TRANSPORTATION ACTS AMENDMENTS-1962

FRIDAY, JUNE 29, 1962

HOUSE OF REPRESENTATIVES,

COMMITTEE ON INTERSTATE AND FOREIGN COMMERCE,

Washington, D.C.

The committee met, pursuant to recess, at 10 a.m., in room 1334, New House Office Building, Hon. Walter Rogers of Texas presiding. Mr. ROGERS of Texas. The Committee on Interstate and Foreign Commerce will come to order for further consideration of the bill, H.R. 11583, by Mr. Harris of Arkansas, to exempt certain carriers from minimum rates, bulk commodities, agricultural commodities, and passengers; and H.R. 11584, by Mr. Harris of Arkansas, through service, joint rates, penalties, mail transportation, rate experimentation, and transfer air and rail loan guaranty to Department of Com

merce.

Our witnesses this morning are Mr. Loevinger of the Department of Justice, and Mr. Boyd of the Civil Aeronautics Board.

Mr. Loevinger, Assistant Attorney General, Antitrust Division, the Department of Justice, is scheduled to appear first.

Mr. Loevinger, if you will come forward, we will be glad to hear

you.

STATEMENT OF LEE LOEVINGER, ASSISTANT ATTORNEY GENERAL, ANTITRUST DIVISION, DEPARTMENT OF JUSTICE

Mr. ROGERS of Texas. Mr. Loevinger, it is nice to have you before the committee and you may proceed.

Mr. LOEVINGER. Thank you very much, sir. I appear today at the chairman's request to present the views of the Department of Justice on H.R. 11583—a bill to exempt certain carriers from minimum rate regulation in the transportation of bulk commodities, agricultural and fishery products, and passengers. The Department recommends enactment of this legislation.

H.R. 11583 implements, in part, the legislative proposals contained in President Kennedy's message on transportation delivered to Congress on April 5, 1962. The bill proposes to exempt from minimum rate regulation the transportation of bulk commodities and certain agricultural and fishery products by those carriers which are subject to the jurisdiction of the Interstate Commerce Commission, the Federal Maritime Commission, the Civil Aeronautics Board. The transportation passengers by carriers subject to the jurisdiction of the Interstate Commerce Commission and the Federal Maritime Commission also would be exempt from miniumum rate regulation.

The bill does not withdraw from the Civil Aeronautics Board authority to impose a minimum level of rates for the transportation of passengers by air carriers. Existing law applicable to air passenger fares remains in effect, as qualified by the congressional declaration of minimum rate policy which provides, as follows:

It is the intent of Congress that regulatory control over minimum passenger fares of the air carriers be reduced to the greatest extent consistent with the public interest, so that business incentives and competition may play a more influential role in the pricing of air transportation.

The obvious thrust of this legislation is to replace regulation with competition. This would encourage increased independence of emphasis upon individual initiative in meeting changing conditions in transportation. In place of the provisions of the various regulatory statutes which authorize the regulatory agencies to determine the reasonableness of minimum rates, fares and charts, the bill would substitute the standards of the antitrust laws. The definition of "antitrust laws" contained in section 1 of the Clayton Act is incorporated by reference in the bill.

The basic objective of H.R. 11583 is to equalize competitive opportunities among carriers by extending freedom from minimum rate control to certain carriers presently subject to such control. Under existing law common carriers by motor vehicle are not subject to such rate control in the transportation of agricultural and fishery products and water carriers under certain circumstances are exempt from such rate control for the transportation of bulk commodities. H.R. 11583 would be a move toward placing all modes of transportation on the same footing in competing for the transportation of these types of traffic.

H.R. 11583 provides that—

com

if any carrier or carriers * * * (exempted from minimum rate regulation) shall enage in any act, practice, or conduct, or be a party to any bination, or conspiracy with respect to any rate, charge, or fare for transportation of (bulk commodities, agricultural and fishery products, and passengers) *** in violation of the provisions of the "antitrust laws" *** such carrier or carriers shall be subject to the proceedings and penalties specified in such laws ***

However, it specifically excepts from the application of the antitrust laws the concerted making of joint rates applicable to through routes. The bill also appropriately amends relevant regulatory acts to make inapplicable to the transportation of passengers, agricultural and fishery products, and bulk commodities the provisions under which regulatory agencies are permitted to grant an exemption from the operation of the antitrust laws. For example, under section 5a of the Interstate Commerce Act (49 U.S.C. 5b) carriers are granted antitrust immunity for concerted ratemaking if such ratemaking conforms to Commission approved rates procedure agreements. The proposed substitution of the antitrust laws to test ratemaking conduct would have the effect of prohibiting carriers from jointly establishing rates and of compelling each carrier in making local rates-those rates which apply on the lines of a single carrier-to exercise its own. managerial discretion, independent of collaboration with competitors. However, with respect to the making of joint rates which apply to traffic moving over more than one railroad between origin and destination, H.R. 11583 provides that the bill should not be construed to

prohibit a carrier from establishing reasonable through routes or establishing jointly with other carriers the rates which will be applicable on such through routes. This provision for joint ratemaking by end-to-end carriers is consistent with traditional concepts of ratemaking for through routes a practice which the Interstate Commerce Act authorizes the Commission to require of rail carriers.

In addition to the substantive safeguards contained in sections 1, 2, and 3 of the Sherman Act (15 U.S.C. 1, 2, 3) against the elimination and destruction of competition by concerted ratemaking and by unilateral action of a carrier monopolizing or attempting to monopolize transportation services, the instant bill will operate to provide a significant procedural advantage to a carrier injured or threatened with injury by such practices. The bill provides that carriers freed of minimum rate regulation shall be subject to the proceedings and penalties specified in the "antitrust laws." The definition of antitrust laws is that contained in section 1 of the Clayton Act which, of course, includes the Clayton Act itself. Section 16 of the Clayton Act (15 U.S.C. 26) permits any person to sue for injunctive relief in any court of the United States against threatened loss or damage for a violation of the antitrust laws. The withdrawal from the Interstate Commerce Commission of jurisdiction over the regulation of certain minimum rates will permit a carrier who might be injured by a ratemaking practice violative of the antitrust laws to seek a district court injunction against the practice. This will permit prompt recourse to the courts to bar anticompetitive agreements or monopolistic practices.

The Department of Justice endorses the objective of placing greater reliance upon the interplay of competitive forces among carriers, rather than upon the restraints of regulation, in order to achieve the objectives of a rational national transportation policy. The Department is in favor of the enactment of this bill.

In connection with H.R. 11584 on which the committee is also hearing testimony, the Department defers to the Commerce Department for presentation of the administration's proposals contained in that bill since the provisions of that bill do not directly relate to our enforcement responsibilities under the antitrust laws.

Mr. ROGERS of Texas. Thank you, Mr. Loevinger.

Mr. Hemphill, do you have any questions?

Mr. HEMPHILL. Yes. Thank you, Mr. Chairman.

I want to thank you for this statement. It is concise and raises a lot of questions and answers some. I believe you said that you are going to substitute the present regulatory powers of the Interstate Commerce Commission, the Federal Maritime Commission, and the Civil Aeronautics Board by using instead, for the purpose of enforcement, or guidance, or administration or correct the antitrust laws. Is that what I understand that statement to be?

Mr. LOEVINGER. No, sir; I don't believe that this is quite a fair statement. What we are substituting for the regulatory powers of agencies is the free play of the market. The role of the antitrust laws is to maintain the free play of the market, to maintain competition in the market, and the free play of market forces against destructive, predatory, or monopolistic practices.

Mr. HEMPHILL. The reason I ask this is I understand as a lawyer what you are saying, but if this bill comes out we have to explain it to a lot of people who aren't lawyers. Suppose a single carrier, rail or barge or truck, or I believe even the airlines are included, was running a bulk commodity service from, say, Homestead, Fla., where they have great trucking interests, into New York. As I understand the provisions of this bill, if it is single carrier it has the right to make the rates it wants.

Mr. LOEVINGER. Right to make the minimum rates, yes, sir.

Mr. HEMPHILL. The minimum rates. And if it wants to get the business it can trade with a number of people and agree to how long one commodity, say, at below cost and to haul other commodities at a profit. Can it make that trade and not violate any law?

Mr. LOEVINGER. The question is too abstract to be answered in those terms, sir. Actually the present practice in the transportation industry, as I understand it, really not only permits, but in effect requires that some commodities be hauled below cost and others be hauled at very much above cost.

Incidentally, I would suspect that this has relatively little effect upon air carriage.

Mr. Boyd is here and of course can go into this further, but air carriers by and large don't carry a great many of these agricultural commodities, at least in terms of bulk, or many of the bulk commodities. However, if a carrier undertook to haul below cost for the purpose of driving a competitor out of business, it seems to me this would be monopolistic. This would be subject to private suit or to Government suit under the antitrust laws. The mere fact that the fare or charge is not directly related to demonstratable cost, as I understand rate regulation in the transportation industry, has never been thought to be of controlling significance. Today the whole structure of freight charges is based upon the so-called value of service theory, and if you haul something that is valuable you charge a great deal more than if you haul something that isn't valuable, and many of the bulk commodities that are not very valuable are probably hauled below cost today under the present regulatory scheme.

Mr. HEMPHILL. Perhaps I misunderstood your statement. On page 2 in the third paragraph, I believe the third sentence of that paragraph

you say:

The proposed substitution of the antitrust laws to test ratemaking conduct would have the effect of prohibiting carriers from jointly establishing rates and of compelling each carrier in making local rates-those rates which apply on the lines of a single carrier-to exercise its own managerial discretion, independent of collaboration with competitors.

Do I understand that the antitrust laws then would permit a single carrier to make the rates in its managerial discretion it thought were proper?

Mr. LOEVINGER. Yes, sir; generally.

Mr. HEMPHILL. And could it make one rate to one shipper and one rate to another?

Mr. LOEVINGER. No, sir. The prevailing rules applicable to common carriers would prohibit this. Common carriers are bound to treat all shippers alike, all shippers of the same commodities, for example.