Mr. YOUNGER. Mr. Symes, your later statement kind of confuses me a little bit. Do you believe in the transportation policy that is set forth in the act?

Mr. SYMES. I certainly do. Mr. YOUNGER. Then how can you preserve the inherent advantages of each mode of transportation unless you adhere to the full compensatory rate!

Mr. SYMES. I don't believe you can do it in every case. I don't think any business can. But, in principle, I agree with it.

Mr. YOUNGER. I know, but who is going to determine when it is to be applied? Is it all right in a case where you want to destroy one truckline?

Mr. SYMES. No, no; I wouldn't want to do that.
Mr. YOUNGER. Who is going to determine when?
Mr. SYMES. I think the ICC.

Mr. YOUNGER. You would come to the point where every rate has to be determined by a full compensatory line of evidence.

Mr. Symes. I agree with you 100 percent in principle.

Mr. YOUNGER. I agree not only in principle but in fact. I do not see how you are going to operate otherwise, because in a case where you have the competing modes it looks to me as if you cannot operate half slave and half free. You have to go down the line on a fully compensatory, nondiscriminatory rate.

Mr. SyMEs. In every case?

Mr. YOUNGER. In all cases. I do not see how you can preserve the inherent advantages of any mode of transportation in competition unless you do that.

Mr. SYMES. I don't mean lose money on it to get the business. Absolutely not. But if it contributes to net, I think we ought to have certain leeway on it.

Take, for example, this passenger business. And I will use round figures where we say out-of-pocket cost per train-mile is $4, the revenue is $6, and the full cost is $8.

I have the investment. I have all of the equipment. Certainly I couldn't, as a good business manager, take off a train that is earning $6 to save $4 even though I know the full cost is $8. That is our big problem.

Mr. YOUNGER. And yet you deny the right, that same right, to the State regulatory authority which says that you have to take into consideration your freight rates and everything else.

Mr. SYMES. I agree.
Mr. YOUNGER. You say they should not have that right?
Mr. SyMEs. They certainly shouldn't.

They won't let us take off trains that are operated with out-ofpocket loss.

Mr. YOUNGER. I agree with that, but I do not see how you can have part fish and part fowl. It just does not make sense to me.

I am not a railroad man, but if you are going to permit that, then the railroad is going to come in and say, "Now this isn't fully compensatory because of this and that, and so forth, but we can substantiate this rate."

The trucklines have established a rate that is way below yours, and you can go in and pick out a truckline or an inland waterway and

say, “Well, now, for this reason or that reason and some other reason, we can substantiate this rate." And it may be way below the truck rate or way below the water rate. Yet, if you had to analyze it and if you had to give arguments to substantiate it as a fully compensatory rate, you could not do it.

Mr. SYMES. On a full cost basis.
Mr. YOUNGER. That is all, Mr. Chairman.
Mr. ROBERTS. Thank you very much, Mr. Symes.
Mr. SYMES. Thank you, sir.

Mr. ROBERTS. The next witness is Mr. James F. Pinkney, of the American Trucking Associations, Washington, D.C.

Mr. Pinkney. STATEMENT OF JAMES F. PINKNEY, GENERAL COUNSEL, ACCOM

PANIED BY ALLEN C. FLOTT, ASSISTANT DIRECTOR, DEPARTMENT OF RESEARCH, AMERICAN TRUCKING ASSOCIATIONS, INC., WASHINGTON, D. C.

Mr. PINKNEY. Mr. Chairman and gentlemen of the committee, my name is James F. Pinkney. I am general counsel of the American Trucking Associations, Inc., 1424 16th Street, NW., Washington, D.C.

We understand that the purpose of this hearing is to consider three subjects which have been before the Senate Subcommittee on Surface Transportation but on which there are no bills pending in the House, at least no bills introduced by this committee or any member thereof.

I understand there is a bill similar to S. 3778 which was introduced over here last week which is identical to the one pending in the Senate.

For the purpose of this discussion, therefore, we assume that discussion on the Senate subcommittee report and the statutory language in S. 3778 to be the matters under consideration.

Our interest is primarily in the subject referred to as competitive rates. We are not directly involved in the proposals dealing with the abandonment of service and intrastate rates. We are included in the proposal for the establishment of construction reserve funds.

The trucking industry favors the last-mentioned proposal, which is designed to encourage the replacement of carrier facilities and necessary modernization of the carrier plant by creating a construction reserve fund on the books of common carriers.

The current financial problem of the railroads is likewise present in the trucking industry, particularly in the eastern section of the United States where the railroads seem to be in most serious trouble.

For the past several months many of our largest trucklines have been suffering from the effects of the current business recession, and it may well be that for them to continue to render good service to the public they will require such temporary financial relief. While this device may not be used by our people to anywhere near the extent it may be used by the big eastern railroads, we nevertheless feel that it should be made available to the regulated trucking industry.

While I have not made a detailed study of the statutory language suggested in S. 3778, our preliminary examination of this leads us to believe that it is a sound proposal and one which should go far toward solving the problem of carriers in distressed circumstances.

COMPETITIVE RATE PROPOSALS

As we have indicated here and before the committee of the other House, there are a number of the proposals recommended by the Senate subcommittee which we actively favor. Insofar as the competitive rate proposal is concerned—section 5 of S. 3778—we feel very strongly that it would not be in the public interest to make such a change in the rate provisions of the Interstate Commerce Act. We have been searching hard and diligently for some solution which would resolve this question in a manner satisfactory to all concerned. We feel that the problem is largely one which, on the surface at least, should be susceptible of solution by the discovery of words which, on the one hand, would make it clear that the Commission should not hold up the rates of one form of transportation solely to protect another form, but, on the other hand, also make it clear that it is not intended by such language adversely to affect the rate structure of this country or permit destructive or unfair rates and practices. The trucking industry seeks no change in the act, but the railroads are most insistent upon some change, and the problem that has been posed to us is one of giving up in some degree our position without at the same time having action taken which will inpinge upon the industry's vital interests. Let me say in passing that of the many proposals contained in the subcommittee's report and that are before this House and on which you have held hearings, the only one of serious concern is the one on competitive ratemaking. As I have just indicated in part, we do not seek to stand in the way of any of the other proposals which deal with the truly serious problem of some of the railroads, and, of course, we are very much in favor of some of the other proposals such as the one dealing with the agricultural exemption problem. Mr. Roberts. Is that in your prepared statement? Mr. PINKNEY. I did not have that in my prepared statement. I return to my statement on page 3. Mr. Roberts. Are you returning to your prepared statement now? Mr. PINKNEY. I am now back on my prepared statement, page 3. The railroads for the past 3 years have been making a major effort to gain what they choose to term more freedom to compete. They have inserted or promoted the insertion in a very large number of magazines, newspapers, speeches, and other means of expression the theme that the Interstate Commerce Commission is preventing the railroads from exercising their inherent advantages |. holding up their rates solely to protect their competitors. They contend there must be something placed in the law which will prohibit the Interstate Commerce Commission from thus holding an alleged umbrella over the rates of their principal competitors. As we have heretofore stated to you, we do not agree that the Commission does hold an umbrella over our rates, and we do not advocate such a policy on the part of the Commission. We think it not only can but that it has been demonstrated that the Interstate Commerce Commission does not condemn reduced competitive rates solely for the purpose of protecting competing modes of transportation, although on rare occasions language can be found in

their decisions indicating that they might be doing so. I refer to de-
cisions that go back 5, 6, 7, 8, 9, years, none in the last 5 years, so far
as I know, cited by anyone. On this point, it seems to us that the
facts contained in two Commission expressions are conclusive.
First, let me read from an excerpt from testimony of the Chairman
of the Interstate Commerce Commission before the surface transporta-
tion subcommittee of the Senate, March 28, 1958—I got him because
this is a factual statement and I believe these facts to be correct.

Exclusion of schedules involving general increase in rates, more than 50,000. rail tariffs were filed with the Commission in 1957. These rail tariffs contained hundreds of thousands and probably million 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 (of the 1.7 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. Among this one-eighth of 1 percent are found the proceedings which are repeatedly cited as examples of persecution and Outrage. On this same point, Commissioner Arpaia, 1 year earlier, on February 27, 1957, recited the following facts: Railroads alone file with the ICC an average of over 3,000 rate changes every working day of the year. During the year 1956, how many rates out of the million or more rate changes filed by railroads were adjudged to be unlawful by the Commission after protest by competing forms of transportation? Ten thousand? Two thousand? Ome thousand? One hundred? No. Just exactly 12. How much traffic was involved in these 12 cases? In other words, how badly hurt were the railroads by our finding that these rate changes were unlawful? If they had been able to obtain every single pound of the traffic involved, from competing forms of transportation, which, of course, is hardly likely, they could have added only $1,22S,879 to their gross revenue; $1,109,359 of this amount from water carriers and a mere $119,520 from motor competitors. This represents only eleven-thousandths of 1 percent of the total revenue of railroads for the year 1956. This committee will recall that the principal burden of the railroad complaint 2 years ago was that the Commission was allocating traffic between the several modes of transportation on a so-called fair-share basis. We believe that the testimony which was placed before the House committee in the hearings in 1955 on the so-called Presidential Cabinet, Committee report, and subsequently on the rail-sponsored “three shall not” proposal, conclusively demonstrated that the Commission was not attempting so to divide the traffic. Inasmuch as nothing more has been heard of this argument from the railroads, we assume they have abandoned it in favor of their current line which appears to be equally without substance as the statistical data of the Commission proves. However, assuming for the sake of the argument that the Commission has on rare occasions placed minimum limits on the rates of one mode of transportation for the purpose of protecting another mode, we feel that any statutory limitation placed upon the power of the Interstate Commerce Commission in connection with the exer

cise of its minimum rate power—to keep it “honest” in this respect—
would do far more harm than good.
At the present time the Commission is simply directed by the
Congress to see that all rates are just and reasonable.
In the determination of just and reasonable rates, the Commission
presently looks at all pertinent facts, including the cost of the serv-
ice where that is or can be known; the rates of both the carrier seeking
a change as well as the rates of its competitors; the value of the com-
modity and the value of the service; and, in the interest of preserving
a reasonably uniform and equitable freight rate structure, it con-
siders whether the rate is lower than necessary to meet competition;
whether the rates are so low as to destroy competition; whether the
rates will throw an undue burden on other traffic; and whether the
rates will jeopardize an entire rate structure. -
We submit that in making of freight rates, which is essentially a
legislative process, the rate-fixing body must be permitted to exam-
ine all of the facts, just, I might say, in the manner in which this
committee examines all of the facts as a preliminary step to making
a legislative recommendation.
If the Commission must wear blinders and ignore facts such as
the fact of competition or the effect of rates on the existence of com-
petition, it seems to us that it will be impossible to maintain either
a sound rate structure or a sound national transportation system.
It will also be extremely difficult, if not impossible, for the Commis-
sion to protect the public at large against discrimination, preference,
and prejudice, and unfair and unsound competitive practices in our
economy at large.
As I will bring out in a moment, the objective the Congress has
set is the establishment of just and reasonable rates for all. To
arrive at this objective the agency to which you have delegated this
responsibility must consider all facts bearing upon the accomplish-
ment of that objective.
Every proposal that we have seen, including the one presently found
in section 5 of S. 3778, would inject a negative element or elements
into the exercise by the Commission of its quasi-legislative power
delegated to it by you.
Let me add at this point, gentlemen, that the Interstate Commerce
Commission the other day presented, as an alternative proposal, lan-
guage which we presently have under study, and a cursory examina-
tion of that language would indicate that it does not contain nega-
tive elements. But I am not prepared to go into the details of that
offer which was made by the Interstate Commerce Commission over
on the Senate side, accompanied by the statement that the Interstate
Commerce Commission still insists that no change is necessary or
desirable.
Mr. RobHRTs. Could you furnish that language to the committee?
Mr. PINKNEY. Yes, Mr. Chairman; I shall be happy to do so.
It is my understanding that the Commission furnished this com-
mittee with its statement before the Senate pursuant to the request
of Chairman Harris the other day. So you may have it in your
records, but I shall be happy to furnish you with a copy also.
Mr. RoBERTs. I am advised by the staff that we do not have it in the
file. So, if you would furnish it to be attached to your statement, we
would like to have it.