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INTERSTATE COMMERCE COMMISSION
(Anthony F. Arpaia) H. R. 9548 would amend section 409 to authorize contracts between freight forwarders and railroads for the movement of trailers on flatcars at less than rail tariff rates. Freight forwarder operations initially were confined almost exclusively to service between concentration and break-bulk points, and consolidated shipments were moved in full carloads by rail carriers, with the profit from such operations determined by the margin between the established less-than-carload rate and the carload rate. About 30 years ago, forwarders began employing motor common carriers to gather and distribute shipments in wider areas surrounding their concentration and break-bulk points. The forwarder made contracts with motor carriers for such services at less than the general charges, and under present section 409 they are authorized to continue such arrangements, except that for line hauls of 450 highway miles or more, the contracts may not be for less than the established rates (R. 289).
Some railroads have joined with motor carriers in the substitutedservice plan and have entered into arrangements with motor carriers, whereby the railroads receive for their trailer-on-flatcar services compensation sometimes called divisions, which is less than their own tariff rates. As a result of this competition forwarders may be compelled to confine future service to areas close to concentration and break-bulk points. Motor carriers act in the capacity of forwarders or shippers when they assemble the traffic tendered by individual shippers into carload lots for rail transportation.
Forwarders would be able to operate more efficiently under such proposed contracts, and thus compete with motor carriers on a national scale. The amendment may not be in the best interest of transportation as a whole. The tremendous volume of traffic controlled by the freight forwarders may be used by them to induce railroads to enter into contracts with freight forwarders at rates so low that they may cast a burden on other traffic. The Commission is not prepared at this time, however, to oppose the objective of the proposal, but believes that certain safeguards should be included. It is recommended that language similar to recommendation No. 30 contained in our 69th annual report, page 137, and for the same reasons, be incorporated in any amendment of section 409. This would (1) place the burden of proof on the parties to the contract, (2) prohibit such contracts at compensation lower than the motor carrier's tariff rates in all cases where the line-haul transportation is for a total distance of 450 miles or more, and (3) provide penalties for acceptance or receipt of any rebate, etc., from the transportation of property at compensation less than that specified in such contract. Our experience with 409 (b) of the act has disclosed some defects, the most important of which is the failure to place the burden of proof on the makers of such contracts. Section 409 (a) now prohibits such contracts at compensation lower than the motor carrier's tariff rates where the line-haul transportation "in truckload lots” is for a total distance of 450 miles or more. The recommended amendment would prevent circumvention of such prohibition (by use of contract rates not subject to specified minimum weights), by eliminating the term
struckload lots" and making the prohibition applicable to all cases where the line-haul distance is 450 miles or more. A penalty provision should be added since there appears to be some question as to whether or not the enforcement provisions of parts II and IV of the act cover this situation.
It is also recommended that the bill be amended to include a requirement that the contracts of forwarders with railroads and motor carriers be filed with the Commission on not less than 30 days' notice, the same as now required of tariffs, and that the Commission be given power to suspend and investigate these contracts.
Section 400 (a) provides that the terms, conditions, and compensation under contracts between forwarders and motor carriers shall not unduly prefer or prejudice any other freight forwarder. A similar provision should be inserted in the corresponding provision of the bill since it is doubtful whether section 404 (c) of the act would apply to the terms, and so forth, set forth in contracts between freight forwarders and railroads.
The phrase "other containers" in the bill could be construed as containers of any size or description, including those loaded in boxcars or any other type of car. This provision would appear to go beyond the transportation contemplated by the bill according to its title, namely, trailers on flatcars. If it is intended that the application of the proposed measure shall be confined to the movement of freight in trailers or other similar containers, on flatcars, the bill should be amended to clearly so indicate (R. 291).
MEMPHIS FREIGHT BUREAU
(C. A. Mitchell) With reference to the statement of witness Morrow for the Freight Forwarders Institute that forwarders' operating ratio averages better than 98 percent, based on Commission statistics for 1954 and 1955 the respective operating ratios were 95 and 92.6 percent. Forwarders make high returns on their fixed investment. The net 1954 income after taxes represented 73.9 percent of net fixed investment and the 1955 net income represented 94.8 percent of the 1954 net fixed investment (R. 1263). NATIONAL INDUSTRIAL TRAFFIC LEAGUE
(William H. Ott) The proposal to permit forwarders to contract with rail carriers regarding compensation for line-haul carriage of freight loaded in or on trailers or other containers would extend to rail shipments the same freedom of contract now authorized with respect to motor shipments, but without limitation as to shipments moving 450 miles or more. Also, the wide open language of "containers" may put all rail forwarder traffic on a contract basis.
Such a contract basis is contrary to the scheme of for-hire carrier regulation. The national policy cannot be furthered by permitting one agency to obtain another agency's service unless the tariff rates are open to all who use the latter's service.
The stake is much larger in the case of rail than of motor contracts. Of $290 million paid by class A forwarders in 1953
for line-haul transportation, $201 million was paid to railroads. The spread between the tariff rate and a contract rate in the case of motor carriers is comparatively small.
In the case of rails, with a much wider spread between out-ofpocket cost and fully allocated cost, the pressure of traffic necessity may induce them to go very much below published tariff rates to their own and to rail patrons' detriment.
All of the advantages of trailer-on-flatcar service can be made available to forwarders by proper tariff publication. No statutory change is needed (R. 947-950).
NEW ENGLAND MOTOR COMMON CARRIERS (VARIOUS)
(Francis E. Barrett, Jr.) Freight forwarders employ rail, water, and motor carriers to perform their transportation service, receiving as compensation for their services the difference between the less-than-truckload rate charged and the truckload or carload rate paid the common carriers for their services. The proposal of H. R. 9548 to permit freight forwarders to bargain and contract for the rates to be paid common carriers for the transportation service rendered, would permit them to bid one carrier against the other, to the detriment of the transportation industry (R. 519–520).
SEARS, ROEBUCK & CO.
(John C. Allen) H. R. 9548 is an expansion of the theory that a freight forwarder is a common carrier in relation to the underlying carriers. Any legislation which attempts to grant forwarders further privileges of an actual carrier, is not conducive to a sound transportation system. If forwarders are permitted to make contracts with railroads for piggyback service, it will invite an extension to traffic in freight cars. The Commission regards present restrictions in section 409 concerning forwarder-motor common-carrier contracts as inadequate. The bill contains none of those restrictions. Permitting forwarder-rail contracts will not produce lower rates or better service, but will place the former in a position to control traffic (R. 1457–1458).
SOUTHERN TRAFFIC LEAGUE
(C. B. Culpepper) H. R. 9548 makes no provision for the filing of contracts made with railroads, and is so broad in its reference to containers that even wooden boxes could be loaded in boxcars. It does not stipulate that movements shall be in carloads. Any size shipment could be loaded in any size container, under agreements to transport on secret rates. This legislation would contribute to the breakdown of orderly regulation of relationship between the various forms (R. 1231).
(A substantially similar statement was presented by the witness on behalf of the Atlanta Freight Bureau (R. 1238).)
National Retail Dry Goods Association, Robert H. Smith (R. 1008).
Traffic Managers Conference of Southern California, L. C. Wolfe (R. 1002).
FREIGHT FORWARDERS INSTITUTE
(Giles Morrow) H. R. 9771 is designed to correct a discriminatory provision of the present law with regard to relationships between freight forwarders and other common carriers. The Commission under the bill could approve the purchase by a forwarder of a carrier of another type, provided it should find that such acquisition would be consistent with the public interest. The Commission is given power to impose upon the transaction such terms and conditions as it may find just and reasonable.
The bill would remove discrimination and provide simple equity. The opposition condemns on the one hand what it condones on the other, under the same misconception about the status of freight forwarders as was considered in connection with H. R. 9548. The Commission fears that permitting forwarders to acquire control of other carriers would open the way for discriminations. A number of motor carriers, water carriers, and
railroads now own and operate forwarders. Opportunities for discrimination are present to the same degree where another carrier owns a forwarder, as in the reverse situation (R. 1180–1182).
AIRCRAFT INDUSTRIES ASSOCIATION
(Harry B. Brashear) H. R. 9771 would amend section 411 (a) of the Interstate Commerce Act by permitting forwarders to acquire common carriers. By controlling the policy of a motor carrier which transports a large forwarder tonnage, a forwarder-owner by such control would create a most undesirable situation, one which Congress definitely intended to prohibit (R. 1324).
AMERICAN TRUCKING ASSOCIATIONS, INC.
(John V. Lawrence) The industry opposes the bill which would permit freight forwarders to acquire control of common carriers subject to parts I, II, and III of the Interstate Commerce Act. Congress has historically followed the policy of prohibiting common control of competing forms of transportation, which would ultimately lessen competition and create a monopolistic giant. If any amendment is needed, it should move in the opposite direction and require divestment and prohibition of mutual control by either forwarders or carriers (R. 810-813).
(Fred Carpi) H. R. 9771, a proposal to amend section 411 to permit a freight forwarder to acquire control of a common carrier under parts I, II, or III of the act would reverse the present express prohibition and permit such acquisition if the Commission finds it to be consistent with the public interest. Undoubtedly the present prohibition stems from the conviction that if a freight forwarder were to acquire a carrier whose services it could use, it could so dominate that carrier in respect of its rates for the handling of the forwarder traffic as to force competing carriers to make equally low rates for the benefit of the forwarders. The present prohibition is basically sound and desirable to protect against the possibility of use of a carrier by a forwarder to gain improper rate advantages over other carriers and competitors.
If, however, there were to be any relaxation of the present prohibition, the safeguards in H. R. 9771 would not be sufficient. In such an event it would seem to be necessary to include restrictions similar to those contained in the Panama Canal Act, and, in addition, to forbid absolutely the use of the services of such carrier by the freight forwarder in the rendition of its service subject to part IV of the act (R. 1217).
INTERSTATE COMMERCE COMMISSION
(Anthony F. Arpaia) H. R. 9771 would remove the prohibition in 411 (a), which makes it unlawful for a freight forwarder, to acquire control of a carrier subject to part I, II, or III of the act, subject to the approval of the Commission after reasonable opportunity for interested parties to be heard.
Chairman Joseph B. Eastman stated in a letter dated March 12, 1941, to Senator Burton K. Wheeler that The conclusion that the public interest requires that the forwarder be an agency independent of carrier control is reinforced by the finding made in Freight Forwarder Investigation (229 I. C. C. 201), that the control and domination of certain large forwarders by railroad companies resulted in violations of the act. He also stated thatThe same considerations which preclude carrier control of forwarders also preclude forwarder control of carriers. Congress failed to adopt Chairman Eastman's suggestion that carriers subject to part I, II, or III be prohibited from having or acquiring control of freight forwarders. Congress was impressed apparently by the following considerations : (i) The two largest forwarding operations in the country were developed under railroad affiliation, and no service complaints had been made by the shipping public; (2) because of the universality of the service which railroads are required to perform, their control of forwarding operations would tend to be more universal and less discriminatory than forwarder service conducted by individual operators having narrower rights and obligations; and (3) the investments made by rail, motor, and water