and the consuming public should not be denied the right of securing the full economic capabilities and advantages that each mode of transportation can provide.

The effect of a "competing rate" on the earnings of another mode of transportation has the effect of guaranteeing a level of earnings. "Earnings" are a result of many factors and vary with each company and industry. Freight rates, whether competitive or not competitive, are not a controlling factor, and it is not a question for the Commission to determine what the "earnings" of one mode of transportation should be as against another. When the various modes of transportation were given permission or authority to handle interstate commerce, the Government or its agencies did not or do not guarantee them immunity from bankruptcy or immunity from competition by guaranteeing a certain level of rates or certain level of earnings. The act to regulate commerce was not intended to equalize fortunes, opportunities, or abilities but rather to facilitate commerce, protect the public interest, and give equality for all persons under substantially similar circumstances and conditions in the pursuit of a healthy free enterprise system. To require strict adherence to the "earnings" factor of each or other carriers when considering "competitive rates" has the effect of also regulating industrial conditions outside of the transportation industry under the guise of regulating rates. It seems to me such regulation would mean the shipping and consuming public would be required to subsidize many inefficient, improperly managed, unnecessary, or impractical operations.

The question of "unjust burden" on other traffic is one to which no set standard can actually be applied in all cases or to all forms of transportation. Here, again, there is ample regulatory powers which preclude unfair, unjust, or discriminatory actions. All the stated purposes of S. 1197 are in fact adequately covered in the present act and the Commission has in the past and currently given due consideration to these matters.

The provisions in S. 1197 are certainly not necessary to protect the public or to preserve an adequate transportation system. The only possible result of this type of legislation would be to create stagnant conditions in our transportation services and slow down the development of new services and techniques that are absolutely necessary if our transportation system is to keep pace with the other segments of our rapidly changing economy. Today's developments in automation, in new types of equipment, motive power, and many other fields must not be hamstrung by antiquated thinking in the regulation of transportation.

We respectfully urge this committee to consider the effect of this proposed bill on the overall transportation system and recommend this legislation be rejected as not compatible with the national transportation policy and sound economic principles.

STATEMENT OF C. S. CONNOLLY

My name is C. S. Connolly. My office address is 5045 Wilshire Boulevard, Los Angeles, Calif. I am employed by the Carnation Co., a corporation, as an assistant vice president, in direct charge of all the company's transportation by forhire carriers. I have an extensive background in transportation, including carrier, government and industrial employment. More than 40 years. On the basis of experience, I am ably qualified to express an opinion on S. 1089 and 1197.

I emphatically say this statement is voluntary on my part. I have not been influenced by all the propaganda that is being fired through the mail right now. I sincerely believe my statement is in the public interest, as I see the matter. I believed in and fought for what was enacted as the Transportation Act of 1958, and now a part of the Interstate Commerce Act.

I am an attorney at law and have practiced before the Interstate Commerce Commission for years. Therefore, from experience, I say the act is satisfactory now with the 1958 amendments relating to rules of ratemaking. You will receive thousands of letters on these bills from people who have been told to write to you. Many know nothing about the Interstate Commerce Act. They don't know a freight rate from a haystack. Therefore, I implore you to take seriously what experienced men in the industrial transportation field are telling you. They ac count for the Nation's freight charges and they know the origin of these bills and the confusion that will result if said bills are enacted and become law,

S. 1197, a bill to amend the Interstate Commerce Act with respect to the rule of ratemaking where competition between carriers of different modes of transportation is involved

Below is the proposed amendment to section 15a (3) (49 U.S.C. 15a (3)). The proposed changes in wording are in italic.

"Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That section 15a (3) of the Interstate Commerce Act (49 U.S.C. 15a (3)) is amended to read as follows:

"(3) 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, among other factors, the facts and circumstances attending the movement of the traffic by, and the effect upon the earnings of, the carrier or carriers to which the rate is applicable, the competitive necessity for the rate, its effect upon a lawful rate structure or adjustment, and its tendency, if any, to cast an unjust burden upon other traffic. Rates of a carrier shall not be held up to a particular level solely to protect the traffic of any other mode of transportation, giving due consideration to all the objectives of the national transportation policy declared in this Act.' Consider first what is meant by "among other factors." One can imagine what will happen when an astute practitioner applies for a rehearing because the law mentions "other factors" and the Commission did not consider every incompetent, irrelevant, and immaterial matter under the sun. The act is plain today with respect to the essentials involved. It is clear that proponents of this bill want to make it impossible to change a rate. Now we come to a real stopper: "And the effect upon the earnings of the carrier or carriers to which the rate is applicable." Always there will be a carrier or carriers of a particular "mode" who are seeking by a rate adjustment to secure traffic which they believe they are justly entitled to a share thereof.

"The effect" might be to increase their earnings. And to decrease the earnings of a carrier or carriers theretofore hauling this traffic. But to appraise "the effect" to a certainty might be a long-drawn-out process and actually prevent what otherwise might be a necessary rate adjustment: "the competitive necessity for the rate."

What about the desire of the shipper for a reasonable rate. Is he not entitled to a just and reasonable rate via one mode of transportation in lieu of a rate via a different mode of transportation regardless of "competitive necessity"? Under our free enterprise system surely a citizen is permitted the right to choose his mode of transport. In South Africa where the government owns the railroads a shipper is actually compelled to use the railroads. He is prohibited from trucking his shipments. We don't want this in the United States.

"Its effect upon a lawful rate structure or adjustment, and its tendency, if any, to cast an unjust burden upon other traffic."

I will consider these two proposed additions together. It can be said that the Commission now considers the above elements in rate adjustments. And the logical answer is, if this be true, why object to inclusion of the above matter in section 15a (3)? I do not particularly object except on the ground that simplicity is usually best; that there is not need for adding this kind of double talk to the act. It can create doubt and confusion where none exists today. The act today is susceptible of clear and reasonable interpretation and has been for a long time with respect to conditions the above wording is apparently directed to. For example, we can go back to 1916 to:

Corporation Commission of Virginia v. C & O Ry. Co. (40 I.C.C. 24), at page 28: "It is true that in determining the reasonableness of rates, due consideration of their relation to other rates of the various carriers serving the same or competing localities should be given. In other words, section 1 of the Act contemplates that rates to be just and reasonable must be relatively fair as between localities similarly situated, as well as reasonable per se."

In 1928, Anchor Coal Co. et al. v. United States et al. (Interstate Commerce Commission et al., Interveners), 25 Federal Reporter, 2d Series, 452, at page

471.

"(4-6) If we are correct in our analysis of the reports of the Commission, there can be no doubt that it exceeded its powers. Of course, since the passage of the Transportation Act of 1920 (49 U.S.C.A. 71 et seq.; Comp. St. 100714 seq.) the Commission has the right to prescribe such rates to cases where the rates proposed are unreasonable per se, or are so low as to cast a burden on

other traffic. It has the right to prescribe minimum rates also to prevent ruinous rate wars and to guarantee reasonable earnings, not only to the carriers affected, but also to competing carriers, who may labor under a higher cost of doing business. New England Divisions case, 261 U.S. 184, 43 S. Ct. 270, 67 L. ed. 605; Dayton-Goose Creek R. Co. v. U.S., 263 U.S. 456, 44 S. Ct. 169, 68 L. ed. 388, 33 A.L.R. 472. And where the Commission fixes a rate or prescribes a minimum in the exercise of the powers conferred upon it, the courts will not interfere with its action, however much they may disagree with its reasoning. The Commission does not have the right, however, to regulate industrial conditions under the guise of regulating rates. And in a case like this, where there is no rate war, where there is no finding that the rates condemned will deprive the carriers of a fair return, and where they cannot injure competing carriers or carriers from a competing locality because they are actually higher than the maximum rates which such carriers may charge, the Commission does not have the right under the law to prohibit the reduction because of a shift in traffic which has occurred from the locality having the lower to the locality having the higher rate."

February 15, 1960, "Interstate Commerce Commission Advance Bulletin of Interstate Commerce Acts, Annotated," volume IV, No. 16, at page 26:

"Competition has been defined as the striving between or among two or more persons or organizations for the same object. Considering that the proportion of total traffic carried by railroads had been diminishing for many years, resulting in a steady decline in revenue, while that moved by motor carriers continued to increase, and that, in particular, as production and motorcarrier movement of paints and products between points in official territory increased, rail carriage thereof decreased, proposal to reduce substantially present rail rates on paints and products in official territory for the purpose of regaining much needed traffic and revenue was compelled by competition and constitutes a proceeding ‘involving competition' under section 15a (3), regardless of whether or not the proposed rates are reasonably related to the competitive situation.— Paint and Related Articles in Official Territory, 308 I.C.C. 439 (440–442).”

"In dealing with competitive rates, the Commission is prohibition by section 15a (3) from holding the rates of a carrier to a particular level to protect the traffic of another carrier, unless the subject rates are in contravention of the objectives of the national transportation policy.-Id., p. 449."

"Competition between carriers comprehends both rates and service. Regardless of whether or not motor protestants, because of service advantages, may be able to continue to compete for considered paint traffic without reducing their rates, there is no indication that proposed rail reductions will adversely affect them in such manner as to constitute an unlawful practice; proposed rates are compensatory, are needed by respondents to attract traffic, and would not constitute a destructive competitive practice in contravention of the national transportation policy; approved.-Id., p. 450."

An important decision of the Interstate Commerce Commission, decided December 19, 1960, is Commodities—Pan Atlantic Steamship Corporation, 313 I.C.C. 23. This was a report of the Commission on reconsideration. At page 25, the following:

"The most important question before us here is whether, in attempting to meet the competition of Pan-Atlantic and Seatrain, the railroads may establish compensatory rates which are on a parity with the rates of those competitors, or whether the ratemaking provisions of the Interstate Commerce Act, interpreted in the light of the national transportation policy, under the facts here presented, require that the rail rates on this traffic be maintained differentially higher than the rates of those competing modes."

Following appears at page 49:

"In the circumstances presented here, we are of the opinion that the objectives of the national transportation policy require the establishment and maintenance of a differential relationship between the rates under investigation on sealand and Seatrain service, on the one hand, and the rates of the rail carriers, on the other, which will allow these water carriers operating in the coastwise trade to maintain rates that (50) will enable them to continue efficient and economical coastwise service."

"It appears to us, however, that the 10-percent differential sought by PanAtlantic would be excessive. The differences between the sea-land and the allrail services are not so marked as to require that wide a rate difference. In our judgment, the rail TOFC rates on the commodities from and to the points

concerned in I. and S. docket No. 6834 should be maintained on a level no lower than 6 percent above Pan-Atlantic's sea-land rates, so long as the latter are not increased above their present levels. While the matter of an appropriate differential for sea-land service on Seatrain service under rail boxcar service is not here directly in issue, it may be helpful for the future guidance of the parties to express our view that, as boxcar service is inferior to TOFC service, the differential under the boxcar rates should be somewhat less than 6 percent."

In the Traffic World April 15, 1961, at page 101, a recommended Interstate Commerce Commission examiner's report in docket No. 33234, "Canned GoodsPacific Coast to Eastern Points," is reproduced. I quote from page 102:

"DESTRUCTIVE RATEMAKING

"Alleged destructive effect of the new rate. The protestants contend that the new rate is unlawful because of its destructive effect on the intercoastal steamship service. No evidence was presented of unfair or destructive competitive practices. Where the new rate applies to those points in group A to which canned goods moved by the intercoastal lines prior to its establishment, the respondents, in publishing it as an incentive rate are merely exercising their right to effectively compete. Nothing in the act requires that their competitors must be shielded from such competition as protestants urge here. Paint and Related Articles in Official Territory, 308 I.C.C. 439, 449. Rather the purpose of the act is to encourage competition in rates and service and to preserve to the public the maximum benefits which flow from it, within the ambit of the regulatory scheme and the standards provided in the statute. New Automobiles in Intersttae Commerce, 259 I.C.C. 475, 539. There is no evidence that Luckenbach sustained a loss of canned goods traffic after the new rate became effective, or that such rate resulted in impairment of its service or of its financial condition. On the other hand, there is abundant proof that the new rate conforms to the standards of lawfulness in the act and is consistent with the objectives of the national transportation policy which are pertinent here."

Certainly, these late decisions of the Commission indicate that there is no difficulty whatsoever today with respect to competitive ratemaking as between carriers. It is true that the law today does not provide a monopoly for any one mode of transportation and this certainly is proper. The confusing language of the two bills under consideration is such that a monopoly would be created in most instances because the uncertainty and confusion incident to interpreting all of the new language sought to be enacted into law, would unduly delay rate proceedings and needed rate adjustments would not be made. The Supreme Court of the United States in Interstate Commerce Commission v. Harry J. Diffenbaugh et al, 222, U.S. 42 56 L. ed. 83 at page 87 stated:

"The law does not attempt to equalize fortune, opportunities, or abilities." It appears to me that the proposed amendments to the act as contemplated by these bills seek to do what cannot be done under the law. The proposed amendments will stifle legitimate competition as between carriers. Also place undue burdens on carriers and shippers by denying them what they are entitled to under the law. At page 88, the following:

"But, as remarked below, the Union Pacific could not be complained of on this ground (176 Fed. 424), and it would be impossible to deny the same right to competing roads, merely because, as the result of the conditions, one city would gain and another lose (Louisville & N.R. Co. v. Behlmer, 175 U.S. 648, 44 L. Ed. 309, 20 Sup. Ct. Rep. 209)."

In a world of competitive free enterprise, there is always someone, during the course of legitimate competition either gaining or losing something of value.

THE WORD "SOLELY"

S. 1197 proposes adding the word "solely" to the last paragraph of section 15a (3), as follows:

"Rates of a carrier shall not be held up to a particular level solely to protect the traffic of any other mode of transportation, giving due consideration to all the objectives of the national transportation policy declared in this Act."

Is the word "solely" added to emphasize what is entirely clear in the act today? It seems so and if this is the reason, why add surplusage to language already clear?

In conclusion, S. 1197, it is my opinion that section 15a (3) is clear and uncomplicated as it now reads and is satisfactory today in its application to conditions within its scope. It should be left alone. S. 1197 should not be approved. S. 1089, a bill to amend parts I and III of the Interstate Commerce Act in order to make unlawful certain discriminatory rates, charges, and practices Before going into the changes in the Interstate Commerce Act proposed by this bill, I want to say that I oppose the bill because it attempts to amend part I of the act relating to rail carriers and also part III relating to water carriers and makes no change in the present law relating to motor carriers (pt. II).

I have searched carefully through part II of the act trying to find what I knew was not there. If S. 1089 contained the same provisions for part II of the act as now provided in the bill for parts I and III, I would still be very much opposed to the enactment of this bill. I will take the first sentence of the new subparagraph proposed for section 3(1) of the Interstate Commerce Act reading as follows:

"(b) When any common carrier subject to this part maintains rates, charges. or practices in competition with another mode of transportation which cause. make, or give any discrimination, preference, or advantage which would be undue or unreasonable in the absence of such competition, such discrimination, preference, or advantage shall be unlawful where the effect thereof may be substantially to lessen competition, or tend to create a monopoly in any line of commerce, or to injure, destroy, or prevent competition with said carrier."

Since the same amendment is proposed to part III of the act, my remarks will apply to both parts. I will repeat what I have said in connection with S. 1197. There are ample provisions in the Interstate Commerce Act today to prevent destructive competition between carriers. To my mind, the above wording in the proposed amendment is directed to destructive competition. However, in fact. the wording, if enacted into law, would actually prevent legitimate carrier competition. Anyone who reads the proposed wording can clearly see there can be no legitimate competition between carriers of the same mode or a different mode of transportation. Certainly, the Commission and the courts will have to be enlarged if every rate adjustment is to be specially scrutinized to determine what would be undue or unreasonable in the absence of competition.

And why, in the absence of competition, should not the rules relating to legitimate competition govern? I say they should. I have cited cases herein at page 3, et seq., which show there is ample control over competitive traffic today under the act as it now reads. I must confess, that in spite of my long experi ence in the transportation field, I am utterly unable to comprehend the language of the proposed amendment as it relates to what might be undue or unreasonable in the absence of competition; also where the effect thereof may be "substantially to lessen competition." Or better stated what is discrimination, preference, or advantage, the effect of which is substantially to lessen competition. Apparently, "competition" is intended to mean competition between carriers however it could be held to cover competition between industries. Certainly, the words "or tend to create a monopoly in any line of commerce" could start many a witch hunt. The words, "in comparing rates, due consideration shall be given to all factors affecting the relative desirability of the services offered" are unnecessary because the Commission has for years done this and proof of this is the Commission's decisions which are of public record. And it seems to me that all of the confusing language above referred to is nullified by the last sentence of the proposed amendment which reads:

"No discrimination in rates shall be held to be unlawful which makes only due allowance for difference in the costs of providing transportation, services, or facilities, or which is made to establish uniform group rates reasonably calcu`lated to preserve competition between shippers similarly situated."

Usually, and I would say that is a must under the act today, due allowance must be made for differences in costs of providing transportation, services, and facilities. This is clearly provided for in section 15a (3) of the act and under the national transportation policy as well as other sections of the act, particularly sections 1, 2, and 3 of the act, also section 15 (pt. I).

As far as uniform group rates reasonably calculated to preserve competition between shippers similarly situated, such wording is mere surplusage. In all of my experience, I have never had any difficulty whatsoever in proving to the Commission, where conditions justified group rates, that from a competitive standpoint the shipper I represented, was entitled to the benefit of a group rate.