Secretary WEEKS. That is why we have private and contract carriers.

Mr. STULTS. And exempt carriers. These people are actually for-hire carriers and they are fortunate enough to have support in Congress to keep an agricultural exemption.

Secretary WEEKS. There is plenty of business in all those fields. We don't have anything against private carriers or contract carriers or exempt carriers although we did recommend that the Congress take a look at the list of exemptions which is constantly growing. We have no quarrel with private, contract, or exempt carriers. They have their place in the field, but we would like to have more precise definitions of what they can and should do.

Mr. STULTS. One other question. I wonder if you have made any study or if Mr. Rothschild's office has any figures to show how many loss points are regularly served by common carriers? We have this in the airline industry. The figures were given to us by the CAB. The ICC said they could not give us such figures for motor transport. I wondered if you had any?

Mr. ROTHSCHILD. They don't exist, Walter.

Mr. STULTS. They do not exist. How can you force a common carrier to stop in a town on his route, which you say is unprofitable and which is the reason you are protecting him from competition? How can we guarantee that he will stop in every small town on his route and pick up any size shipment?

Secretary WEEKS. One good example is in the air business where the CAB directs schedules to certain points, small and large.

Mr. STULTS. In the airline industry, I agree; but I wondered about the motorcarrier industry.

Secretary WEEKS. I think the same thing would apply in effect with the ICC. Would you want to answer that?

Mr. MARGOLIN. It would be within the discretion of the Interstate Commerce Commission to see whether that was done.

Mr. STULTS. Are you aware of any enforcement proceedings whereby the ICC has taken away a carrier certification because he has not served every shipper along every point in his route?

Mr. MARGOLIN. I am not aware of that but I know it is within the powers of the Commission to look into that.

Mr. STULTS. I am sure it is within their power. But this committee has had testimony that carriers certified to serve small towns do not actively serve them and will not solicit business in those areas.

Mr. ADAMS. Mr. Secretary, you would agree that regulation of this industry should be conducted in the interest of consumers; is that right?

Secretary WEEKS. Yes, sir.

Mr. ADAMS. In this case the shipper?

Secretary WEEKS. Yes.

Mr. ADAMS. And the shipper should have maximum freedom to choose?
Is that right?

Secretary WEEKS. I think so.

Mr. ADAMS. Freedom of choice is the watchword here?

Have many complaints, proportionately speaking, come to your attention concerning the operation of the exempt carriers for agriculture? Have many farmers as individuals or as groups complained about the performance of the exempt segment of the motor-carrier industry?

Secretary WEEKS. I can only say as to that, and I will confine my observation to the recommendation the Committee made which was to the effect that there have been tremendous enlargements in the scope of agricultural exemptions and we recommended that Congress look at that in the light of present conditions and see where they wanted the exemptions to start and where to stop.

The court decisions have considerably extended what we think may have been the original intent of Congress.

Now, as to who is complaining about it, I can't tell you offhand. I know there have been complaints.

Mr. ADAMS. Specifically, you don't recollect any farm organization, for exsuple, complaining to the President's Cabinet Committee about the operation of the exemption?

Secretary WEEKS. I can't recollect whether that was so or not. The task committee that studied these things. Where their complaints came from I don't know, but they received complaints.

Mr. ADAMS. Mr. Secretary, has it been called to your attention that we had appear before this committee representatives from every single farm organiza78456-56-pt. 1-5

tion-well, the major farm organizations in the country, the Farm Bureau, the Grange, the National Farmers Union and the National Council of Farm Cooperatives expressing great satisfaction with the operation of this segment of the industry, that is the exempt segment of the trucking industry. Has that been called to your attention?

Secretary WEEKS. I think not, but I would expect them to express that satisfaction. I am sure the industry, the transportation industry, has been serving them well in this exempt field and what they have been doing for the farmer would be satisfactory. But you also find the hauling of certain things like cocoa beans falling within the field of agricultural exemption. Such products do not concern any farmer in the country.

Mr. ADAMS. Cocoa beans are a foreign product. We will leave them out of consideration. For any domestic product you feel the farmer, as a rational consumer, knows what is in his best interest?

Secretary WEEKS. Certainly.

Mr. ADAMS. And he is satisfied with the agricultural exemption, is that correct? Secretary WEEKS. If he came here and said so, he must be.

Mr. ADAMS. And you would accept that as a rational judgement about the performance of an industry?

Secretary WEEKS. I am sure there is no problem to this except as to where Congress wants the exemptions to start and to stop. That is all there is to this problem.

Mr. ADAMS. I just have two more brief questions.

If this exempt segment of the trucking industry is operating to the great satisfaction of shippers-in this case, farmers-do you suppose that we might experiment with an extension of the exemption to shippers who are producers of manufactured products?

Secretary WEEKS. I don't think I should guess today. Any properly authorized contract carrier can pick up a load from a manufacturer.

Mr. STULTS. If he has the route structure, I think; is that right?

Secretary WEEKS. If he has the route structure.

Mr. STULTS. Yes.

Secretary WEEKS. Yes. But again I say any encroachments on the commoncarrier field I think are bad.

Mr. ADAMS. Generally, then, you would agree that competition means rivalry among individuals over such questions as rates, for example, and service? Secretary WEEKS. Yes.

Mr. ADAMS. And a competitive industry is also one which provides competitive opportunity; is that right?

Secretary WEEKS. Yes.

Mr. ADAMS. That is people are free to get into the industry?

Secretary WEEKS. Well, if you are going to have any regulation whatever, you should have a certain certificate from the regulatory body. Any attempt I think to liken the competition in this field with competition within a given manufacturing industry, any attempt to create an analogy there, I think, is not on sound ground, because you must have regulation in the transportation field and you must have a certification to go into the business and so on and I think all you have to do is give it as much competition as you can.

Mr. ADAMS. In other words, there ought to be licensing by this Government agency to determine if the applicant is fit, willing, and able to provide a particular service, that would be part of the regulation wouldn't it? Is that right?

Secretary WEEKS. Yes.

Mr. ADAMS. And then also you would agree that we ought to get as many people in as possible. That is, an application ought to be approved in that respect unless there is a showing that it is against the public interest. Would you say that is right as a matter of policy?

Secretary WEEKS. That is right.

Mr. ADAMS. Thank you, that is all, Mr. Secretary.

Senator DUFF. This record will be kept open for 2 weeks to allow anyone who desires to make a further written statement for the record and that will include your opportunity to make a rejoinder to this statement made this morning. Secretary WEEKS. Thank you, Mr. Chairman.

(Whereupon at 3:10 p. m. the hearing was closed.)

Secretary WEEKS. I wish to affirm the position taken by the Department as presented in these statements. I am as thoroughly convinced

=pgar} now as I was a year ago when the report was submitted to the PresiFindent that our transportation regulatory policy is urgently in need of revision if our transportation services are to continue to flourish and expand.

From a broad standpoint, there are two basic revisions that the committee found to be urgently needed and which have been incorporated in this legislation. First, we felt that common carrier managers are unduly restricted in the exercise of discretion in pricemaking. As a result, they are denied opportunity to reflect in their rates the true cost and service characteristics of their properties. To correct this situation, we propose that the present declaration of policy be restated to emphasize reliance on competitive forces in ratemaking and to make it plain that Government economic regulation shall be held to the minimum consistent with the public interest. In addition we propose that Congress effectuate such a policy by redefining particular substantive provisions of the Interstate Commerce Act having to do with

rates.

Second, the diversion of profitable traffic to exempt public carriers poses a serious threat to the maintenance of a financially strong and progressive common carrier system. In addition, certain common carriers suffer large and debilitating deficits from the enforced operation of unprofitable services.

These threats to a stable and sound common carrier system, we believe, result in part from a lack of clarity in the present statute and a lack of equality in the regulation of those who render similar public transportation services. We propose, therefore, a series of amendments which would reduce some of these exemptions in the case of operations which are essentially public in character, would redefine private and contract transportation, and would provide the Interstate Commerce Commission with definite standards to cope more effectively with these troublesome problems.

It is, I think, a fair question to ask why the advisory committee has recommended these basic revisions in our national transportation regulatory policy. The answer as plainly as I can put it is the public interest-the interest of all our citizens in the best kind of transport service our economy can provide at the least cost.

The transportation industry is a large and important segment of the Nation's economy, representing many billions of dollars of invested capital, employing millions of workers, and consuming billions of dollars of materials and supplies. Such services are vital to industry, to commerce, to agriculture, and to national security. They greatly influence cultural as well as economic development and contribute importantly to the Nation's recreation.

Consequently, our transportation regulatory policy is of great public moment, for it must foster the development and maintenance of adequate facilities, assure that such facilities are operated with economy and efficiency, and without undue discrimination, and without undue preference or prejudice.

Consider first our proposed revision of rate regulatory policy. Our dynamic economy can ill afford the burden of high costs which will result from restraint of competition.

The policy of regulation was originally designed to protect the public from abuses resulting from near monopoly conditions. Yet

today widespread competition exists between and among the many transport agencies. As we stated in the report:

there is available today a wide selection of transport methods for the movement of goods and people from one place to another with economy, expedition, and safety. The individual, whether traveling for recreation or businespurposes, has a choice as between the private automobile, intercity bus transporta tion, air transportation, and railroad travel. The shipper, distributing finishe products to a nationwide market, is free to elect the use of his own trucks, com mon or contract carriers by highway, a continental and physically integrate<! system of common carrier transportation by railroad, pipelines, coastal an intercoastal services, inland water transportation, or the rapidly developing air cargo services.

In the channels of commerce, we exercise vigilance under antitrust laws to prevent combinations which throttle competition. But in transportation, instead of using competition to spur the carriers to greater efficiency, we impose ratemaking restraints that inhibit the carriers from demonstrating true cost and service capabilities and to a large extent substitute government fiat for free market judgment.

The objective of our proposal, therefore, is to embody this prover concept of competition insofar as feasible in the economic regulation of common carriers. We conceive that the proper role of rate regulatory policy is to establish reasonable bounds within which common carrier management is free to compete on a price as well as a service basis without undue governmental interference, provided no customer or area is discriminated against or unduly preferred or prejudiced. The reasonable minimum and maximum bound would continue subject to supervision of the expert regulatory body.

Because competition is to be encouraged under the revised declaration of policy, we would remove the present requirement that the Interstate Commerce Commission condemn rates merely because of their effect on competing carriers. The power of the Interstate Commerce Commission over minimum rates would not otherwise be changed. would also continue the ICC's maximum rate authority to prevent any common carrier from charging unreasonably high or excessive rates. No change whatever is intended in the ICC's power to correct unjustly discriminatory prices or practices.

A

We see no reason why intercity carriers should not compete for intercity traffic without any regulation requiring the Interstate Commerce Commission to determine what share each should have. sharing of the market arranged by regulation is the same in effect as a sharing arranged by competitors in other fields of endeavor. Neither should be sanctioned by law, since both are opposed to the fundamental American theory of fair competition.

In

Each form of transportation has its particular advantages. respect to trucks, for example, they have very special advantages in that they can carry less than rail-car lots which means smaller inventories and benefits many small shippers and they make deliveries where the railroads and water carriers do not. There is not the slightest chance that the measure will deprive the American public of the truck services, local and intercity, which the public interest requires.

It has been suggested that the railroads can and will reduce rates below the compensation level, drive the trucks off the roads, and then but the rates up again to the public disadvantage.

In the first place, the proposed legislation leaves the Commission every substantive power it ever had with regard to rates which are less than a reasonable minimum.

Secondly, whenever a railroad raises rates so that truck prices are cheaper (service considered) the trucks can move in. The roads are there, and the flexibility of the trucking business is such that I doubt if any important freight could be offered for 48 hours and no truck, contract or common carrier, be on hand to bid for it.

The measure does free all intercity carriers to compete. For example, most of the vast volume of traffic the motor carriers have acquired in recent years is theirs by virtue of rates and service, and they will keep it and it will grow. Some of the competitive traffic which they have enjoyed under past regulatory policies they may lose, and on the other hand, some of the traffic which the rails have gotten under the division of traffic theory, the trucks may get.

Each type of carrier will get what it deserves in competition, without preference or discrimination. This is in the public interest because in the last analysis the public pays all the bills and under the present policies the bills are undoubtedly higher than under the more ompetitive philosophy which we advocate.

We are not proposing any change in the general pattern of regulation by the Interstate Commerce Commission. We believe release of restraints on competition between the various modes of transportation will reduce the litigation before the Interstate Commerce Commission, improve carrier economy and efficiency and materially benefit the public interest. The principal change is to restore to arrier management the prerogative and privilege of deciding the evel of rates, within bounds of reasonableness, which will best serve its needs, and hence the needs of the public. Under the existing system rate-fixing responsibility has always belonged initially and primarily with the carriers. However, the exercise of this responsibility snow frequently frustrated by a policy which encourages and even iemands extensive intercarrier litigation before the Interstate Commerce Commission. Revesting in the carriers their historic responsibility will encourage them to experiment with new concepts in rates and services, stimulate and accelerate technical innovation, and promote greater efficiency in management.

We have seen the fruits of hard but fair competition in the economy generally. The public can enjoy like beneficial results in transportation if we give competition adequate leeway.

Let me turn now to the second basic revision in transportation policy which is to maintain and strengthen the common carrier sys

tem.

We should never lose sight of the fact that there can never be a truly dequate transportation system as a whole without having available a ánancially strong and technically progressive common carrier system. The Nation's economy, organized as it is on a mass production system with distribution effected throughout a continental market, depends primarily on a highly integrated, readily available, and responsible common carrier system for transportation. The common law and our statutory processes, in their wisdom, dictate that we strive to maintain

mon carrier services by imposing restrictions and disciplines on sach carriers and, in exchange, granting special rights and privileges