprehension is extending and I would like to call your attention to the publication of the Traffic World of June 2, this year. The Private Carrier Conference of the American Trucking Association addressed a letter, I think to the Chairman of the Commission, in which they said:
The Private Carrier Conference, Inc. is deeply disturbed because of the many statements originating from the Commission which constitute unwarranted attacks upon private carriage in the United States.
Mr. Chairman, we think that the Commission should not be put in that unfavorable light. I have the most profound respect for that organization. They have done some marvelous work and we would like to see them restored to the old basis and I know of nothing that has ever been proposed which will so successfully accomplish that as the proposals of the Cabinet Committee report in the modification of the declaration of policy.
There is one part of this H. R. 6141 to which I would call your attention especially, and we are particularly opposed to it, and that is section 19 relating to forwarders. We have exposed in our statement the reasons why we are so vigorously opposed to that.
I might add that in the movement of materials going to the air. plane plants in California, much of the material they draw is from points east of the Mississippi River. They buy in small quantities from three to four or five thousand different manufacturers.
They consolidate these shipments and ship them to the west coast in carloads to save money. If their consolidations are knocked out by this proposal, if the Commission should come along and say, “You are interfering too much with the forwarders," it means from our own investigations that on a carload of freight that would weigh probably 30,000 pounds, they would pay an increased charge of $300.
In conclusion, Mr. Chairman, I have made some observations with respect to H. R. 9548 and H. R. 9771 and H. R. 9772.
The statement contained in my written presentation covers that fully and I don't need to comment. I want to thank you for this opportunity, Mr. Chairman. Mr. Mack (presiding). Thank you, sir. Do you have any questions, Mr. Hinshaw? Mr. HINSHAW. No questions. Mr. DOLLIVER. No questions. Mr. Mack. I would like to ask what type of carrier do you normally use in your industry?
Mr. BRASHEAR. All kinds, Mr. Chairman, chiefly for-hire carriers. We use to a substantial extent contract carriers because of the very, very efficient service that they render.
Mr. Mack. You referred to private carriers. You referred to concerns such as yours becoming interested in private carriers. My question is, Which private carriers were you referring to?
Mr. BRASHEAR. That is their own operation. A private carriage under the Interstate Commerce Act is the firm's operation.
Mr. Mack. Private trucking concerns?
Mr. Mack. That is what I mean. I assume that they would be interested in private trucks rather than any other type of transportation.
Mr. BRASHEAR. Oh, no, sir. In fact, they prefer for-hire carriers. Mr. Mack. I was trying to determine if the private carrier or the private transport that you had referred to did refer to trucks exclusively and I assume that your answer is “yes.”
Mr. BRASHEAR. That is correct.
Mr. Mack. Is it your opinion that the rates in this field, as far as common carriers are concerned, are too high?
Mr. BRASHEAR. I have none in mind right now, Mr. Chairman, but these situations are arising from time to time where adjustments have to be made.
Mr. Mack. I perhaps was misled in the comments that you had made and I wanted to be sure to straighten that out. I thought that you had made a reference to the rates in the industry being too high.
Mr. BRASHEAR. I say this, Mr. Chairman: That these rail carrier rates were very, very extensively increased, as I have shown, over 400 percent in that period. That brings up a high plateau of rates. I have never contended at any time that those rates were too high for the trucking industry.
The trucking industry came into the field when that was in operation, but I don't think that we should work on the theory today that that high level of rates must be maintained at all costs.
Mr. Mack. I know that you understood my question. My question was exclusively to see if you had referred to the trucking rates being too high and I am pleased to have had your answer.
Mr. BRASHEAR. I hadn't contended that, Mr. Chairman; no.
Mr. Angus McDonald of the National Farmers Union. Is Mr. McDonald present? Mr. McDonald may have permission to file his statement in the record, if he desires, at this point.
(The statement referred to follows:)
STATEMENT OF Angus McDONALD, REPRESENTATIVE OF THE NATIONAL FABMERS
UNION, IN REGARD TO H. R. 6141, WHICH WOULD AMEND THE INTERSTATE COMMERCE Act, PURPORTS TO PROVIDE FOR A STRONGER NATIONAL TRANSPORTATION INDUSTRY
Mr. Chairman and members of the committee, I am appearing here in opposition to H. R. 6141, which would change drastically national transportation policy established by the Interstate Commerce Commission and weaken greatly the authority of the Interstate Commerce Commission to administer that policy, We call attention to the fact that transportation policies and administration of those policies have been established over a long period of years. The problem of regulation arose during the period when the railroads constituted the only system of transportation which was developed in response to the needs of the growing economy. Although the railroads did a magnificent job in bringing about the settlement and development of the interior of the United States during this period, abuses soon developed and public-spirited citizens realized that some regulatory agency was needed.
Farmers particularly suffered from these abuses. They were overcharged and discriminated against both on commodities they sold and on farm supplies and other things necessary to their home living and farm production. Because the big shippers were in a position to make demands, they were granted such favors as rebates and rates which discriminated against small shippers, against regions and communities not favorably situated. The result of such discriminations was the passage of the Interstate Commerce Act of 1887, followed by the passage of other acts, including the Shipping Act of 1916, the Transportation Act of 1920, the Motor Carrier Act of 1945, the Merchant Marine Act of 1936, and the Transportation Act of 1940. These laws also strengthened the authority of the Interstate Commerce Commission in regard to competitive rate cutting and other transportation matters.
Transportation legislation over the years has been under constant review and has been subjected to searching scrutiny by many congressional committees. The Interstate Commerce Commission has also implemented and improved the administration of the act because of experience gained in such administration. It is not true, therefor, as some critics contend, that transportation policy and legislation is outdated and does not meet the needs of the constantly changing economy. We feel that the declaration of policy, which is set forth in the Interstate Com. merce Act, provides a fair standard by which to measure legislation and administrative policy. It sets forth the policy of the Congress, and I quote, "To provide for fair and impartial regulation of all modes of transportation as to recognize and preserve safe, economical, and efficient service, and foster sound economical conditions in transportation.” The policy statement also sets forth the standard of reasonable charges without unjust discriminations or unfair or destructive competitive practices. The general purpose of the law as stated is the development of a national transportation system, consisting of all modes, adequate to the needs of the United States and of the national defense.
I call attention to section 2 of this bill, which would strike from the statute books these fair standards, the heart of which is fair and impartial rate regulation and substitute a nebulous standard of dynamic competition. Phrases designed to protect the public interest are stricken and the emphasis is changed to promote full competition between modes of transportation.
It seems to us that those who recommend this change in transportation policy have lost sight of the basic purpose of the transportation industry. This industry is primarily a service industry and its importance is based upon its use, not upon competition between its various segments. An adequate transportation system
is necessary for the further development of our highly industrialized economy, our resources, and our agriculture. Transportation must be a servant and not a master of agriculture, industry, and national defense.
Under the Interstate Commerce Act, as interpreted by the Commission, consideration of other modes of transportation is taken into account when a reduced rate is being considered. The Commission has established the standard that the rate must be reasonably compensatory and no lower than to meet competition. The Commission has also developed a rate structure which is designed to encourage development of commerce throughout the United States. For example, it has established a rate structure which makes it possible for fruits and vegetables to reach eastern markets in competition with fruits and vegetables from the east. It has developed special rates on luxury items such as cigarettes and alcobolic beverages. It has in general taken into account economic factors and established rates which would benefit the greatest number of groups possible.
The Commission has denied that it has held an umbrella over uneconomical carriers. Authorities in the field substantiate this contention. They point out that there is only one decision of the Commission which has been challenged in regard to the imposition of rates above a carrier's cost in order to preserve a national system of transportation consisting of more than one mode of transportation. In that instance the Commission reopened the case and the complaint was subsequently withdrawn.
It is denied that the Commission has prevented the railroads from making drastic competitive rate cuts. In the fall of 1955, the railroads presented a list of important commodities on which they had made drastic reductions in rates. Steel rates were cut about 39 percent below normal rates and reductions on the eastern railroads, in regard to this one commodity, amounted to about $61) million a year.
Ir the railroads are permitted to make rate reductions withont review by the Interstate Commerce Commission, it is possible that a small shipper and a small community and captive areas 'vill suffer the most. The big shippers can generally take care of themselves, but the small shippers cannot financially carry through proceedings which would result in relief from the discrimination. It appears that mmder this legislation that the railroads would be permitted to discriminate at will in any section of the United States. Under the changes which are asked in 16a of the Interstate Commerce Act, the Commission would be precluded from considering the effect of lower rates on other modes of transportation. It would also be precluded from relating rates of other modes of transportation to railroad rates or to determinine whether such rates were lower than necessary to meet competition of other modes of transportation.
Under present procedure the Interstate Commerce Commission can suspend a specific rate, but under this bill it could only operate in a wide area of maximum and minimum rates, and if we interpret the legislation correctly the railroads would be permitted to cut rates down to the point where they would recoup only the out-of-pocket costs. It is important to realize that the fixed costs of the railroads are relatively much greater than those of other segments of the transportation system. This would enable the railroads to reduce their rates proportionately as compared to trucks. Such reductions would put the trucks in an economic straitjacket since their variable costs are proportionately touch greater.
The short-time effect on the railroads of such rate reduction would be of no benefit to them, if no contribution was made to fixed costs, or overhead and if the rate reduction existed over a long period of time, the revenue of the railmids would be depleted. If the rate reduction enabled the railroads to eliminate or destroy competition, the public interest and the national defense might be seriously affected. Discriminations without adequate review and without being Evaluated by an impartial agency under the standards of the policy laid down in the act, would result in many forms of discriminations between persons and places and between commodities and, in all probability, would carry us back to ruinous cut-throat competition.
While this organization has been highly critical of some of the administratire acts of the Interstate Commerce Commission, we believe that the abandon. ment of its administrative powers and procedures as suggested by this Commission would result in transportation anarchy. Competition cannot be the sole gide in transportation policy, if we are to have a strong and flexible system of transportation responsive to the needs of the growing economy and responsive to the needs of the Nation in times of war. We believe that we need cer