In the war and early postwar years, because of full mobilization and emergency powers exercised by the Commission, suspensions were less of an issue. However, times change. In the 12 months ending June 30, 1957, the rails' share of the total revenue resulting from the transportation of property by regulated carriers was 56.8 percent. This may be contrasted with their share of 73.6 percent in the postwar period of 10 years earlier. Rail carriers in the postwar years, and increasingly so prior to and during the hearings before the Senate Interstate and Foreign Commerce Committee in 1958, complained of their being inhibited in their managerial judgment through needless regulation, particularly in the matter of rates.

Commissioner Howard Freas, then Chairman of the Interstate Commerce Commission, testified before the Surface Transportation Subcommittee of the Interstate and Foreign Commerce Committee on March 28, 1958:

Exclusive of schedules involving general increases in rates, more than 50,000 rail tariffs were filed with the Commission in 1957. These rail tariffs contained hundreds of thousands and probably millions of rates. It is our estimate that 98.3 percent of these tariffs became effective without protest or restraint by the Commission. Of the remaining 1.7 percent which were protested, about 85 percent were nevertheless permitted to go into effect without suspension. This left about one-fourth of 1 percent of the total in which the voluntary action of the carriers was restrained by the Commission's exercise of its investigation and suspension powers. In almost one-half of the cases suspended pending investigation, the proposed rates were approved upon completion of the proceedings. And so, instead of the specter of a meddling Government unwarrantably preventing what the carriers regard as the proper exercise of their managerial responsibilities, we find that a bare one-eighth of 1 percent of their proposals are condemned. [Emphasis added.]

For the fiscal year ending June 30, 1958, 6,293 tariff publications (3.3 percent of the 191,997 publications filed that year) were considered for suspension. Actually, there were 4,532 rate adjustments considered. Of these, 3,367 were adjustments proposed by motor carriers, 643 by rail carriers, 384 by water carriers, 111 by freight forwarders, 4 express and 3 pipeline adjustments. Of the total number of adjustments considered, 49.3 percent were suspended in full-3 percent suspended in part, 31.8 percent were permitted to become effective, and 15.9 percent were disposed of otherwise.

For the fiscal year ending June 30, 1959, a total of 5,600 rate adjustments involving charges in tariffs and schedules of rail, motor, water, freight forwarder, and express carriers were disposed of by the Board of Suspension, Division 2 of the Interstate Commerce Commission. These included 3,968 motor, 1,174 rail, 160 water, 293 freight forwarder, and 5 express. Of the total 148 represented increases, 5,331 reductions, 85 both increases and reductions, 36 neither increases nor reductions. There were 8,441 tariff publications involved in these rate adjustments.

71512-61--46

Of the 5,953 protests filed against these 5,600 adjustments, some were directed against more than one tariff publication, and some were joint protests. In many instances, more than one request for suspension of the same tariff was filed. Among the protests were 39 from State government agencies and 19 from Federal Government agencies. 5. Industry complaints against suspension procedures

It is not surprising to find that the sources of criticism of the suspension powers or of their administration by the Interstate Commerce Commission from time to time have shifted from one segment of the transportation industry to another depending upon which mode was being adversely affected in its competitive status through what it considered a strict or loose interpretation or application of the suspension provisions. Thus, for instance, from 1911 to 1929, when the Commission's main task was to protect the shipper against unreasonable increases in rates, the most vigorous protests against suspension powers came from rail carriers. We have seen that, during that period, the Commission found fully justified proposed advances in only about 25 percent of the cases, and fully or partly justified in less than 50 percent of all such proposals. A typical complaint of that kind was made in 1943 by Arthur Van Meter,56 former assistant solicitor, the Pennsylvania Railroad Co.

Mr. Van Meter's criticisms were as follows:

The investigation and suspension procedure is and has been from its inception unfair to the carriers. In instances in which an attempt is made to advance rates, it deprives carriers of needed revenue at the very time when such revenue is vitally required. On the other hand, when an attempt is made, by reducing rates, to retain the traffic which would otherwise go to a competing agency, the suspension is frequently instrumental in bringing about diversion of the traffic. The right of suspension tends to discourage voluntary reductions in rates, since, once the rate is reduced, it has been the carriers' experience that it has been difficult to secure restoration of the previous level, should the action in reducing rates prove to have been ill advised.

Criticisms of that kind down through the years did not convince Congress that suspension powers should be repealed. In fact, Congress lengthened the original suspension period from 120 days (4 months) to the present 7 months in order to give the Commission more time to act judiciously before the rate goes into effect. The

Article by Arthur Van Meter entitled "The I. & S. Procedure-No Significance in a System of Modern Ratemaking," ICC Practitioners Journal, November 1943, p. 100.

latest change, in 1927, increased the suspension period from a maximum of 5 to 7 months.

We have seen that in the postwar period between 1947 and 1957, the rails' share of the total revenue resulting from the transportation of property by regulated carriers was reduced from 73.6 percent to 56.8 percent. The rail carrier representatives constantly demanded greater freedom for management in the making of rates in order to compete effectively with their competitors. They complained that the Interstate Commerce Commission, through the use of their power of suspension and otherwise, interfered unnecessarily with management decisions in this respect. The hearings preceding the Transportation Act of 1958 are replete with such statements. The Congress responded by enacting section 15a (3) of the Interstate Commerce Act, which states:

In a proceeding involving competition between carriers of different modes of transportation subject to this act, the Commission, in determining whether a rate is lower than a reasonable minimum rate, shall consider the facts and circumstances attending the movement of the traffic by the carrier or carriers to which the rate is applicable. Rates of a carrier shall not be held up to a particular level to protect the traffic of any other mode of transportation, giving due consideration to the objectives of the national transportation policy declared in this Act.

This changed in some respects the criteria of the Commission in judging the reasonableness and lawfulness of rates proposed by one mode of transportation designed to attract traffic from another mode.57 We find, as pointed out above, that for the fiscal year ending June 30, 1958, just before the Transportation Act was adopted, of the 4,532 rate adjustments considered for suspension, 49.3 percent were suspended in full and 3 percent suspended in part, while 31.8 percent were permitted to become effective. We have also stated above that for the year following the Transportation Act of 1958, for the fiscal year ending June 30, 1959, of 5,600 adjustments in rates sought, 32.3 percent were suspended in full and 3.2 percent suspended in part; 48.3 percent of them were not suspended but were permitted to become effective.

It would not be accurate to conclude that section 15a (3) is solely the cause of this sudden change in percentages. At times, protests are filed but are not pursued further. For instance, from October 1, 1958, to September 30, 1959, 1,308 cases, including 1,132 motor and 176 rail, were discontinued by order of the Commission for the reason that no evidence was submitted. As stated by then Chairman Howard Freas of the Interstate Commerce Commission: 58

** it should be pointed out that in investigation and suspension proceedings, the statute places the burden of proof upon the respondent carrier or carriers to show that the proposed changed rate is just and reasonable. That burden, of course, is not sustained if the proponent carriers offer no substantial evidence in support of the proposed rates. Consequently, such failure of proof requires the Commission to condemn the rates in issue. Accordingly, there may be cases where competitive rates filed by a low-cost carrier are not permitted to go into effect, but they represent instances where either the data necessary to a determi

57 The extent to which the criteria were changed will remain nebulous for many years unless Congress restates its intent. See exhibit 2, p. 693, for an indication of the vagueness of the language used in sec. 15a (3) of the Interstate Commerce Act.

Statement before the Surface Transportation Subcommittee of the Senate Interstate and Foreign Commerce Committee on Mar. 28, 1958.

nation of their reasonableness has not been supplied or the record establishes that the level of the rates is unreasonably low. These are matters within the control of the carriers and within their power to cure.

However, it cannot be denied that section 15a (3) has had some effect upon these percentages. As the initial summary judgment upon whether the proposed rates shall be suspended is based principally upon the apparent reasonableness or unreasonableness of the rate, any change in the substantive rule of reasonableness or in the criteria pertaining to reasonableness is bound to have an effect upon the percentage of suspensions granted or denied.

In the hearings before the Merchant Marine and Fisheries Subcommittee above referred to, water and motor carriers complained that the criteria and the policy under which the Board of Suspensions of the Interstate Commerce Commission operates in making their determinations are unknown. However, they charge generally that

since 1958

the criteria used by the Board of Suspension changed and that greater reliance appears to be based on costs, to the exclusion of other factors, in determining whether to suspend or not suspend a proposed reduction in rates."

59

Mr. G. C. Taylor, a witness for the inland waterway operators, in explaining the difference in decisions in suspension proceedings prior to 1958 and thereafter, stated:

I say again we didn't get every suspension we asked for but perhaps you don't expect to. We did not feel that we were-well, to be blunt about it— being unfairly treated, and I think we do feel that way now."

60

While numerous complaints were made by water and motor operators against the Interstate Commerce Commission since the passage of the Transportation Act of 1958 upon grounds such as that the Commission and the Suspension Board have not adopted adequate standards of ground rules under which suspension proceedings are conducted,61 their main complaint is that the Commission in its decisions subsequent to the amendment to the rule of ratemaking in the Transportation Act of 1958 have permitted the railroads to further accentuate the pattern of selective and discriminatory rate reductions on traffic competitive between railroads, on one hand, and water and motor carriers on the other, based on out-of-pocket costs. They buttress their case with proof that suspension decisions are made on the basis of inadequate and incomplete data and that cost techniques and data used by the Commission contain basic defects that should be corrected.62

6. An evaluation of industry complaints against suspension procedures In other parts of this report, we have criticized the fact that there exists insufficient and unsatisfactory cost techniques and data with reference to the various modes of transportation,63 and we have made recommendations to remedy this serious defect.

As the initial determination in suspension cases is a capsule judgment on the reasonableness of the rates upon whatever data is present before those called upon to decide at that point, whether the data is

69 "Decline of the Coastwise and Intercoastal Shipping Industry," report of the Merchant Marine and Fisheries Subcommittee, of the Senate Interstate and Foreign Commerce Committee (committee print), Aug. 29, 1960, p.. 12.

60 Ibid., p. 14.

61 Ibid., p. 1.

62 Ibid., p. 2.

63 See, for instance pt. VI, ch. 2 of this report.

furnished by the carrier proposing the rate or by the protestant, it is impossible, of course, to surround this decision with all the safeguards in the form of complete statistical data, etc., with which the final decision should be clothed.

In order to understand the intended function of suspension powers, it is important to have a clear picture of the ratemaking process. Under our law, it has always been the prerogative of carriers themselves to make their rates, subject to the power of the Interstate Commerce Commission to set them aside and to fix different rates, maximum or minimum rates, if the rates of the carriers are not in accordance with law. This was clearly explained by then Chairman Howard Freas 64 of the Interstate Commerce Commission, on March 28, 1958, as follows:

Rates in the first instance are made by the carriers themselves, subject to the overriding authority of the Commission to prevent the maintenance of any that are in any way unlawful. These carrier-made rates are filed in tariffs published in accordance with rules prescribed by the Commission. Any interested person, shipper or carrier may protest a proposed new or changed rate and request that it be investigated and that, pending final determination, its operation be suspended for a period not to exceed 7 months. Rates that are not challenged generally go into effect as a matter of course.

In practice, therefore, carriers make their own rates. Unless there is evidence in the Commission or reason for the Commission to believe that the rates are unreasonable or otherwise unlawful, or unless an interested person within 30 days files a protest against the proposed rates, the ratès go into effect. Within 30 days after the change in rates has been posted, if a protest is filed, the Board of Suspension considers the protest and either decides to suspend or not to suspend. If the Suspension Board decides to suspend the rate, the Bureau of Rates and Practices inherits the case. After suspension, the Bureau of Rates and Practices has the responsibility of deciding what course of procedure shall be followed. The procedure may take either of two forms. An oral hearing may be ordered before a hearing examiner, at which briefs may or may not be filed. A modified procedure may be ordered, in which event the parties file verified statements which include all of their evidence to support their version of the case. During the 7-month suspension period, the work is divided between Division 2 and Division 3 of the Commission. Division 2, in addition, is the Appellate Division for all cases appealed. The respondent may file a petition to vacate, and the Board will often vacate the suspension but continue the investigation to determine whether the rates are lawful. Because of the shortness of the time within which a decision has to be made (7 months), the Commission has eliminated service of the examiner's report. The Commission may adopt the report of the hearing examiner as its own, without giving the parties 30 days to file an exception and 15 days in which to file a reply.

After Division 2 or 3 has rendered a decision, the losing party will frequently file a petition for further hearing. Replies are filed within a period of 20 days, and if the Division of Rates and Practices recommends a denial the case goes to the entire Commission. Since

Statement before the Surface Transportation Subcommittee of the Senate Committee on Interstate and Foreign Commerce.