Commission has the power to prescribe the exact rates after a finding of discrimination or preference or prejudice the powers presently given to the Commission under sections 2 and 3 of the act would become ineffective and meaningless (R. 870-871).

With the Commission's authority limited to the upper and lower limits of reasonableness, the carriers would be left with a wide open hunting ground as to the more noncompetitive traffic, including coal. The maximum-minimum rate provision nullifies the present ratemaking rule (sec. 15a (2) of the act). If the Commission can only participate in ratemaking at the outermost fringes of reasonableness, what is the use of the ratemaking rule?

It is idle to refer to maximum reasonable rates as a standard of protection. No group of shippers should seek statutory advantages at the expense of others. Those seeking to enhance the advantage of intercarrier competition open to them should not deprive the socalled noncompetitive traffic of long standing, needed safeguards against unreasonable carrier rate actions.

It is recommended that section 15 (1) of the act should remain unchanged, with the exception that the period after the last word "prescribed" be changed to a semicolon and there be added thereto the following (R. 871-872):

Provided further, That in determining a minimum rate the Commission shall not consider the effect of such rate on the traffic of any other mode of transpor tation, the relation of such rate to the rate of any other mode of transportation, or whether such rate is lower than necessary to meet the competition of any other mode of transportation.

NATIONAL GRANGE

(Lloyd C. Halvorson)

The Grange believes that those who buy transportation services should be protected by competition between the carriers and various modes of transportation, and by regulation which authorizes the Commission to determine and enforce (1) the maximum rate that any carrier or group of carriers may charge, (2) the minimum rate, and (3) the just and reasonable rate relationships between persons, localities, or commodities.

The Grange favors leaving a zone of lawfulness, wherein carrier management would be free to give effect to cost advantages of its services in response to the influence of competition. The power of the ICC to set precise rates should be preserved, but it should be exercised only to prevent unjust discrimination and to establish through routes and joint rates.

Proposed rates published by carriers which cover fully distributed costs should be approved, even though such rates are below the costs of competing carriers of the same, or other modes of transportation (R. 1334).

NATIONAL LIVE STOCK PRODUCERS ASSOCIATION, AMERICAN NATIONAL CATTLEMEN'S ASSOCIATION, NATIONAL WOOL GROWERS' ASSOCIATION

(Lee J. Quasey)

Differences in the relative economic strength of carriers must be recognized and considered from the standpoint of the public interest.

9

To give controlling weight to mere out-of-pocket costs in making competitive rates would not be in the public interest because of the destructive effects on carrier service and the shifting of a disproportionate share of the burden to shippers of noncompetitive traffic. Competitive rates would tend to gravitate to a mere compensatory level, resulting in petitions for general increases, and repetition of the process of removing the increases on competitive rates with noncompetitive traffic bearing the extra burden (R. 1811).

It is proposed to take away the power of the Commission to prescribe maximum and minimum, or precise rates. In the majority of its orders the Commission has prescribed either maximum or minimum rates, recognizing that it was undesirable to make its orders more restrictive than necessary. It is a necessary power to have, however, in some cases involving the removal of undue prejudice, in the determination of joint rates, in establishing competitive rates where either carrier or shipper competition is a factor, and in the administration of the fourth section. It is strongly urged that this power be retained (R. 1815).

NORTH DAKOTA PUBLIC SERVICE COMMISSION

(John M. Agrey)

Disagreement is expressed with the contentions of the railroads that the existing policy restricts them in exercising managerial discretion in rate matters. The railroads can exercise their best business judgment in adjusting rates within a zone of reasonableness, or within certain established boundaries. The proposed legislation would prohibit the ICC from considering rate matters, unless the rates established were below the so-called minimum level.

The authority under the proposed legislation with respect to prescribing maximum rates lacks clarity and is not subject to close definition. Small communities lacking competition and relying strongly on rail service may expect substantial increases in rates, while large business and communities, with pervasive competition would be protected against increased transportation charges. The people of North Dakota rely on rail transportation for movement of grain to primary markets. In the event of rate wars, this captive traffic would probably contribute substantially to the railroads loss of revenue on com-' petitive traffic. Unless the railroads can be restrained, requests for additional rate increases on this noncompetitive traffic are foreseen. The Cabinet Committee should have made a study of the principal reasons for the passage of the original legislation. It would reveal that the original policy was designed to protect the railroads to some degree, eliminate the numerous abuses and discriminatory practices, and stabilize freight rates between shippers, areas or territories. The proposed legislation would permit similar abuses and discriminatory practices, eventual elimination of competition, and disruption of the financial stability of our transportation system. Discriminatory practices would be inevitable if the proposed legislation is enacted. Under existing laws, the Commission has the power to equalize competitive conditions, prevent destructive competition and promote financial stability of our transportation system. Pervasive competition as a dominant factor in rate making would tend to weaken other

common carriers, decrease their financial stability, and affect the service which they presently provide (R. 790-794).

OSCAR MAYER & CO., RATH PACKING CO., GEORGE A. HORMEL & CO., JOHN MORRELL & CO.

(Warren H. Wagner)

Under the proposal, cost becomes a controlling factor. It is recog nized that the subject of cost is receiving more and more consideration in fixing transportation rates, but it places shippers at great disad vantages in making their cases before the Commission. Railroads and motor carriers are able to and do make elaborate cost studies, but shippers must employ high-priced specialists to present studies or to rebut carrier presentations. The Commission's own cost data is frequently rejected as evidence unless offered by a specialist, and the Commission has declined to require railroads to produce data concerning their costs (R. 1786-1788).

If the prescription of precise rates has seldom been done, why change the law? It will open the door to greater confusion and additional litigation will be necessary to establish the scope of the change.

PROPERTY OWNERS COMMITTEE

(William N. Maddox)

The fundamental difficulty with this proposal is its failure to recognize the inherent limitations upon the so-called science of cost ascertainment. Even if it were possible to compute out-of-pocket costs within reasonable tolerances, the question of the apportionment of the unassignable expenses between the multitudinous types and kinds of traffic remains. The Commission should not be converted into an agency concerned only with mathematical computations. It should continue to determine what minimum contribution each item of traffic should make to the general cost of maintaining a system of public transportation. The background of Commission decisions, modified to fit present-day circumstances, is still the best test of reasonableness. The end result of the sole use of costs would be increased rates on a large portion of rail traffic, particularly coal, with a consequent shrinkage of volume and damage to shippers and railroads (R. 1064-1067).

TRANSPORTATION ASSOCIATION OF AMERICA

(George P. Baker)

Repeal at this time of the existing legislation authorizing the Interstate Commerce Commission to prescribe through routes and joint rates between railroads and water carriers does not appear advisable. Such action now might make difficult the continued maintenance of existing arrangements for interchange of goods and cars between railroads and water carriers. Certain changes do appear to be called for in the language of section 307 (d) governing the prescription of differential joint rail-water rates. The Commission seems to think that, under these provisions in their present form it is free, and, furthermore, is required by congressional policy, to fix differential rail

water rates lower than competing all-rail rates without knowing or considering the cost of the rail-water service for which the differential rates are prescribed and the relationship of such costs to the costs of carriers offering competing service. The prescription of differentials on this basis is opposed.

Cost of service, while not the only factor to be considered in the prescription of rates, is a very important one, particularly when the essential question involved is one of regulating the competition and division of traffic between different forms of transportation. Thus costs are emphasized by the Commission in minimum rate regulation. They should have a place of equal stature in proceedings relating to the prescription of differential rail-water rates.

The lawfulness of the Commission's failure to consider costs in these differential cases and its interpretation of congressional intent have been upheld by the majority of the Supreme Court. Congress should, therefore, amend section 307 (d) in order to indicate to the Commission that in the future it should not feel itself bound by congressional policy to establish differentials but rather, in determining whether or not to take such action, it should exercise the same broad judgment based on a weighing of all relevant factors, including costs of service, that it now is expected to employ under the other rate provisions of the Interstate Commerce Act. Amendments to the differential provisions of section 307 (d) eliminating their mandatory character would accomplish this objective. The following change is suggested (new language italicized):

In the case of a through route, where one of the carriers is a common carrier by water, the Commission may prescribe such reasonable differentials, if any, as it may find to be justified between all-rail rates and the joint rates in connection with such common carrier by water (R. 367–368).

Additional opponents

American Association of Port Authorities, Charles R. Seal (R. 994). Burlington (Iowa) Shippers Association, Inc., F. L. Patridge R. 779).

California Farm Research & Legislative Committee, Charles S. Gubser (Member of Congress), (R. 805).

California Grape & Fruit Tree League, E. Alan Mills (R. 1124). Columbia Basin River Operators (R. 1614-1615).

Inland Empire Waterways Association, Herbert G. West (R. 17061707).

Intercoastal Steamship Freight Association, Harry S. Brown (R. 1047).

Island Creek Coal Co., Rolla D. Campbell (R. 1665–1669).
Mississippi Valley Association, Marvin B. Marsh (R. 770).

Montana Citizens Freight Rate Association, Lee Metcalf (R. 824-825).

National Council of Farmer Cooperatives (R. 1686).

National Retail Dry Goods Association, Robert H. Smith (R. 1004). North Atlantic Ports Association, Inc., Charles R. Seal (R. 994). North Atlantic Ports Conference, A. C. Welsh (R. 996).

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

Cancellation of through routes

AMERICAN SHORT LINE RAILROAD ASSOCIATION

(J. M. Hood)

Of paramount importance to the members of this association is the proposal to prohibit a carrier from canceling a through route without the consent of all carriers participating therein, unless the Commission after hearing authorized such cancellation. This is an effort to preserve the channels of trade against arbitrary action on the part of a single carrier for its selfish gain. While supporting the objective, the following substitute is offered (R. 889-890):

No through route, joint rate, fare, charge, or classification shall be canceled, and no through route shall be withheld from revised rates, except by agreement of all carriers parties thereto unless the Commission shall, upon application and after hearing, find that such cancellation, or withholding in revised rates, is consistent with the public interest without regard to the provisions of paragraph (4) of this section.

GAINESVILLE MIDLAND RAILROAD CO.; GEORGIA & FLORIDA RAILROAD; TENNESSEE, ALABAMA & GEORGIA RAILWAY CO.

(Moultrie Hitt)

Additional legislation is imperatively needed to halt ill-advised cancellation of through routes and joint rates by certain railroads. The latter contend that section 15 (4) cannot prevent such cancellation, although the Supreme Court holds that the limitations of that section apply only when the Commission establishes new routes under paragraph (3). The contention should be set at rest by an amendment removing the limitation on powers to require through routes, and to prevent cancellation.

Paragraph (4) has been the source of much litigation and has interfered with the intent of Congress to foster weaker carriers. The Commission repeatedly has recommended its repeal (R. 1853-1860).

IV. RULE OF RATEMAKING FOR COMMON CARRIERS

Provisions of Interstate Commerce Act

Section 15a of the Interstate Commerce Act provides that in prescribing just and reasonable rates, the Commission shall give due consideration, among other factors, to the effect of rates on the movement of traffic by the carrier or carriers for which the rates are prescribed; to the need, in the public interest, of adequate and efficient railway transportation service at the lowest cost consistent with the furnishing of such service; and to the need of revenues sufficient to enable the carriers, under honest, economical, and efficient management to provide such service. The term "rates" is defined as meaning rates, fares, and charges, and all classifications, regulations, and practices relating thereto.

Sections 216 (1), 307 (f), and 406 (d) of the act contain comparable provisions with respect to common carriers by motor, common carriers by water, and freight forwarders.