Page images


(Jervis Langdon, Jr.) The difficulty with the present statement of national transportation policy is not its language, but the interpretation given to it by the ICC. If the application of unfair or destructive competitive practices” were limited to rates which are noncompensatory, there would be no occasion to change the language and the proposed change in the statement of policy will be unnecessary to achieve the basic proposal of the Cabinet Committee (R. 539-540).

The railroads believe that such a revised interpretation of the present policy would follow as a matter of course if the three shall-nots as previously identified were enacted into law. For as we have seen, they would constitute a positive command to the ICC to exclude a faulty standard in its review of competitive rates, and such a mandate, in the form of a provision of substantive law, would necessarily modify the ICC's definition of an “unfair or destructive competitive practice.' Otherwise stated, if the ICC, in passing upon rates designed to meet the competition of another form could not take into account their effeet upon such other form but was confined to a consideration of whether the proposed rates were reasonable per se and nondiscriminatory, it is not likely that the present policy prohibition against "unfair or destructive competitive practices” would constitute an obstacle or otherwise jeopardize this basic recommendation of the Cabinet Committee.

It is the position of the railroads that a change in the national transportation policy is not necessary to achieve the basic proposal of the Cabinet Committee (R. 540).

The witness responded to certain questions as follows:

The Commission relies upon the "unfair or destructive competitive practices” provision of the national transportation policy in determining the economic effect which proposed rates would have on another mode of transportation. In certain decisions the ICC has found that proposed rail rates would be reasonably compensatory and yet condemned the rates because they would have an adverse effect on another mode of transportation. The proposed rule of ratemaking would prevent the Commission from relying on the "unfair or destructive competitive practices” provision of the policy to condemn compensatory rates (R. 553–554).

The Transportation Act of 1940 amended the ratemaking rule in each part of the Interstate Commerce Act so that the ICC could consider the effect of proposed rates on the movement of traffic of the proponent carriers, but not other carriers. It also amended the antipreference provisions of each part of the act so that they would not apply to the traffic of any other mode of transportation. Congress rejected a proposed amendment which would have compelled the Commission to approve, in all cases, compensatory rates proposed by one form of transportation, apparently because the ICC said, in effect, that it was unnecessary since that would be done in any event. In decisions immediately after the act of 1940, the Commission concluded that rates found to be compensatory should not be condemned because of their effect on another form of transportation. However, since 1945 the ICC has frequently deviated from this position (R. 555-556).


(C: B. Culpepper) The proposal eliminates the important directive to recognize and preserve the inherent advantages of each form, and inserts the term *dynamic competition” which may provide a dangerous latitude for the various agencies. The present statement provides a comprehensive basis for national policy, and no change is actually necessary (R. 1234).


(George Peterkin, Jr.) This water carrier does not object to fair competition, but objects vigorously to selective rate cutting by carriers with a large reservoir of noncompetitive traffic from which to recoup revenue lost due to rate cutting. Strong rail competition is encountered on all of its barge traffic, while due to the character and location of rail freight, the water carrier is precluded from competition. Under the proposed amendments, there would be a return to the law of the jungle with the water carriers driven from the rivers, as before effective regulation (R. 1702–1703).


(Angus McDonald) The proposal would change drastically the present national transportation policy and weaken greatly the authority of the Commission to administer that policy. The present policy provides a fair standard by which to measure legislation and administrative policy. The transportation industry is primarily a service industry and its importance is based upon its use, not upon competition between its various segments, as is emphasized by the proposed legislation.

If the railroads are permitted to make rate reductions without review by the Interstate Commerce Commission, as proposed it is possible that a small shipper and a small community and captive areas will suffer the most. Small shippers cannot financially carry through proceedings which would result in relief from the discrimination.

The abandonment of some of the Interstate Commerce Commission's administrative powers and procedures as suggested by the proposed amendments, would result in transportation anarchy. Competition 'cannot be the sole guide in transportation policy if we are to have a strong and flexible system responsive to the needs of the growing economy and to the needs of the Nation in the time of war. All modes of transportation are necessary (R. 1328–1330).


(Giles Morrow) The proposed new policy fails to recognize the inherent advantage of freight forwarding, and would have the effect (1) of lessening the protection which the industry has and needs against unfair and destructive competitive pricing and practices, and (2) of permitting and encouraging an intensification of competition in the forwarding industry by liberalizing the standards for obtaining freight forwarder permits (Ř. 1151).


(John H. Eisenhart, Jr.) The wording of the proposed national transportation policy is vague and is without definite standards. Any decision rendered by the Commission on the basis of paragraph 2 of the proposed bill, stating that its primary purpose is to promote full competition, must surely fall when tested by the courts. Furthermore, there is absolutely no connection between "full competition" and the encouragement of technical innovations and the development of new rate and service techniques.

The present policy was adopted without much experience in watercarrier regulation on the part of the industry, the Commission, or the Congress.

If any thing is to be done legislatively, the policy, the suspension power, and the rate powers of the Commission should be made more positive, and the Commission should be directed specifically to act affirmatively to foster sound economical transportation, leaving to the Commission a reasonable exercise of administrative discretion (R. 1590–1592). INDEPENDENT ADVISORY COMMITTEE TO THE TRUCKING INDUSTRY,


(B. M. Seymour) The proposed legislation, by opening the doors to rate-cutting competition, would retard technological progress. Intercarrier competition can emphasize either competitive rate cutting or competitive improvements in service. There is a tendency toward the former because it is quick and certain. The present transportation policy has contributed to the technological revolution by holding a rein on competitive rate cutting. The proposal would reverse this policy. The fundamental conclusions of the Advisory Committee's report are faulty (R. 1337). INLAND NAVIGATION CO., RIVER TERMINALS CO.

(Harry C. Burnett) Implementing the testimony of Chester C. Thompson for the American Waterway Operators, Inc., who was requested to submit specific instances of "spot" rate reductions where the railroads had attempted to publish rates so low that the continued operation of competing barge lines was threatened, the witness stated that such unfair or destructive competitive practices are followed by the railroads in connection with water transportation on the Columbia River and in the Pacific Northwest. The original stern-wheel steamer transportation on the Columbia River was eliminated by rail competition. Navigation has been reestablished during the last 15 years with the help of diesel-powered towing vessels and modern steel barges, and has caused reductions in rail rates which were raised when the earlier competition was eliminated.

In January 1953, the railroads in the area filed applications with the Commission for further reductions on bulk petroleum shipments, reducing the rates and estimated weights by amounts ranging from 25 to 40 percent, and below the level of rates in effect in 1935. The

proposed rates were suspended upon complaint of competing water and motor carriers, but the Commission permitted the reduced rates to become effective, finding them not below the out-of-pocket cost, without taking into consideration the fully distributed costs. The competing water and motor carriers succeeded in obtaining a court injunction restraining the enforcement of the Commission's order, and the case has now been remanded to the Commission for rehearing (R. 476).

Since 1942, the Commission has authorized rail-rate increases totaling 79 percent leaving the establishment of the increases to the discretion of the railroads. The latter have not applied those increases to their rates on petroleum and petroleum products in competition with the barge lines on the Columbia River. This situation still exists today in spite of the fact that at the time Ex parte No. 175 was heard (1951-52), the railroads assured the Commissioners that they would apply the increases to their petroleum rates in the Pacific Northwest.

Concerning the statement of Jervis Langdon, Jr., on behalf of the Association of American Railroads, that there was no intent to change the national transportation policy, but only to prohibit the Commission from considering (1) the effect of proposed rates on the traffic of any other mode, (2) the relation of such rates to the rates of any other mode, and (3) whether such rates are lower than necessary to meet the competition, the witness stated that these proposals would have the general effect of enabling the railroads to put water carriers on the Columbia River out of business.

In connection with H. R. 6208, proposing to permit circuitous lines to get automatic fourth-section relief to meet the lower rates of direct lines, it would enable the rail lines to reduce their rates to meet direct water carrier rates, with no recourse to the Commission's suspension power. The combined effect of the three prohibitions sought by the railroads, and of H. R. 6208, could be to effectively eliminate barge and water transportation, regardless of the declared purposes of the national transportation policy (R. 476-477).


(Anthony F. Arpaia) The introduction to the advisory committee report states that present regulation is based on the historic assumption that transportation is monopolistic. It is submitted that the statement is based on a misconception of the true situation. With the advent and development of highway transportation, the emphasis has shifted largely from intraagency to interagency competition. The task of ratemaking has changed from a situation in which value of service predominated to one in which cost and competitive considerations must be given greater emphasis. This does not mean that competition should be permitted to run riot or that all existing principles of ratemaking should give way to a statute requiring a fixed course of action. It is suggested that analysis of recent action of the Commission will show abundant evidence of the recognition of the changes in the competitive transportation picture (R. 261).

Resort to the laws of the jungle with competition in full play will not produce the desired transportation system. Complaints against

rate reductions on the ground that they unnecessarily dissipate carrier revenue frequently are filed by railroads against railroads and by motor carriers against motor carriers. They ask protection by the Commission against such disruptive practices. The dominant effect of the proposed legislation would be to permit all rates to gravitate to the bare compensatory level (R. 262).

The proposed changes in the national transportation policy lack clarity in several respects, and would constitute a continuing source of confusion as to the scope of the regulatory authority. The phraseology doubtless will cause the courts to speculate as to whether the Commission has duly considered the bearing of the policy statement in any particular determination. If a statement of policy is desirable, the present statement should be modified only after careful consideration (R. 262-263).

The primary consideration in regulation of transportation has been the protection of the public interest. Congress clearly set this out in the transportation policy of the act of 1940, and unless conditions have so changed that the definition of the public interest is no longer valid and some restraints on competition are no longer necessary, it is felt that it is unwise to make any fundamental changes in that policy or in the present rate-making powers of the Commission (R. 295).


(James R. Rowan) The conference opposes the two principal proposed bills primarily because their avowed objectives are contradictory to the purposes of public regulation, and because they could foster a monopolistic drive by some carriers, with the Interstate Commerce Commission relegated to the role of a mere "research agency.”. The conference's opposition is specifically directed against those sections of the bills which would amend the national transportation policy and relieve the Interstate Commerce Commission of the obligation to place restrictions, conditions, or limitations on individual modes of transportation (R. 897--899).

The conference is concerned with the threat of suppression and strangulation of the moving industry by the entry of larger carrier organizations from other modes of transportation. The fear is premised on the proposed elimination of the present language in the declaration of the national transportation policy, which states that the Commission has the obligation to "preserve the inherent advantages" of each mode of transportation, to "foster sound economic conditions," and to prevent "unfair or destructive practices” among the several carriers.

The elimination of this statement and the substitution of language which would merely require "minimum economic regulation without special restrictions, conditions, or limitations on individual modes of transport,” would leave the moving industry wide open for entry by financially more powerful carriers of other modes of transportation. This result would be inconsistent with the historical congressional policy of keeping each form of transportation independent of ownership and control by carriers of competing modes of transportation (R. 899-901).


« PreviousContinue »