Appendix B Statement of Procedures Railroad 1955 Data - Column 2. The revenue and expense data are from the I.C.C.'s Statement No. M-100 for the twelve months ended December 31, 1955. The distribution of Account 101, Freight Revenue (Line 9), among categories of traffic was based on the Freight Commodity Statistics for the first nine months of 1955. The competitive portion of Manufactures (Line 1) was taken at 75% of the total of the Manufactures group. Federal income taxes (Line 17) were adjusted upward and net operating income downward by 187 million dollars to eliminate the effect of income tax deferrals. This adjustment is based on the testimony of the statistician of the American Association of Railroads in Ex Parte 196. Motor Carrier 1955 Data - Column 3. The revenue and expense data are from "Financial and Operating Statistics," published by the Research Department of the American Trucking Associations, Inc. The original sources of the data are the quarterly reports filed with the I.C.C. by Class I Motor Carriers of Property. This source was used rather than the I.C.C.'s Q-800 series to secure broader coverage since the Q-800 report excludes Class I carriers with gross annual revenues under $1,000,000. Rail Out-of-Pocket Cost of Handling Motor Carrier Tonnage (a) Motor carrier tonnage - Source same as Column 3 - Millions. Note: Separation of tonnage of common carriers of general freight between LTL and TL and ratios of tons originated to tons carried based on industry experience in the year 1954. (b) Out-of-pocket unit cost of handling motor carrier truckload tonnage. The territorial out-of-pocket costs per ton excluding any return on value for a load of 15 tons in box cars and a short line haul of 200 miles (or about 230 operated miles) from Statement No. 2-55 of the Bureau of Accounts, Cost Finding and Valuation of the Interstate Commerce Commission were weighted on the basis of the hundredweight-miles in each territory excluding gondola and hopper traffic. Territorial costs per hundredweight - Pages 18, 28, 38 and 48. Ratio of out-of-pocket cost excluding return on value to out-of-pocket cost including return on value - Page 4. Hundredweight-miles excluding gondola and hopper traffic from underlying work papers of I.C.C.'s Cost Section. Loss and damage per ton Page 92, line 9. Note: Average of 15 tons on shipment and average haul of 230 miles reflect motor carrier experience in the year 1954. (c) Out-of-pocket unit cost, excluding return on value, of handling motor carrier less truckload tonnage. Source: Work papers underlying Statement No. 2-55. The data for the four territories, adjusted to the January 1, 1955 level, were combined and unit costs developed as shown below: 1. Out-of-pocket costs unrelated to distance $212,544,347 320,235,060 Appendix C "FAIR SHARE" OF COMPETITIVE TRAFFIC AS TEST OF RATE REASONABLENESS Clyde B. Aitchison The principal complaint made against the Interstate Commerce Commission as to its administration of the Interstate Commerce Act, to support the present movement for fundamental changes in that Act, is as to its supposed policy in the regulation of intercarrier competitive rates. Upon hearing before a Subcommittee of the House of Representatives September 20, 1955, (printed record, pages 120-121), the Vice President and General Counsel of the Association of American Railroads, Mr. J. Carter Fort, stated: "When competitive rates proposed by the railroads are assailed by either motor carriers or water carriers, and when competitive rates proposed by motor carriers are assailed by railroads, the so-called fair share test, that is to say, the effect of the rates on the competing mode, is regarded by the Commission as of overwhelming importance. This is made clear by the cases themselves." He designated certain decisions of the Commission (Record, p. 121, footnote) in which he says "The test has been applied" in what are termed "innumerable cases", as being "examples of its application in such a way as to restrain railroads in their efforts to compete with regulated and unregulated transportation both by highway and water". He asked the rhetorical question "What is a 'fair share' of the available traffic for any one mode of transportation?" and answered it thus (Record p. 123): "No group of men, however wise they may be, can possibly apportion or allocate traffic among the several forms of transportation on the basis of a fair share for each. There is no statutory standard or guide however nebulous or general by which to determine what is a "fair share". In the very nature of things there is no conceivable standard or guide that could justly and rationally be provided or applied for such a division of traffic." The same general critical contention as to the use of a so-called "fair share" test appeared shortly after in a law review article under the name of the Chairman of the Association of Southeastern Railroads, Mr. Jervis Langdon, Jr. He says: 1/ "The Regulation of Competitive Business Forces: The Obstacle Race in Transportation", Cornell Law Quarterly, vol. xii, No. 1, Fall, 1955, p. 57-92. "First: During the past five years or so, the ICC has repeatedly acted as if under some obligation to see that no form of transportation, particularly the railroads, got more than a fair share of the competitive traffic and to condemn as unfair and destructive any rates, including those shown to be fully compensatory, which promised to attract more than a fair share. It has sought to preserve competition by keeping the competitors happy with fair shares for each. "But what is a fair share? "The ICC has never undertaken a definition, and in the nature of things, it never will. **" Then he blasts the "fair share" test in terms not usually employed in temperate law review articles: "The concept of fair shares would seem to be a pipe-dream." (id., p. 85) Mr. William T. Faricy, President of the Association of American Railroads, in a widely-printed and circulated advertisement, said: "As matters now stand, one of the principal tests applied by the Interstate Commerce Commission in its control over rate competition among the different types of carriers is the concept that the government's power to regulate rates should be used to see that each form of transportation gets what the Commission deems to be its 'fair share' of the available traffic." These statements have been reiterated country-wide, with variations and amplification. That they caused surprise in the circle of those who had authoritative part in making the decisions of the Commission, is an understatement. They led to a tedious and meticulous examination of the thousands of pages of printed decisions of the Commission, to see whether the language employed in its decisions running into the hundreds warranted any such criticisms. I But before stating the results of such search, it would be well to look at the words themselves, to see what opprobrious meaning they carry with them. That they are now considered by responsible railroad executives to have an invidious sense seems strange, when we turn to the "Report of the Committee" appointed by the President September 20, 1938, to "Submit Recommendations Upon the General |