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I am. But the language that I read from new automobiles in interstate commerce, you say you subscribe to that!

Commissioner FREAS. Yes, I have no quarrel with that language.

Senator SMATHERS. Well then, what I don't understand is why that language is any different than the language we have in our amendment.

Commissioner FREAS. Well, for this reason

Senator SMATHERS. We tried to make this amendment just as near that language as we could

get it. Commissioner FREAS. The language in the amendment

Senator SMATHERS. We may have missed. We apparently did. We shot at it.

Commissioner FREAS. Precludes the Commission from considering the facts and circumstances attending the movement of the traffic by any other mode. Now it happens that in this particular case, in the New Automobiles case, the Commission did consider the facts and circumstances surrounding the movement by all the modes that were involved there. There were about six pages of the opinion devoted to the question of distribution of traffic.

There were before the Commission cost studies covering the different modes on the rails, both on an out-of-pocket and on a fully distributed basis and on the other modes just on a fully distributed basis.

The Commission found in that case that there was no question about this threatening the financial stability of any of the carriers, but it considered those matters in order to determine what action it should properly take under the act.

Now, the point is that under this proposal we could not consider the facts and circumstances surrounding the other form of transportation. In this case, while the statement generally is in accord with it, nevertheless the Commission did in that very case consider those things.

Senator SMATHERS. Do you consider that there were not-the overriding statements in the national transportation policy, that they are not of such weight that they would not override "and not buy such other modes."

In other words, does not the import of the national transportation policy, is it not sufficient, in and of itself, to permit you to consider, for example, promote safe, adequate, economical and so on, and to stop unfair or destructive competitive practices?

It is your view that those words “by such other mode” would prohibit the Commission from considering this language used in the national transportation policy? Would this language of our amendment be a repeal of the national transportation policy?

Commissioner FREAS. Well, I think it would create a-if not a definite conflict, and I believe it would, certainly something that would result in a lot of litigation, on the ground that it was a conflict.

Senator SMATHERS. Suppse we added “and not by such other mode” always keeping, of course, in mind the provision of the national transportation policy which the Congress approved in 1940 and reaffirms here now?

Senator POTTER. Why don't we put in the amendment to conform with the national transportation policy, strike out the part "by any other mode."

Senator SMATHERS. The way I look at it if you strike that out, it is just like performing an operation

Senator POTTER. Actually what we want the Commission to do is to conform to the transportation policy.

Senator SMATHERS. That is right.
Commissioner FREAS. We will buy Senator Potter's suggestion.

Senator SMATHERS. What I am saying is this: If we don't say “and not by such other mode,” then you eliminate the inherent advantage, I think. I am afraid that is what has happened. If you strike out “and not by such other mode,” then the Commission is less and less considering—the cases show less and less consideration here of the advantages of one mode as distinguished from another. They are becoming a giant handicapper more and more, in their desire to do a good job, I mean.

Senator POTTER. I agree that they shouldn't do that, but actually what we want the Commission to do is to carry out the transportation policy. That is what we are trying to say here. Isn't that right? Commissioner FREAS. That is right. Senator POTTER. We have a vote.

Senator SMATHERS. They have a vote going on, Mr. Chairman, but just for the record, let me ask you that—Potter comes before "S.' They all come before me, “M,” “N,” “O,“P,” "Q,” “R,” “S,”I have a long time to go yet.

What kind of a looking verbal apparitions would it make legislative apparition would it make if we leave in "and not by such other inode,” but add “always consistent with the national transportation policy”?

Commissioner FREAS. I don't see that it would by that language, a part of which seems to lean one way and then we turn back again, I don't think we would be adding anything to the present rule 15-A-2, but I believe it would result in a lot of litigation, a lot of uncertainty. Different people would contend for different meanings.

Senator SMATHERS. Well, now, do you have any recommendation that you could make to us, legislativewise I know that your official position is, no, you think it ought to be left as it is.

Commissioner FREAS. Yes. Our official position is, as I say, we recommend against it, first for the reason that it seems to single out one form of transportation. Second, because

Senator SMATHERS. We would agree that that ought to be changed, we should not leave it just with respect to railroads. That amendment should be changed to cover motor carriers, too.

Commissioner FREAS. Second, because we think it is somewhat uncertain, and third, because there are places where we believe it would be unworkable. But in trying to be helpful we have made a suggestion. As I say, we are not suggesting that this be incorporated but if the Congress does want to make some change in it, this is the thing that we submit

Senator SMATHERS. May I say just one thing, because I will wait and let these other Senators hear you. You say this is somewhat uncertain, do you think your procedure is certain in this ratemaking field with respect to that?

Commissioner FREAs. Considering all the intricacies involved, ISuppose it never will be absolutely certain, but I was talking now about the course we are steering to, at least the statutory requirements. Senator SMATHERs. All right, sir. Let's just take an informal recess here for about 6 minutes. Thank you, sir. (Short recess taken.) The CHAIRMAN. Mr. Chairman, suppose you continue with your statement beyond the point at which you were interrupted. Commissioner FREAs. We have covered quite a few of the things that appear next in the statement. I might mention that we do assume that this amendment is not intended to embody the three shall-nots because the subcommittee stated that it is not convinced that the record before it justifies approval of the railroads' proposals. Mr. Langdon indicated that he did not discern any great difference between them and this, and I, for that reason, particularly call attention to that. I also think that his statements emphasize the fact that the real uestions, as we do set them out in our statement are, first, whether ongress desires—this is on the bottom of page 4 and running over to page 5—the first question is whether Congress desires to give the highcost carrier in every competitive rate situation complete discretion to establish any rates which cover its out-of-pocket costs, without regard to its effect on the ability of the low-cost carrier to move the particular traffic at rates which cover all of their costs. And the second: Whether, and to what extent, Congress desires to prohibit the maintenance of minimum rates on high value commodities at a level higher than would be justified by cost considerations alone. Now these questions, we feel, are too important to be left in any doubt. It would result in endless litigation and whatever changes are made in the act should remove any danger of unnecessary litigation. I mentioned before that one of our objections is that we feel that the proposed amendment would be unworkable. We take the position that the purpose of rate regulation should be to encourage the flow of traffic by the most economical means and that this requires as a starting point the determination of the mode of economical means, and this determination, in turn, requires a consideration of the facts and circumstances surrounding the transportation. I had started before the intermission to— Senator SMATHERs. You were giving us— Commissioner FREAs. I suggested that we have language here to Substitute for paragraph 3 in the bill. I want to make it clear that we are not advocating it, that if the Congress does want to make some changes, we believe this language would be better. It appears on page 8. In a proceeding involving competition between carriers, the Commission, in determining whether a proposed rate is lower than a reasonable minimum rate, shall consider the facts and circumstances attending the movement of the traffic. Rates of a carrier shall not be held up to a particular level to protect the traffic of a less economic carrier, giving due consideration to the inherent cost and service advantages of the respective carriers. Now, of course, if that language were adopted, it would, since it applies to all types of carriers, there would have to be corresponding changes made in the other sections of the act.

And also I should mention that the language we suggest would not affect the special provisions in section 305 (c) which we have referred to relating to water-carrier rates and practices, but we have accepted as settled policy of the Congress those provisions and have not undertaken to go into them.

Senator SMATHERS. In other words, the objections which the water carriers, barge-line people, have been making against this subcommittee's proposed amendment, you don't believe that they would make that objection, or if they did, you don't believe they would be justified in making that objection to this particular amendment.

Commissioner FREAS. Well, I don't know whether they would. My statement simply is that we have not tried to suggest any change in section 305 (c) because we thought that was a policy of the Congress that for the moment seemed to be settled and we just didn't disturb that.

Senator SMATHERS. But it would not affect the special provisions of 305 relating to water-carrier rates and practices, so that in fact, they should have no particular objection?

Commissioner FREAS. I don't think they would. Those provisions would stay as they are.

The change in the first part that we are suggesting would be to make the provisions apply intramode as well as intermode. And the last sentence is simply intended as a clear statement that we do not intend to hold an umbrella over any form of transportation.

Senator LAUSCHE. Repeat that, please.
Commissioner FREAS. In a proceeding-
Senator LAUSCHE. No, read what you said.
Commissioner FREAS. I am sorry.

Senator LAUSCHE. The last part of what is identified is intended as a declaration to the effect that you do not want to hold an umbrella over any mode of transportation, is that

Commissioner FREAS. That is right.

Mr. BARTON. Pardon me, too, what did you say about intramode and intermode ?

Commissioner FREAS. I say the change in the first part of the paragraph is to make it applicable intramode as well as intermode. You will recall that when the three shall-nots first came out, they only applied intermode. The suggestion was made that the same thing should apply intramode.

We have taken the position that there should be equality between all forms of transportation and if the language is to be used, we would suggest that it would not be limited between carriers of different modes.

Mr. BARTON. Your language here in 3 would do what you propose, is that right?

Commissioner FREAS. This would make it applicable intramode as well as intermode.

Senator LAUSCHE. Mr. Freas, in the preparation of this language, were any of the representatives of any of the modes of transportation consulted ?

Commissioner FREAS. No, they were not.

Senator LAUSCHE. This is the product of the members of the Commission?

Commissioner FREAs. That is right, but I do want to emphasize it is not something that we are urging, it is something we are suggesting as an alternative if the change is to be made. Senator LAUSCHE. And as far as you know, none of the representatives of any of the different modes of transportation were familiar with the fact that this language was being assembled? Commissioner FREAs. I think I can say without any hesitation at all that until they saw it here in this room today that no members of any transportation organization knew anything about it. enator LAUSCHE. That would then mean that what reaction will be is unknown to you? Commissioner FREAs. That is right. Senator LAUSCHE. And they might, or might not subscribe to it? Commissioner FREAs. That is right. Senator LAUSCHE. The question put by Senator Smathers, that in your belief the arguments made against the committee's recommendation would not be applicable to the language which you recommended, do you answer that in the affirmative? Commissioner FREAs. Not to the same extent, but I think the argument would still—could still be made here that no change was necessary, and whenever you incorporate new language there is always room for some contention of uncertainty. We have tried to avoid that here, but that contention might appear. Senator LAUSCHE. Now, based upon your experience as a member of the Commission, it is your belief that the language which you have suggested reflects and carries into effect the declaration of policy as set forth in the 1935 act and the 1940 act, holding that there shall be no deprivation to any mode of transportation of the benefits residing in their inherent advantage; is that correct? Commissioner FREAs. Yes. I think this language would be entirely consistent with the congressional declaration of policy. Senator LAUSCHE. And that is, it has been the purpose of the Commission to give to each mode of transportation the full benefit of its inherent advantages? Commissioner FREAs. That is right. Senator LAUSCHE. And this language would implement that declaration of policy? Commissioner FREAs. I hesitate a little to answer that in the affirmative. I don’t know that it would actually implement it. I don’t believe any implementing is necessary beyond the giving us the necessary information in the course of the proceedings. But this language. would be entirely consistent with that. Would confirm it. Senator SMATHERs. Mr. Chairman; this, of course, would be on the part of you people an effort, also, to eliminate any destructive and unfair competitive practices, not only as between modes of transportajo, but also between carriers within the same mode of transportation? Commissioner FREAs. That is right. I pointed out in my previous testimony, Mr. Chairman, that of the rail suspensions that we had in 1947, I believe it was, 19 percent of them were suspensions at the request of other rail carriers. Senator SMATHERs. Do you think that the let's take the motor carrier system for the moment; do you think they would like to be in

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