Monopoly Under the Interstate Commerce Act * BY ALAN M. WHITE † A superabundance of transportation facilities and services which has brought active competition into all areas of transportation has reduced the ancient issues of monopoly in transportation to matters of academic or historical discussion. Though these issues can now have but minor influence upon industrial well-being, they are nevertheless kept alive for their political value and their usefulness in advancing the special interests of some group. Thus we see opposition to railroad mergers from labor organizations and municipalities who fear the loss of jobs, from competing railroads who fear loss of traffic to a strengthened competitor. Water carriers and truck lines oppose the use by railroads of highway and water facilities. Airlines oppose collective bidding by the railroads for the movement of Government personnel. Seldom is there any evidence of fear on the part of the shipping or traveling public, founded or unfounded, that merger or collaboration will result in poorer service or higher rates. All the evidence, in fact, indicates that the efforts being made in the direction of extension of cooperation and unified control over larger segments of the transportation machine are for the purpose of reducing costs and improving service and efficiency, not to wield economic power but simply to survive in a highly competitive environment. Even those who are prone to conjure up the spector of the railroad industry as it purportedly was in the days of the trusts must admit that conditions have changed considerably. If we do not like the level of passenger train fares, the state of the equipment, the convenience of the schedule or the attitude of the personnel, we are inclined to jump in our private automobile or take a plane. In fact, our personal convenience results, it is estimated, in 90 percent of our travel taking place in the private automobile. To place the question of monopoly in transportation in proper perspective, it is necessary to examine the purpose and performance of regulation under conditions as they were and as they now are. The economy of the country demands an efficient transportation in which services and costs are so balanced as to consume a minimum of our manpower and material resources. It is accordingly a first principle that the public interest transcends that of any individual supplier or purchaser of transportation. It is also basic American philosophy that all business activities are to be conducted according to free enterprise principles, subject only to such restraints as are deemed necessary to assure equitable treatment of *One of three winners of Honorable Mention in the 1961 Clyde B. Aitchison Essay Contest. These essays are being published according to alphabetical listing of winners. † Mr. White is Assistant to Director, Business Development, REA Express, New York City. He has engaged in rate analysis for many years as a member of the Traffic Departments of the Illinois Central and Pennsylvania, The Railroads Tariff Research Group and the Tariff Executive Association-Eastern Railroads. all segments of the public wherever there may be present conditions of monopoly, partial monopoly, or unduly concentrated economic power. The Interstate Commerce Act was designed to further these principles. As the possibilities for abuse were great, so were the powers granted the Commission. As the only agency of intercity transport between most sections of the country, the railroads at that time possessed a power of economic life or death over much of the private business of the country. At the same time the keenest of intercarrier competition between common points compelled railroads to bid for competitive traffic with all manner of contrivance. This paradox of absolute monopoly as to many segments of the shipping public contrasted with unrestrained competition as to other, could not but help produce extreme examples of favoritism and decidedly antisocial results for the economy as a whole. Fair play was demanded by those shippers or localities who felt they were being prejudiced and regulation was designed to compel the railroads to provide reasonable and nondiscriminatory rates. Serving thousands of communities, hauling thousands of commodities, and offering a variety of services, rail transportation is an extremely complex business and, touching as it does every detail of the business, regulation is equally complex. Stripped of the minutiae, however, the practical way in which regulation achieved its purpose prior to the advent of highway competition, was by requiring the extension of the same treatment to noncompetitive traffic as that accorded under the pressure of interrailroad competition to competitive traffic. Distance formulas and geographical relationships therefore, arose as rough measures of the price to apply according to quantity of transportation furnished and similarities or dissimilarities as between commodities, i.e., transportation characteristics became the rough measure of classification. Competition between common points was relied upon to sustain an acceptable standard of service. The knowledge that rate bargains would have to be extended to all, upon complaint, acted as a powerful restraint to competitive excesses, thus the Commission has seldom had occasion to issue minimum rate orders and the initiative for proposing rate changes could be left with the carriers. Real or fancied differences in service have historically led communities and industries to desire service by more than one railroad. The consolidation plan developed by the Commission following passage of the Transportation Act of 1920, therefore, evidenced a philosophy of seeking maximum inter-railroad competition between large railroad systems. Intermode competition now provides the spur for service excellence and the public's interest in pooling and consolidation has accordingly turned to the anticipation of cost reduction. The regulatory powers granted the Commission are extremely broad. Even where the directions of Congress are relatively specific, wide discretion is granted the Commission to authorize exceptions in the public interest. Congress has always leaned heavily upon its expert regulatory agency for legislative recommendations dealing with interstate commerce and it seems a safe assumption that the continuing will of Congress is really no more specific than that the Commission should regu late as best serves the public interest. Enactment of section 15a (3) in 1958 could well be interpreted as a measure of criticism of the Commission for letting itself become excessively bound by its own precedents and thus failing to adapt to rapidly changing circumstances. It accordingly seems clear that the Commission has adequate power, or could easily secure it from Congress, to deal with any situation involving undue restraint of trade on the part of the carriers it is charged with regulating and that the Commission's duty is to prevent or remedy any such exercise of monopoly power, not according to the conditions of 1878, or 1910, or 1920, but as they stand in 1961. What are the facts concerning monopoly or potentials for traderestraint in transportation in 1961? The situation is quite a contrast from the state of railroad monopoly that caused the creation of the Commission. So far as the shipping public is concerned the threat has vanished with the development of the Federal highway, waterway, airway system. This is not to say that the public is satisfied with the service and rates of common carriers. It is simply that shippers have been handed the alternative of providing their own transportation with little or no capital investment. Rather than feeling at the mercy of the forhire carrier, they look to him only for better or cheaper transportation than they can themselves provide. The efficiency of private transportation and the difficulty common carriers have in matching it is quite evident from their shrinking share of the total intercity movement. The strongest evidence as to the changed situation is the altered character of the Commission's rate work. Rate litigation brought by shippers is confined almost wholly to what the carriers consider unremunerative freight, i.e., commodities of negligible value, high claim potential or light-loading characteristics. As to the great mass of commerce, the shipping public seems to feel convinced that they can secure lower rates through voluntary negotiation under the present state of carrier competition than they could expect to justify in an adversary proceeding before the Commission. Shipper appearances in rate cases are chiefly in support of carrier efforts to justify rates under suspension or investigation. To a minor extent shipper appearances may be for the purpose of obstructing a competitor's rate and in this regard there is an element of shipper trade restraint involved. The major field of Commission activity which involves a monopoly aspect is, however, that of intercarrier or intermode controversy. Here the carriers strive to limit the number of competitors in the field, restrict their operating rights, limit the commodities they are permitted to haul, the types of service they can offer and the rates they may charge. Apart from the questionable wisdom of the regulated carriers' spending time, money and effort in handicapping each other while the common carrier's share of the transportation market continues to shrink, an outright perversion of the original aim of the Act is perpetrated. Control over entry into the transportation business dates only from 1920, it being thought that this would encourage investment by stable companies and thus contribute to efficient and adequate service. The purpose was to enhance the ability of the certificated carriers to fulfill their common carrier obligations not to insure a monopoly situation for the owners of grandfather rights. The deterioration of the common carrier is evidence that the proper objective of entry control has not been attained by onerous restrictions and a very good argument could be made that those limitations on carrier freedom on the contrary have been used to deny the public needed services, to prevent the adoption of improvements in technology, have frozen existing carriers in uneconomic situations, and have reduced the ability of the carriers to adapt quickly to changing transportation requirements. To summarize, changes in economic conditions with no corresponding changes in the Interstate Commerce Act, have transformed the Commission's role from that of protector of the public from carrier monopoly power to one of preserving vested carrier interests. If the Commission cannot liberally construe the present statutory language, and it is questionable if the courts would permit that, it becomes its duty to recommend to Congress the changes that would restore the focus on the general public's interest in adequate efficient common carrier service conducted under free enterprise principles. In this observer's opinion the attempts of self-seeking carriers to turn provisions of the Act designed to further the public interest into instruments of opportunistic advancement by stifling carrier competition constitute the only monopoly question of significant public concern at this time. Common carriers who are fighting a losing battle for existence are hardly in position to gouge a public protected by intensive competition, nor is a Commission empowered to prescribe maximum, minimum and exact rates likely to permit it or any other kind of deleterious action by such completely supervised public utilities. The danger to the public is in the fragmentation of the transportation system into countless uncoordinated petty monopolies, incapable and unwilling to provide a reliable and complete nationwide common carrier service at a cost commensurate with the possibilities of modern technology. The wheel has turned a full cycle and we now have the spectacle of legislation, designed in an era of monopoly to insure the benefits of competition, invoked in an era of competition to achieve the aims of monopoly. Association of Interstate Commerce Commission Practitioners 1961-1962 Committee on Nominations Chairman: John F. Donelan, Pope, Ballard & Loos, 707 Munsey Building, Washington 4, D. C. Members Robert N. Burchmore, Burchmore, Good & Bobinette, 2106 Field Building, Chicago 3, Illinois. Henry E. Foley, 10 Post Office Square, Boston 9, Massachusetts. W. L. Grubbs, 1021 Louisville & Nashville Building, Louisville 1, Kentucky. Richard H. Heilman, Director of Transportation, A. O. Smith Corporation, Milwaukee 1, Wisconsin. Paul H. Johansen, Central Motor Lines, Post Office Box 1057, Charlotte 1, North Carolina. Ernest Porter, Commerce Attorney, Denver and Rio Grande Western Louis A. Schwartz, General Manager, New Orleans Traffic and Tranpor- *At the Annual Meeting in Washington, D. C., April 5-6, 1962, the President, Secretary, and Treasurer, together with Vice Presidents from the odd-numbered districts are to be elected. (Constitution, Article V.) |