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man money and do a good job for him, you should let the truckline handle it or the rail l. c. l.
This way you are getting more and more into a regimented setup here in this country where it is going to be bad for business. It is getting worse and worse. I am absolutely opposed to regulation of associations, even. Even though they are my competitors, I think it would be terrible to have the Commission pick on one, and another, and this one and say “You can't do this and you can't do that.”
You would stop business in this country. You stop normal trade. It is a terrible situation to be getting into.
Mr. HINSHAW. You have to regulate the carriers and, of course, you pay the regulated carriers' rates so such rates can't be considered to be unfair.
Mr. ANDERSON. That is right.
Mr. HINSHAW. The rate that you charge the public is something less than the regulated carrier's l. c. l. rates, and something more than his carload rates. Therefore, you perform essentially the same function that the nonprofit shipping associations perform.
Mr. ANDERSON. Absolutely the same. There is no difference in our operation whatever, not a bit.
Mr. HINSHAW. And you make a profit, you say?
Mr. ANDERSON. I can't beat them in price usually, but I can come pretty close, and a lot of them would rather deal with me than do all the work themselves. I notice some of the larger firms here today.
I will talk about the company of a man I just met back here, the biggest in the country, Sears. Years ago I used to have volume rates, before regulation. If a man gave me 6 or 7 million pounds a year, he got a certain rate. If he gave me 2 million pounds a year he got another rate.
Then it went down to the nifty-gifty. He got a high rate. There wasn't much difference between the little fellow and the big man, say, 50 or 60 cents a hundred, but the big man made it possible. Ile paid more money for service rather than make up his own cars.
He saw that I made a profit. Most of these firms are fair. They don't want you to work for nothing for them. They gave me a small profit and that permitted that little fellow to take advantage of that big tonnage, and it was a fine thing.
However, I had the Commission down my neck. They threatened to take me to court. They were going to fine me for all kinds of things. I don't know how many acts they pulled on me. I was going to take it to the Supreme Court, but I lost out.
They told me I was discriminating, so I had to stop that. I am sorry now I did. I should have taken it to the Supreme Court. We wouldn't have had so many associations if I had won.
I think regulating carriers is enough. Why regulate a middleman? Let people operate. That's what makes the country great. Let them ship wherever they want to; competition. That's what makes life.
Mr. HINSHAW. Thank you. No further questions, Mr. Chairman.
Mr. Rogers. Thank you, Mr. Hinshaw, and thank you, Mr. Anderson, for a very interesting statement.
Although there is an issue here as to what should and should not be done with the middleman, I think I can assure you that if there is skul
duggery afoot, as you charged several times in your statement, this committee will try to get to the bottom of it.
Mr. ANDERSON. Thank you.
(The following statement was submitted for the record :) ADDITIONAL STATEMENT OF GILES MORROW ON BEHALF OF FREIGHT FORWARDERS
INSTITUTE Mr. Carl E. Anderson, of Western Freight Association, appeared before the subcommittee on June 12, 1956, ostensibly for the purpose of testifying on certain pending bills concerning the regulation of freight forwarders. Actually, Mr. Anderson said very little about the bills, but used the occasion to present his views and arguments regarding certain cases that are now pending before the Interstate Commerce Commission. He bitterly attacked what he referred to as the “organized forwarder," in which category he apparently places all members of the industry except himself.
As a springboard for his attacks, accusations, and insinuations, Mr. Anderson submitted a proposal for complete repeal of forwarder regulation by elimination of part IV of the act. He did not oppose, as such, the specific forwarder bills that were before the subcommittee for hearing. In fact, as to the “permits” bill, H. R. 9772, he said "I think this would be desirable if forwarders are to be regulated at all." As to the "piggyback” bill, H. R. 9548, he thought he might not fare as well as larger units of the industry in dealing with the railroads on a contractual basis, but he admitted that the trucks have treated him fairly under similar provisions for contracts with them. He endorsed, with certain limitations, the bill (H. R. 9771) regarding ownership by forwarders of other types of carriers.
Before launching his discussion of the pending litigation Mr. Anderson briefly stated his basic philosophy about forwarder regulation, which is that the busiDess of forwarding is not affected with a public interest and hence that the industry should not have been federally regulated in the first place. He attacked the motives of all those who originally sought the regulation, saying, in effect, that the forwarders asked for regulation in order to legalize unlawful practices; that the ICC advocated regulation in order to increase its power and spending ability : and that otherwise regulation was sought only by "a few purists and theorists." The best answer to these intemperate charges is the voluminous record which constitutes the legislative history of part IV of the act.
Mr. Anderson's real reason for seeking repeal of regulation, as it appears from his testimony, is that it has restricted his freedom to maneuver his rates. He referred to the litigation that has ensued regarding his rates in the last 2 years, and charged :
(1) That the "organized forwarders” are embarked upon a deliberate program to harass or drive him out of business.
(2) That they are aided in their objective by regulation and by a sympathetic if not actually a collusive Commission. As Mr. Anderson tells the story, his costs were suddenly and sharply reduced in the fall of 1954 by certain changes in the rate structure of the transcontinental railroads. He said he simply tried to pass along to the public the results of these decreases in his costs, whereupon his competitors, the “organized forwarders," began their program of harassment, protesting his traffics, complaining about his rates, and tying him up in court.
It is not the purpose of this statement to argue the merits of the pending rate Cases Attorneys for the individual litigants are doing that in the proper tribunala, But the record has been badly distorted, and a rather serious indictment has been levied at the freight-forwarding industry. Some vital facts have been carefully withheld and they should be supplied.
Kepented reference was made by Mr. Anderson to the "organized forwarders," and at one point he referred to the "larger forwarders, now organized as the Freight Forwarders Institute.” Thus, by innuendo, it may have been made to appear that the large forwarders, through the Freight Forwarders Institute, are banded together to fight the small Western Freight Association. Nothing could be further from the truth. The institute is composed of large and small forwarders some much smaller than Mr. Anderson's company, and it does not participate in rate cases in behalf of or against its members. The record will show that the freight forwarders who are parties to the proceedings he refers to par.
78456_56-pt. 3— 12
ticipated as individuals who are competitive with him. It will show that those forwarders are both members and nonmembers of the institute and that many institute members are not parties. And a fact not mentioned by Mr. Anderson is that a great many motor carriers are also parties to the proceedings.
The most significant fact which Mr. Anderson has omitted, in relating the history of his rate difficulties, is that throughout his long career as a freight forwarder he has been a specialist, concentrating on the handling of glassware, pottery and a few other items. In this field he carved out a useful and recognized place for himself. His operating methods were unorthodox, as compared with those of other forwarders, but the other forwarders made no objection so long as he confined his activities to his recognized field.
When the changes in the rail rate structure referred to by Mr. Anderson oecurred, in August of 1954, he seized upon that as an opportunity to expand his operations and become, in effect, a general commodity forwarder instead of the specialist he had always been. His rates did not suddenly become what he described to the subcommittee as "unreasonably high in relation to my reduced costs." The rates he maintained on commodities other than those in which he specialized had always been unreasonably high-so high that they did not move any appreciable amount of traffic.
It was when Mr. Anderson decided to extend his service into fields where he had never before functioned that his unorthodox methods of rate-making became, at least in the eyes of a number of the forwarders with whom he then became competitive, a serious threat to the entire forwarder rate structure. Those forwarders undertook to invoke the protective machinery of the Interstate Commerce Act, exactly the same as that machinery is invoked by every carrier subjeet to regulation, whether rail, motor, water, or forwarder, when his business is threatened by what he deems to be unreasonably low and competitively disastrous rates.
That the affected motor carrier industry took the same grave view of Mr. Anderson's radical rate policies and practices is demonstrated by their activity in the cases. In a brief filed on June 18, 1956, in ICC Dockets 31878 and I and S. 6530 the transcontinental motor carriers, through their agent, the Rocky Mountain Motor Tariff Bureau, Inc., said:
"The transcontinental motor carrier rate structures, in which approximately 1,000 motor carriers participate, have been long established.
"It is submitted that the national transportation policy declared in the Interstate Commerce Act should preclude Western Freight Association from jeopardizing the existing rate structures of all of its competitors."
Why Mr. Anderson does not make the same charges against his motor carrier opponents that he levels against his forwarder opponents is not clear. It can only be supposed that he does not think that would aid him in his objective to bring about the repeal of forwarder regulation.
Another fact which Mr. Anderson failed to mention is that his crusade to reduce rates has not extended to his own business-that is the business he has always handled. With possible insignificant exceptions Mr. Anderson has not reduced his rates on the articles he always handled, which as stated previously are glassware, pottery, etc. His proposed reductions have been on traffic handled by, and which he hopes to capture from, his competitors. As somebody has said, it is easy to be generous with someone else's money. And whether Mr. Anderson is being hampered in the conduct of his own business or restrained or delayed in his efforts to raid the business of others becomes a very important question.
Mr. Anderson referred to a suit brought against him in court, implying that it was only a delaying or harassing action. The fact is that the forwarders who brought the suit undertook to test whether the Commission, having once suspended a tariff and entered an order of investigation, may dismiss the proceeding without a hearing on the facts at issue. The court refused to enjoin the Commission, and since the rates then became effective the suit was withdrawn. It may serve to indicate the good faith of the complainants to mention that in two subsequent cases, involving similar circumstances, the courts have enjoined the Commission. (Amarillo-Borger v. U. S. (N. D. Tex., 138 F. Supp. 411); and Long Island R. R. Co. v. U.S. (Civil No. 16321, E. D. N. Y.)).
From the story of his harassment, beginning late in 1954, it would be logical to assume that Mr. Anderson's business might have fallen off drastically in 1955. The opposite happened. Mr. Anderson told the subcommittee he bandied 31,000 tons of freight in 1955, but he failed to say that that was 3,000 tons more than he handled in 1954. Mr. Anderson grossed almost $300,000 more in 1955 than in 1954, and his net was up $7,000, or more than 11 percent. That is not the picture of a
man being hounded into bankruptcy. This prosperity cannot be due to the fact that Mr. Anderson had his rate reductions held up because, as previously stated, the reductions have applied not to the traffic which he has always handled but to traffic which he has not heretofore handled.
Mr. ROGERS. The next witness is Mr. Ernest T. Sherry, representing the Shippers & Receivers Cooperative Association, Inc., of Philadelphia, Pa.
Will you come forward, identify yourself, and proceed.
STATEMENT OF ERNEST T. SHERRY, AGENT, SHIPPERS & RECEIVERS COOPERATIVE ASSOCIATION, INC., PHILADELPHIA, PA.
Mr. SHERRY. My name is Ernest T. Sherry, the agent for Shippers & Receivers Cooperative Association, Philadelphia, Pa.
My testimony is on the omnibus transportation bills.
Mr. ROGERS. You may have a seat, Mr. Sherry, if you desire, and proceed with your statement.
Mr. SHERRY. Thank you, sir.
The primary intent of this testimony is the delineation of some of the facts of shippers' associations operations in general, and, more specifically, our own in particular.
We feel, that is, the members of Shippers & Receivers, which is known around Philadelphia as S. & R., that any legislation that would limit, suppress, or possibly destroy the legitimate
and natural efforts of shippers' associations would be detrimental to the general public and injurious to our national ecoonmy.
Our association was formed over 7 years ago by a group of Philadelphia manufacturers who felt that this was an answer, at least in part, to the problem of ever-increasing transportation costs.
The initial purpose of the association is to get the benefit of volume truckload or carload rates by the process of consolidation of small shipments. All savings so effected are visited directly upon the member or his customer.
I would like to clarify that. Under rule 10 every specific commodity takes its own rate in the territory to which we have service or the facilities of the association are available, and because of that we know what our fixed costs will be. In our case, we use trucks to Chicago, St. Louis, Detroit, and Cleveland. Where í say the "savings so effected are visited directly upon the member or his customer, the bill for charges on each individual shipment reflects that saving:
As the association is operated on a nonprofit basis, savings to our 88 member-companies are quite substantial.
Our association's policies and operations are directed by the members and great care is taken at all times to make certain that we do not overstep the limits of our exemption in section 402 (c) of part IV of the Interstate Commerce Act.
We would further like to include in this testimony a report, made and this is just in part here-to our members by our board of directors last month at our annual election meeting. This report follows:
EVOLUTION IN TRANSPORTATION The story of shippers' associations is a fairly simply one, and while its path of progress was impeded by many obstacles, both physical and legal, the gate
way was finally opened by the thinking and action of the transportation men of American industry.
Many years ago enterprising men of traffic realized that there was a definite need for an agency which could consolidate many small shipments. These shipments had heretofore moved as individual shipments, on individual bills of lading, and were tendered to the railroads as less-than-carload freight.
The destinations of these shipments were so many, both to terminal cities and offline points, the railroads found themselves handling this freight at a loss. However, as the railroads were the backbone of America and were dedicated to the service of Americans and American industry, they had no alternative but to suffer out the less-than-carload shipments and hope that the carload shipments would take care of the profit side of the ledger. This proved to be the case.
To get back to the enterprising transportation men, the thought was born that if all of these unprofitable and highly pestiferous I. c. 1. shipments could be consolidated at key origin points, shipped as carloads, and then distributed at key destination points, everyone, including the railroad, the shipper, the consignee, and the enterprising transportation men, would be happier or richer, or both.
The men who conceived this idea of consolidating freight were able to get carload rates from the railroads and therewith had the spread between the less-than-carload rate and the carload rate to effect pickup, delivery, pay operating expenses, and still have enough left for a tidy profit.
The shipper and consignee were happy because their freight now moved as carloads and there were no delays or other inconveniences that had been the burden of less-carload shipments. Also on many commodities, the rates were even lower than l. c. l. tariff rates.
The railroads were happiest of all, as one of their biggest headaches had been eliminated to a great degree and they still retained all their profitable carload business, now increased by these consolidations. In fact, the railroads were so pleased with this arrangement that they bought or controlled most of these consolidators, who were now known as freight forwarders, so that nothing would disturb this gratifying operation.
And so the freight forwarders continued as a part of the general transpor. tation picture of the United States and did a very good job. Eventually the ICC decided that, as profitmaking entities, they should be classed as carriers rather than as shippers, which had been the case up to then. Consequently, in part IV of the Interstate Commerce Act, forwarders were classed as carriers and were issued permits to operate.
In the meantime, there were other enterprising men in the transportation seg. ment of American industry who saw in these same freight consolidations & method of overcoming many of their companies' transportation problems by using the same basic plan as the forwarders.
The primary difference between the two operations was that, where the forwarder made a personal profit on his consolidations, the men of industry turned back the savings on freight shipments to their companies or to their companies' customers.
In other words, the freight forwarders did the same thing physically as the associations or the shippers who consolidated, with the exception that in the case of the freight forwarders it was done for a profit, which was very good, and in the case of the men of industry it was done for the savings on their commodities so that they could put their products into competitive markets farther away at a lower cost and, in turn, increase their production.
Mr. HINSHAW. And profits.
Mr. HINSHAW. Mr. Anderson in his testimony a few moments ago pointed out that while cooperative associations do not report a profit for themselves, they would not be in business if they did not record a profit for their members.
Mr. SHERRY. Yes, sir. We are a very small association, speaking about tonnage. We just operate from Philadelphia for certain Philadelphia manufacturers and our tonnage runs only about 25 million pounds a year.
Mr. Anderson says, “I am a relatively small operator," and he handled 62 million pounds last year, which is well over twice what we