Mr. BEARDSLEY. I don't dispute the factual aspect of the statement. Senator SMATHERS. I don't expect you to agree with the reasons why, but I wanted to get the facts.

Mr. BEARDSLEY. All I was trying to point out before, Senator, was that if you take that 76 percentage figure back in 1926 and-what was the other figure? Forty-five percent?

Senator SMATHERS. Yes.

Mr. BEARDSLEY. I believe you will find that the 45 percent in actual tons handled was a far greater figure than the 76 percent that they had in 1926.

The CHAIRMAN. It must be remembered that the Doyle report was not speaking of competitive modes in the common carrier system, but of an increase in traffic of private carriers. This is what is encroaching upon all modes of transportation in the common carrier system. Private carriage has risen by leaps and bounds.

I think the figure of 3 percent a year is correct. If that keeps on going, it is going to hurt the whole common carrier system, not only railroads or trucks or inland waterways, because this has been growing a great deal.

Senator SMATHERS. Mr. Chairman, I think we had better correct one statement, and I appreciate the friendliness and impartiality. However, this reference in the Doyle report is to certificated regulated carriage. There is however, another reference that was the main burden of his argument-that while the certificated carriers are fighting with each other to see who will get this traffic, the private carriers are in fact beginning to take it all away, and that today the certificated regulated carriage is not going to be extended too far into the future unless they get together and quit fighting each other.

That is all that I have to say.

The CHAIRMAN. The Senator from Kansas.

Senator SCHOEPPEL. I am especially glad that the chairman here indicated the extent of the work of the subcommittee and the entire committee on the Transportation Act of 1958. I am glad the record is clear, certainly to my way of thinking, that before this bill or this measure was considered, that there was total and complete opportunity for all of the representatives of all of these various modes of transportation to communicate and to confer and to consult in trying to arrive at what that act contained as it is here today in its final form.

I had the distinct understanding, because I sat in those hearings as did the distinguished Senator from Florida, the chairman of the subcommittee, and other members, that this particular act was agreed to by the various representatives, not only of the rails but of the trucks and of the water carriers. I am glad that that is in the record now.

And as the chairman has said here a while ago, and as pointed out by the distinguished Senator from Florida, the certificated carriers or the common carriers have a battle on their hands here with reference to the private carriers and the others who are making great inroads on this traffic, and unless something is done about that we are going to be in further trouble down the line.

I am acquainted with a good many measures of that Doyle report, which I think is commendable in a great many respects. We may not all agree with everything about it, but it does point up certain salient facts and circumstances which are very important for us to consider even in this series of hearings.

I want to ask you, Mr. Beardsley, this question: You are one of the regulated carriers, as are the rails and water carriers. If the regulated carriers-and that goes for you and the railroads-if you develop a more efficient and a less costly method of handling traffic, is it your position that the savings in costs should not be reflected in your carrier pricing or the railroad carrier pricing, or the water carrier pricing?

Mr. BEARDSLEY. I don't see anything wrong with your statement, Senator Schoeppel. I do say that the major question in most of these cases is whether the traffic is really being charged for, considering all the provisions of the act and the national transportation policy, at rates which are where they ought to be, considering the nature of the traffic and all the other provisions. That is our problem in these cases. There is nothing wrong with the theories under which we are going. It is that we find that essentially these rates seem to us to be being made at very low levels and primarily with the intention of putting us out of business.

Senator SCHOEPPEL. I am glad we can start with that major premise. I think that is very important for us to keep in mind in consideration of all of these proceedings here.

Mr. BEARDSLEY. Yes, sir.

The CHAIRMAN. Are there any further questions by members of the committee?

Senator BARTLETT. Mr. Chairman, just one or two.

The CHAIRMAN. The Senator from Alaska.

Senator BARTLETT. Mr. Beardsley, did you say that piggybacking is a dominant consideration in respect to this bill?

Mr. BEARDSLEY. I hadn't thought of it that way. I thought of it all the way across the board. I think piggybacking presents a very striking example of the type of thing we are talking about here today. But I don't mean to suggest that the only area in which these destructive rates are being made is in the piggyback field. I do think that we are talking about this diversion of freight away from the regulated carriers. One of the ironic aspects of piggybacking is that the railroads have made rates so low, so-called plan 3 and 4 piggybacking operations, that the so-called shipper consolidators have literally sprung up out of the woodwork by scores, and I am sure that the committee has heard some complaints from at least the freight forwarders about that aspect of the operation.

In utilizing that service they, I think, in many instances are violating the law. I don't think they are genuine shipper consolidators. The railroads are getting very low level rates for very high quality traffic and lots of traffic the trucks were handling has gone by the boards.

Senator BARTLETT. You said there were some striking examples of this. Would you give us some illustrations?

Mr. BEARDSLEY. I thought I said, Senator, that this striking example of what we are complaining about is in this piggyback area. And I mentioned how under these plans 3 and 4 rates which the railroads have made at such a low level for such high grade traffic, organizations that were never heard of before yesterday, relatively speaking, have suddenly come into being and claimed to be shipper consolidators entitled to exemption under section 402 (c) of the act.

73155-61-pt. 1- 3

I suspect the bona fides of a large percent of those shippers consolidators. I am not talking about the genuine ones.

Senator BARTLETT. What has been the practical effect of this? Mr. BEARDSLEY. That particular aspect of it?

Senator BARTLETT. Yes.

Mr. BEARDSLEY. The traffic as I said has moved, because of the low level of rates, because of the high quality of traffic which can move on those rates, that traffic is going away in many, many cases from truck operators who have handled it for years, moving in plans 3 and 4 piggyback service, and I suppose, although I don't speak for them, I suppose the freight forwarders have a good many complaints in that area, too. They believe a lot of the traffic they have been handling is now moving under so-called shipper-consolidators.

Senator BUTLER. Mr. Chairman.

The CHAIRMAN. I think what you were suggesting is that this is only one facet of what we are talking about.

Mr. BEARDSLEY. Yes, sir.

The CHAIRMAN. But it is a facet?

Mr. BEARDSLEY. Yes, sir.

Senator BUTLER. Mr. Beardsley, would you agree that if the rate charged by the railroads was compensatory, that there is nothing wrong with honest competition through piggybacking?

Mr. BEARDSLEY. No, sir, there is nothing wrong with honest competition anywhere. But I would point out, Senator, that every rate that is compensatory is not ipso facto just and reasonable.

Senator BUTLER. Explain that.

Why wouldn't it be?

Mr. BEARDSLEY. Because, as I read-the easiest way to explain it is to refer back to my testimony.

Senator BUTLER. Do you mean it doesn't cover all of the costs, that it covers only part of the costs?

Mr. BEARDSLEY. No, sir. I would suggest that it is not proper ratemaking, and Mr. Freund will get into this in much greater detail I believe in his testimony. It is not necessarily proper ratemaking in every instance, considering the nature of the traffic if you merely allow any rate which merely recovers the fully distributed cost.

Senator BUTLER. Do I understand your testimony to mean this: That even though the railroads can show that this traffic is very lucrative, at the rate that they are charging, that they should nevertheless be prohibited from engaging in that traffic?

Mr. BEARDSLEY. I doubt that there will be very many situationsSenator BUTLER. I am asking a specific question and directing my attention to you on piggybacking.

Mr. BEARDSLEY. I am not suggesting that where the railroads can show that traffic is very lucrative that there is any reason why they shouldn't have it.

Senator BUTLER. If the traffic is lucrative, do you then agree that the railroads should have a right to compete to try to get that traffic? Mr. BEARDSLEY. Yes, I do.

Senator BUTLER. I have in my hand here, and I don't vouch for the authenticity of this publication, it has the stamp of the International Brotherhood of Teamsters, Chauffeurs, Warehousemen of America, 25 Louisiana Avenue NW., Washington, D.C., entitled "How Piggyback Destroys the Work Opportunities of Teamsters."

I am not relating you to the Teamsters in any way. But I do relate to you what I am about to read is pertinent in this part of the record:

One of the questions that they ask:

Question. Are the railroads making money on the piggyback operation? Answer. There is no doubt about that. One study of piggyback shows that a regular boxcar travels only 42 miles a day, is loaded about 18 times a year, and earns about $4,000 annually for its owner. In contrast to this, a piggyback car, loaded with truck trailers, travels an average of 192 miles to 250 miles a day, is unloaded over 105 times a year, and earns approximately $28,000 a year for its owner. One of the largest railroads in the country estimates that piggyback will contribute about 30 percent of its total revenue during the year 1960. These figures illustrate what a lucrative operation piggyback really is.

I renew my question again: If this answer is correct, is there any reason why the railroads should not compete at the rates they are presently charging for this lucrative business?

Mr. BEARDSLEY. Senator, I didn't have anything to do, as you pointed out, with the authorship of that statement. I find it hard to understand precisely what it is being gotten at. If you talk specifically about it, of automobiles in piggyback service, and that seems to be directed in that direction

Senator BUTLER. That is right.

Mr. BEARDSLEY. There is a witness coming on this morning, Mr. Rentzel, who is an automobile transporter, and I believe he is better qualified to answer that question with respect to that particular brand of traffic than I am.

Senator BUTLER. I introduced this in the record for the purpose of promoting discussion. I do not know whether it is authentic. It appears to have been circulated by the union that I referred to.

I think it behooves all of the people who come here to say whether it is true or it is not true. And if it is true, I think that the railroads should not be prohibited, under any restrictive interpretation of the Transportation Act, to prevent legitimate carriers from competing legitimately for the retention of lucrative business. If your contention is that they should be prohibited, then I think we have to alter our thinking a bit. We can't go back, as I said before, maintaining a high rate structure just to protect some other form of transportation. I am not suggesting that that is present in this hearing. But I do think, in honesty to everybody, that these facts should be brought out. If this is a lucrative traffic, if the railroads are able to handle it at a rate below the trucks or other forms of transportation, they should have a right to bid on it and try to compete in that field.

Senator MONRONEY. Mr. Chairman.

The CHAIRMAN. The Senator from Oklahoma.

Senator MONRONEY. I come back to my original question: Have the members of the Interstate Commerce Commission ever looked at these figures, ever caused by public hearings or proper consideration the development of these facts, which I think would relate more to the question here than would a direct mail piece to the members of the Teamsters Union by some economists that we don't know or don't even know what facts they have? We should be able to justify, if these new and very great savings are being accounted for, by the Interstate Commerce Commission at least taking the trouble to look

I suspect the bona fides of a large percent of those shippers consolidators. I am not talking about the genuine ones.

Senator BARILETT. What has been the practical effect of this! Mr. BEARDSLEY. That particular aspect of it!

Senator BARTLETT. Yes,

Mr. BEARDSLEY. The traffic as I said has moved, because of the low level of rates, because of the high quality of trafle which can move on those rates, that traffic is going away in many, many cases from truck operators who have handled it for years, moving in plans 3 and 4 piggyback service, and I suppose, although I don't speak for them, I Suppose the freight forwarders have a good many complaints in that area, too. They believe a lot of the trathe they have been handling 18 now moving under so called shipper consolid stors

Senator BU1ÆR. Mr. Chairman.

The CHAIRMAN. I think what you were suggesting is that this is only of e facet of what we are talking about.

Mr. BEARDSLEY. Yes, sir.

The CHAIRMAN. But it is a facet !

Mr. BEARISIP. Yes,sr

Senator BU1FR. Mr. Beardsley, would you agree that if the rate charged by the rulroads was compensatory, that there is nothing wrong with honest competition through p ggybacking

Mr. BEARDSLEY. No, sir, there is nothing wrong with honest com petition ar y where. But I would point out, Senator, that every rate that is con pensatory is not ipso fa to just and reasonable. Senator BU1R. Explain that. Why wouldn't it be?

Mr. B) ARDSTEy. Because, as I read the easiest way to explain it 14 to refer back to my test mot.y.

Senator Bum. Do you mean it doesn't cover all of the costs, that it covers only part of the costs!

Mr. BEARDSLEY. No, sir. I would suggest that it is not proper ratemaking, and Mr. Freund will get into this in much greater detail I believe in his testimony. It is not necessarily proper ratemseng in every instance, considering the nature of the the if you merely allow any rate which merely recovers the fully distributed cost.

Senator Bumя. Do I understand your testimony to mean this: That even though the ra lroads can show that this traffic is very in crative, at the rate that they are charging, that they should neverthe Jess be proh.b ted from erg gir g in that traffic!

Mr. BEARDSLEY. I doubt that there will be very many situations Senator BU1118. I am as Ig a specifie question and directing my after on to you on piggy bat g

Mr. Branistry. I am not suggesting that where the railroads can show that traffe is very lu rative that there is any reason why they shon'dn't have it.

Serator buman If the traf cas lucrst ve, do you then agree that the ra "roads stond have argit to cor pete to try to get that traa Mr. Beartstry Ye I do

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