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Transportation Act of 1940, and because I also introduced the 1935 act which became part 2 of the Interstate Commerce Act. The distinguished Senator from Florida asked me if I would be willing to relate the legislative history of the provisions relative to ratemaking. I might say at the outset that only at the repeated request of President Roosevelt did I undertake the task of managing the transportation legislation in 1939. It was after my disagreement with him on the Court issue that he sent for me and asked me if I would handle the transportation legislation. I told him at the time there were things in the reports that had been given to me with which I didn't agree, that it would be tough legislation to pass, and that I preferred not to handle it. But I finally consented to do so. From time to time, because of the opposition of the water carriers and the trucks, as between the contract carriers and the common carriers, and the railroad brotherhoods, and various other groups, I consulted with the President from time to time and reviewed the progress of the bill. I also went over its provisions with him, to make certain that it was in accord with his thinking. It had his complete support at all times. Among the important features of the Transportation Act of 1940 were those relating to ratemaking. Now, to fully understand them it is necessary to consider the history of the Motor Carrier Act which we passed in 1935. Prior to 1935 there had been attempts to pass acts regulating motor carriers. Legislation to accomplish this had failed in the House and passed in the Senate, and vice versa, but nothing finally had been accomplished. By 1935 some of the motor carriers had changed their minds and wanted regulation. But they still expressed fear that the Commission, because it had long regulated the railroads, might tend to favor them. Accordingly, in the declaration of policy and in the ratemaking provision, we directed the Commission to recognize and preserve the inherent advantages of the motor carriers. The actual language in the declaration of policy was— To regulate transportation by motor carriers in such a manner as to recognize and preserve the inherent advantages of such transportation. During the course of the hearings in 1939 and 1940, the water carriers expressed the same fear of the ICC rate regulation. Perhaps they expressed it more vehemently than did the motor carriers in 1935. We, therefore, wrote safeguards to protect their inherent advantages into the section of the 1940 act o rates of water carriers. To assure equality of treatment in the ratemaking field for all forms of transportation, we wrote the National Transportation Policy, making the “inherent advantage” the !. of Congress, theretofore applicable only to motor carriers, applicable to all modes of transportation. - In other words, it was the motor carriers who first wanted this policy initiated to protect them, and subsequently in 1940 we wrote it in for all forms of transportation, for the motor carriers, for the railroads, and for the water carriers. We stated it was the policy of Congress to provide for fair and impartial regulation of all modes of transportation subject to the provisions of the act so administered as to recognize and preserve the inherent advantages of each.
In the 1940 act we also took the other language in the Motor Carrier Act intended to accomplish this purpose, and made it applicable also to the railroads. So what we did was to take two provisions from the Motor Carrier Act and insert it into the 1940 Transportation Act, So that those provisions would apply not only to motor carriers and to waterways, but to railroads as well.
In substance, as the ICC subsequently found in the Seatrain case, this language required the Commission, in prescribing rate— to give due consideration, among other factors, to the effect of rates upon the movement of traffic by the carrier or carriers for which the rates are prescribed. The other change in the 1940 act to preserve to the railroads as well as other carriers their inherent advantages, was to the effect that they should not be required to maintain rates which would be unreasonably high, judged by other standards for the purpose of protecting the traffic of a competitor.
To make, as we thought, doubly certain that the inherent advantages of each form of transportation would be recognized and protected in the fixing of the rates, we made specific reference to it in our report. In fact, the ratemaking rule was the first substantive matter discussed in the report of this committee.
The ratemaking rule has been amended to expressly provide adequate safeguards for the public, and at the same time the Commission is directed, in prescribing a rate, to consider its effect on the movement of traffic only by the
and the word “only” is important—
by the particular type of carrier for which the rate is prescribed. That is, in prescribing a rate for water carriers, the Commission will not consider the effect of that rate on the movement of traffic by either rail or motor carrier. During the course of the debate on the bill, those who participated in the hearings in support of the measure also took that occasion to make it abundantly clear that in the determination of rates the Commission was to preserve and fully protect the natural and inherent advantages of each mode of transportation. Statements to this effect were made by Senators Truman, Reed, Austin, and by me. In the House they were made—similar statements were made by a number of members of the House committee. The House committee report was equally strong on this point. It stated— The manifest difference in the economic advantages of transportation by water, highway, and rail makes the question of rate adjustment as between these carriers a practical question. The bill is so drawn as to make it plain that there is no purpose to so adjust rates as to deprive any carrier of the inherent advantages of his cheaper cost of carriage. As a matter of fact, there was fear—claimed fear—on the part of the water carriers that what the Commission would do would be to raise the water carriers’ rates up to the railroad rates so that they would lose traffic. But we specifically—and Senator Norris asked that question on the flood of the Senate—assured them that, of course, that nothing of that kind could take place under the bill, and that all we were doing was to make it so that the inherent advantages of each mode of transportation would be preserved and there would be equal opportunities for each mode of transportation. In other words, if the railroads could carry freight cheaper in some places than what the
motor carriers could, then they would have the advantage of that fact, as the motor carriers would in some instances, and the water carriers would in others.
And it should be borne in mind that the language that we used in the 1940 act was the very language that the motor carriers wanted when we wrote the Motor Carrier Act, and the water carriers wanted when we wrote the Water Carrier Act.
Senator SMATHERS. Right there, may I ask you this question, Senator?
Mr. WHEELER. Yes.
Senator SMATHERS. Was there ever, at any time, an intention expressed on the part of any members of the committee, or of the Senate, that the Interstate Commerce Commission should, in effect, set rates so that one mode of transportation would be protected against another mode?
Mr. WHEELER. Definitely not. There was never any such intention. We thought we were making it perfectly clear that there was no way in which water carriers' rates could be raised so as to protect the railroads, and nothing to protect the motor carriers, and nothing to protect the railroads. We wanted it so that each one of them would have full advantage of their inherent advantages.
Senator SMATHERS. Was it the opinion in the committee and in the Senate that the general public would be better served if a system of transportation were provided whereby whatever inherent advantage one mode of transportation had over another, that particular mode of transportation would be able to operate under that inherent advantage? Mr. WHEELER. Exactly,
no question about it. Senator LAUSCHE. Mr. ChairmanSenator SMATHERS. Senator Lausche.
Senator LAUSCHE. Why did the water carriers and the truck carriers ask that there be included in this bill language which would protect them in the exercise of their inherent advantages?
Mr. WHEELER. Well, they wanted it because they claimed they were afraid that the Interstate Commerce Commission was railroadminded, and that if they were regulated by the Interstate Commerce Commission, the Commission would raise the water rates or the truck rates up to the level of the railroad rates, and thereby the barges and trucks would lose their inherent advantages. And so we wrote in language for that purpose not only as a policy, but in the rate-making provisions in the Motor Carrier Act of 1935.
Then, when the 1940 Transportation Act was written, we simply said that the same rule that applies to the motor carriers shall apply to the railroads and apply, also, to the water carriers.
Senator LAUSCHE. I am correct in this understanding, then, that the water carriers and the truck carriers felt that under their modes of transportation they possessed certain inherent advantages, and above all, wanted to be made certain that they would not be cheated out of those inherent advantages?
Mr. WHEELER. Very definitely, correct.
Mr. WHEELER. Well, I mean, all you have got to do is go through the hearings that took place on the 1940 act. We started the hearings
in 1939 and held hearings for months. The water carriers not only carried on a campaign before the committee, but they carried on a propaganda campaign that was unequaled at any time that I was in the Senate, excepting that of the public utilities, when they were attempting to defeat the holding company bill.
Senator SMATHERS. Senator Schoeppel would like to ask a question.
Senator SchoEPPEL. Senator Wheeler, you are giving us here the congressional or senatorial intent?
Mr. WHEELER. That is right.
Senator SCHOEPPEL. As these pressures that you are testifying to came out?
Mr. WHEELER. Yes.
Senator ScHoFPPEL. Of course, all of that was tied to one cardinal factor; namely, that those rates, when they were established, should be compensatory, was it not?
Mr. WHEELER. Exactly. As long as they were compensatory, then they could reduce the rates. The water carriers could reduce their rates as long as they were compensatory to take business away, or the motor carriers could reduce their rate to a compensatory level to take business away from the railroads, and the railroads could reduce their rates to meet the competition, as long as their rates were compensatory. That was our understanding.
Senator SCHOEPPEL. And then the guardian at the gate was the Interstate Commerce Commission?
Mr. WHEELER. Exactly, exactly.
Now, the bill, as drawn
Senator SMATHERs. Right there, may I ask you this question, to see whether or not you might recall this colloquy which apparently went on on the floor of the Senate, where Senator Austin asked you this question:
So if there is one type of common carrier which has a natural facility or a natural advantage over another, the bill does not require—indeed, I understand it not to permit, the extinguishment of the natural advantage in competition for the benefit of the competitor which has not the advanage; am I correct in that interpretation?
Senator WHEELER. The Senator is entirely correct, and I thank him for his statement. The ratemaking provision, and in three different places in the bill, we wrote in such a provision specifically so as to protect them.
Mr. WHEELER. That is right.
Mr. WHEELER. The House committee report was equally strong. It stated:
The manifest difference in the economic advantages of transportation by water, highway, and rail, makes the question of rate adjustment as between these carriers a practical question. The bill is so drawn as to make it plain that there is no purpose to so adjust rates as to deprive any type of carrier of the inherent advantage of his cheaper cost of carriage.
The preservation of the inherent advantages of each mode of transportation was further sought to be guaranteed by the report of the conference committee, and I quote it:
The conferees are unanimously in harmony in the viewpoint that the inherent advantages of each type of carrier should be preserved for the benefit of the Nation. Legitimate regulation must look to the protection of the economic advantage of each type of carrier against destructive competition of the other. NO carriers should be required to charge—
and I want to call your specific attention to this no carrier should be required to charge unreasonable rates for the benefit or purpose of compelling diversion of traffic to a competitor.
Senator SMATHERS. Do you mean—was it your understanding that that meant that the Interstate Commerce Commission should not fix what you say, an unreasonable rate; that is, a higher than necessary rate, in order to protect some other mode of transportation?
Mr. WHEELER. Definitely. I mean, that was our understanding of the bill. As a matter of fact, with reference to those provisions, and these reports, I haven't any recollection and I don't think there was any testimony or any objection on the part of the motor carriers or anybody else to those provisions because of the fact they were taken from the Motor Carrier Act, itself, and they were what the motor carriers wanted adopted when we passed the 1935 act.
I know this because I handled the 1935 act, myself.
Senator LAUSCHE. Senator Wheeler, do you know whether or not the transcript of the proceedings indicates what position the railroads took on this item at that time?
Mr. WHEELER. My recollection is they did not object to it.
Senator SMATHERS. At that time, the motor carriers, did they object to this particular type language, for example, that was used in this conference report. Did the motor carriers at that time object particularly to this type of language which you used here, where you said no carrier should be required to charge unreasonable rates for the benefit or purpose of compelling diversion of traffic to a competitor?
Mr. WHEELER. I never heard of any objection to that at all.
Senator SMATHERS. As a matter of fact, at that time they were very much for that language, were they not?
Mr. WHEELER. I think so. As a matter of fact, I can't see why they shouldn't be for it today.
Senator SMATHERS. I can't, either.
Mr. WHEELER. However, I am not here to pass upon that. I am not a rate expert, I don't profess to be, I have never represented anybody in any rate case-railroads, truckers, or anybody else. We have represented railroads, truckers, and unions. We have also represented shippers. For the life of me, I just can't understand their opposition, because it would seem to me it would be beneficial to the truckers as well as to anybody else.
Senator LAUSCHE. One further question.
Senator LAUSCHE. Was there any discussion at that time pertaining to the rights and the interest of the public, and the impact that an absence of such provisions which you urge would have on the public?
Mr. WHEELER. Well, we pointed out all the way through we felt it was in the public interest that this should be done, and when we were passing this legislation we were doing what we felt was in the public interest.
Let me say this: When this legislation was pending in Congress there were some things which the railroads didn't agree with. There were some things that the railroad brotherhoods didn't agree with. And sometimes the railroads threatened that, if I didn't put something in the bill, that they would fight it, and the railroad brotherhoods threatened to fight it.