tion who must compete with the railroads. On the other hand, these railroad spokesmen who want to strip the Commission of its powers over minimum rates because the Commission is, in their words, "incompetent" have the audacity to tell the committees of the Congress that ICC is competent to administer maximum rate controls and therefore protect this area of the public interest.

It should be noted that the Commission will not exercise minimum rate power for the purpose of settling disputes between competing shippers over their markets when no undue preference or prejudice under section 3 exists. In Sugar cases of 1922 the Commission said: "We are really being asked *** to fix such rates for the purpose of giving each refining point what we may deem to be its 'fair share' of the sugar business in the destination territory under consideration, a purpose which considered alone rather than as a mere incident of other purposes, clearly does not justify the use of this power." A minimum-rate order of the Commission was set aside by a court in Anchor Coal Co. v. United States, 25 Fed. (2d) 462 (1928), on the grounds that the Commission had (although the Commission stoutly denied it) prescribed rates for the purpose of dividing markets between competing producers.

Of course, cases are bound to arise in which the wisdom of interfering or not interfering is problematical, and differences of opinion will necessarily appear. The Commission has, however, exercised its powers with restraint and it has not attempted to freeze the rate structure, nor has it unduly interfered with the efforts of the railroads to make reasonable competitive adjustments in rates. And, finally, the Commission has not exercised this power to protect the highcost carrier from the low-cost carrier. The Commission is bound, by law, to recognize the "inherent advantages" of all carriers. Low cost is one such advantage. In recent years, the Commission has been laying great stress on costs in determining whether a rate is reasonable. Some commissioners are even advocating that the value-of-service principle in ratemaking be abolished. To the extent that the cost factor is employed, minimum rates become that much easier for management to justify, and for the ICC to find unreasonable and unjust.

Section 3 of the act gives the Commission power to deal with preference and prejudice as regards rates bearing upon companies, firms, corporations, associations, localities, ports, gateways, transit points, regions, districts, territories, etc. Chairman Murphy has pointed out that:

"In port-equalization cases, protestants frequently urge that a rate to a competitive port is below a reasonable minimum rate and request the Commission to prescribe a minimum reasonable rate. Under this bill, ports not having the advantage afforded by strong competitive lines could be at a disadvantage and might suffer seriously."

He added that the Commission's power to deal with discrimination affecting points and places and shippers would be hamstrung without the power to eliminate discrimination by prescription of minimum as well as maximum rates. This point is certainly valid as regards the service now being rendered by rail carriers in competition with each other or with other modes.

It is clear, therefore, that the Commission is not abusing this minimum-rate power to the detriment of the railroads. As a matter of fact, the Commission is prohibited by section 15(a)(3) of the act from holding up railroad rates for the mere purpose of protecting another carrier. The use of managerial discretion on the part of railroads still achieves the publication and use of almost all of the rates they propose. If a rate comes along that is obviously and probably noncompensatory, as does happen, it should be condemned as unjust and unreasonable and perhaps otherwise unlawful regardless of the desire of the proponents to have it made effective. We cannot understand how anyone sees evil in this kind of regulation.

Now, for your consideration, let me put on this record the facts with respect to the manner in which a rate below minimum level can presently be stopped. Consideration of such facts are necessary since the Department of Commerce and the Department of Justice are insisting that application of the antitrust laws to the ratemaking modifications of the carriers will adequately take the place of the Commission's minimum-rate powers.

As it is now, the various carriers that respond to these and other Commission ratemaking powers file their rates in the form of tariffs and tariff supplements. Thousands of such tariffs flow into the ICC yearly-so many, in fact, that only a percentage of them can be inspected by ICC work forces to see whether they comply with the law.

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These tariffs can be protested by parties (carriers and shippers) who may be aggrieved thereby. If their protests and the replies thereto show that the rates are below minimum standards, the Commission can and will suspend these rates for 7 months. The process normally takes about 30 days during which the rates are suspended pending effective date. The protest process is fairly uncomplicated and can be handled with the Commission by managerial forces of the interested parties.

If the rate is suspended, it is also set for investigation, but it can go into effect, automatically, 7 months after the first-named effective date regardless. The investigation is a formal process. It involves rate experts, cost experts, and sometimes, lawyers or practitioners. If the case is a small or uncontested one, the Commission allows the record to be made by verified statements instead of under oath before an examiner. Many such cases are disposed of by the Com. mission in routine fashion before the 7-month period has elapsed. The more important cases take longer to decide. They run the gamut, ordinarily, of a proposed report by the examiner, exceptions, a division report, and a petition for reconsideration. The Commission makes the ultimate decision. Under recent procedures, it has been speeding up the process by establishing employee boards and divisions of the Commission to render the decision. The process, over the years, has become well understood. Although it is somewhat technical in nature, the end result is seldom questioned. If it is, the party or parties can always resort to the Federal courts.

If the proposed rate is allowed by the Commission to become effective on the first date set forth in the tariff, which it does in the vast majority of cases, the opposing parties then must file a complaint if they want to attack the rate. This is a formal legalistic process which also requires experts at all levels to deal with its disposition. The interested parties and the Commission's bar through the years have established effective liaison with the Commission for disposing of such complaints.

The Commission is even now in the process of devising new cost formula procedures that will facilitate the assembly, presentation, and evaluation of cost data so as to expedite consideration of such material in ICC proceedings (Order No. 34013).

The Commission has employed and trained a substantial work force of experts to deal with these matters. The Commissioners themselves, as time goes on, become conversant with the intricacies involved. The end decision reflects the expertise that goes into the case at all levels. The end results through the years have come to be respected, and, in the main, honored.

A subsequent statement by one of our witnesses will show that the ICC processes are much more expeditious than those involving the Federal courts. As a layman, I cannot understand how comparable results to those I have outlined can be accomplished under the existing antitrust statutes.

Let us suppose a water carrier is affected by a ruinously low rate made by a railroad. The fact that the rate was ruinous to the water carrier would not of itself make out a basis for an action under the antitrust laws. The action under the antitrust law would not attack the rate as such. Instead, the water carrier would have to show that the rate was a product of an unlawful conspiracy to destroy the water carrier or of an unlawful attempt to obtain a monopoly. It is far more difficult to prove an attempt to monopolize or a conspiracy to restrain trade than to show to an expert and experienced transportation agency, such as the Interstate Commerce Commission, that a particular rate is below fully distributed or out-of-pocket costs. Even if we assume that it would be possible under judicial procedures and standards of proof to establish that a rate or group of rates is below the costs of performing the service, would that prove monopoly or conspiracy to restrain trade? I seriously doubt it. A conspiracy to monopolize or to restrain trade would depend upon other factors of proof.

It is quite plain to me that the Sherman Antitrust Act can not seriously be claimed to be a regulator of the day-to-day rate changes in transportation rates required by our dynamic economy. The Sherman Act is enforced primarily through investigations and prosecutions by the Department of Justice in Federal district courts. Persons injured in their business or property by violation of the antitrust laws may also bring suit in a Federal district court for damages sustained and for injunctive relief. Such enforcement procedures necessarily place emphasis upon punitive rather than preventive measures. We are not interested in having railroads prosecuted by the Department of Justice or in

filing damage suits after the water carriers have been severely damaged or driven from the inland waterways.

Enforcement through proceedings in the Federal district courts would make impossible the application of any single, consistent policy with respect to transportation. We would suppose that enforcement activities under the antitrust laws might vary from one administration to another, depending upon the energy and interest the Department of Justice would be willing or able to devote at any one time to the subject of transportation. May I point out that Congress has always endeavored to keep administration and enforcement of regulatory laws affecting transportation in the hands of an independent, nonpolitical, bipartisan agency responsible to the Congress? It has been a fundamental principle that ratemaking, being a legislative function, should be supervised and controlled by a congressional rather then an executive agency. To do otherwise would be openly to invite the uncertain hand and changing face of politics as a factor in the intricate port, city, and regional rate relationships upon which all industrial and business activity depends.

Further, since each antitrust case under the Sherman Act is necessarily tried on its own particular facts before a particular judge or jury, involving particular parties, the result in one case is not controlling in another. It is entirely possible to have a different judge or jury reach a different, even a contradictory, decision on the same facts in a case involving different parties. Thus, the interests of thousands of shippers, carriers, industries, and localities affected by depressed rates brought about by rail, water, and motor competition, would depend upon the diverse judgments of the Federal courts. It cannot be pretended that such procedure would bring about any consistent enforcement or development of the national transportation policy as laid down by the Congress in the Interstate Commerce Act.

Finally, in connection with H.R. 11583, may I earnestly reinvite your attention to the entire pattern of transportation regulation in this country. Private initiative, managerial discretion, ratemaking freedom, or whatever you may want to call it, still is in basic control of the system. It is only the abuses that the Interstate Commerce Act seeks to regulate-specifically in this field-a rate or rates so low as to be adverse to the public interest. This is in keeping with our American tradition. Where, as here, experience has demonstrated that the public suffers as a consequence of harmful practices, statutes are enacted to regulate or prohibit them. This was the impetus that lay behind the congressional grant of power to the Interstate Commerce Commission to fix minimum rates. For all of the reasons that I have indicated, and doubtless many other good and sufficient reasons that will be brought before you by alarmed and interested carriers and shippers, I urge you to refuse to enact the legislation in question.

I should like now to make some brief observations and a pointed protest concerning H.R. 11584.

The particular section of this bill that I am authorized to oppose by the members of the American Waterways Operators, Inc., is section 2 which would empower the transportation regulatory agencies to sanction experimental freight rates. Specifically, the Interstate Commerce Commission, Civil Aeronautics Board, and the Federal Maritime Commission wou'd be "empowered to authorize experiments by individual common carriers, between common carriers of the same mode of transportation, between common carriers of different modes of transportation, or among common carriers of all modes of transportation subject to the regulatory authority of agencies of the United States."

So far as the ICC is concerned, in its rate dealings with water carriers and railroads, it is believed that the provisions of the Interstate Commerce Act are now sufficiently broad to enable that Commission to make or authorize almost any kind of rates that are in the public interest. The power to authorize just and reasonable rates is a very broad power. Traditionally, this power has been exercised in formalistic terms with emphasis upon the law of reasonableness and the keeping of rates within that zone by assaying them in terms of shipping conditions such as the nature of the commodity, the value of the commodity, the risk of loss and damage, average loading and volume of movement; under the value of service concepts; and under the influence of carrier conditions such as operating conditions, terminal expenses, special facilities or extra services, length of haul, traffic density, and the carriers' need for revenue.

During the era when rates were made mainly to accommodate shippers and in the public interest per se, these rate considerations were germane and pertinent. They are still so in cases where the public interest must be safeguarded.

Where the major question, as in many rate cases today, involves carrier competition, cost of service becomes a predominant ratemaking factor.

Within this broad habit of rate measurement the Commission can range widely in allowing rates to be made. It cannot, of course, go beyond the boundaries of the other provisions of law relating to discrimination, preference, prejudice, long and short haul restrictions, and rate publication requirements. A just and reasonable rate, in other words, may be otherwise unlawful. The Commission recently found itself confronted with such a situation in the now famous rug case in which the respondent railroad wanted to make so-called guaranteed or agreed rates and charges, which would have benefited large shippers. The Commission said this could not be done because of the antidiscrimination features of the act which we hope no one is ready to discard.

We wonder, of course, whether what is now being sought by H.R. 11584 is a back-door method of allowing such agreed charges to be made legal as experimental rates. This we resist wholly and strongly since such a rate scheme even though experimental would destroy small carriers.

I have said that experiments are now approved within reason. The Commission recently authorized multiple car rail rates on petroleum, salt, soybean oil, asphalt, and molasses, and trainload rates on coal, for instance, which the so-called old Commission always frowned upon. Very recently the Commission endorsed a so-called constant charge plan for certain motor carriers calling the plan feasible for a "reasonable, test period”—a “fair trial"-calling the same a bold innovation.

In the piggyback field, many kinds of rates and rate arrangements are being experimented with to the point where the Commission has now found it necessary to conduct a widespread investigation into such practices. There are 20 or more classes of motor carriers, all of which have diverse ways and means of publishing rates and minimum charges. Water carriers, with Commission permission, "experiment" with different kinds of rates.

In short, there is no need for this legislation. It could be wrongly construed as a prod from Congress to go faster than is presently warranted in the field. This would be disastrous to many carrier interests including the water carriers, particularly the small business water carriers we represent.

On top of the foregoing, there must be consideration given to the shipperpublic interest in such an undertaking. To be sure, the Commission has declared that "frozen rate structures are not conducive to the fullest use of railroad transportation facilities," but the preservation of rate stability is important to shippers and communities and this is widely recognized.

Unrestrained or encouraged experimentation in carrier ratemaking would have to take such circumstances into account. It is sufficient, we believe, for the ICC to have to report its progress in this connection annually to the Congress. We should make haste slowly in a field so fraught with economic dynamite.

Some of the arguments I have set forth relating to the question of minimum rates would also relate to experimental rates and should be so construed. Basically we believe that portion of H.R. 11584 dealing with experiments in ratemaking is dangerous open-door legislation because it can be construed so as to sanction practices which otherwise would be illegal and which, if they are to be sanctioned, should be accomplished under more specific authority. In other words, if there is a public need for some specific kind of experiments in ratemaking, we believe the Congress would be on much sounder legislative ground if the definitions of these practices were better defined. As we pointed out, ICC already has a great deal of leeway to permit experiments, and we are confident that the Commission is ready to permit full exploration of experi mental practices so long as they are in the public interest, and so long as they will not contravene other tried and tested provisions of law.

In closing, I want to thank this committee for permitting me to make this extended statement. We deem the issues involved of such great importance that we cannot pass them over lightly. We urge you to give them careful consideration and we know you will.

(Whereupon at 12 noon the committee recessed to reconvene at 10 a.m., Friday, August 10, 1962.)

TRANSPORTATION ACTS AMENDMENTS-1962

FRIDAY, AUGUST 10, 1962

HOUSE OF REPRESENTATIVES,

COMMITTEE ON INTERSTATE AND FOREIGN COMMERCE,

Washington, D.C.

The committee met, pursuant to recess, at 10: 14 a.m., in room 1314, New House Office Building, Hon. Oren Harris (chairman of the committee) presiding.

The CHAIRMAN. The committee will come to order.

Our first witness this morning is Mr. A. Alvis Layne.

STATEMENT OF A. ALVIS LAYNE, ATTORNEY, ON BEHALF OF THE AMERICAN WATERWAYS OPERATORS, INC., WASHINGTON, D.C.

Mr. LAYNE. Thank you, Mr. Chairman.

I am A. Alvis Layne.

The CHAIRMAN. Yes, Mr. Layne.

Mr. LAYNE. And, Mr. Chairman, if it is satisfactory with the committee, I will not read the prepared statement that has been circulated to the committee, but I would like to, instead, present an oral summary of that which, I believe, will save the committee some time, and if it is satisfactory to allow my written statement to be before the committee and make an oral summary, I will proceed in that fashion, Mr. Chairman.

The CHAIRMAN. Mr. Layne, you may present your statement and it will be included in the record in full and, under the regular procedure of the committee, you may give such analysis of it as you desire.

Mr. LAYNE. Thank you, Mr. Chairman.

(The full statement of Mr. Layne follows:)

STATEMENT OF A. ALVIS LAYNE ON BEHALF OF THE AMERICAN WATERWAYS OPERATORS, INC.

My name is A. Alvis Layne. I appear on behalf of the American Waterways Operators, Inc. My testimony relates specifically to the proposal in H.R. 11583 to substitute antitrust remedies for Interstate Commerce Commission regulation of minimum rates on bulk and agricultural commodities.

I am an attorney in private practice. I have been practicing law for some 15 years, and had prior experience as an economist in the Department of Justice and in the Department of State. Antitrust matters are a substantial part of my law practice. I have investigated, prepared for trial, tried, and appealed antitrust cases before Federal courts and administrative agencies. It may be of particular interest here that I was a trial counsel for the plaintiff trucking companies in Riss v. Association of American Railroads, et al., a private treble damage antitrust case in the District of Columbia. One of the principal charges in the Riss case was that the railroads had used rate cuts as a means to eliminate competition and to obtain a monopoly in transportation of Govern