INVESTIGATION AND SUSPENSION DOCKET No. M-1722 DAIRY PRODUCTS FROM THE NORTHWEST TO TRUNK LINE AND NEW ENGLAND TERRITORIES

Submitted March 27, 1942. Decided July 17, 1943

Proposed motor common carrier commodity rates on dairy products, other than cheese, in truckloads, which generally represent reductions, from points in North Dakota, South Dakota, and northern Minnesota to points in central, trunk-line, and New England territories, and a reduced classificationexception rating on cheese, in truckloads, from points in southeastern South Dakota, southern Minnesota, northern Wisconsin, and the Upper Peninsula of Michigan to points in trunk-line and New England territories, found not shown to be just and reasonable. Suspended schedules ordered canceled, and proceeding discontinued.

Harry M. Slater and P. M. Greenberg for respondents.

T. J. Slattery, Conrad Olson, A. H. Lossow, L. D. Veltum, Frank W. Sullivan, F. C. Culkin, George K. Reid, and O. H. Timm for protestants.

W. H. Ott and W. M. Tuohy for others.

REPORT OF THE COMMISSION

DIVISION 2, COMMISSIONERS ATTCHISON, SPLAWN, AND ALLDREDGE BY DIVISION 2:

Exceptions to the order recommended by the examiner were filed by respondents, and protestant rail carriers replied.

By schedules filed to become effective July 16, 1941, approximately 400 respondent motor common carriers, parties to tariff MF-I. C. C. No. 55 of Central States Motor Freight Bureau, Inc., agent, propose to establish commodity rates, minimum 20,000 pounds, on dairy products, other than cheese,1 hereinafter called dairy products, which generally represent reductions, from points in North Dakota, South Dakota, and northern Minnesota to points in central, trunk-line, and New England territories, and a reduced classification exception rating on cheese, minimum 20,000 pounds, from points in southeastern South Dakota, southern Minnesota, northern Wisconsin, and the Upper Peninsula of Michigan to points in trunk-line and New England territories. Upon protest of western trunk-line rail carriers, operation of

1 This commodity description embraces butter, n o. 1. b. n.; frozen butter; butter grease; eggs, in standard cases; frozen or desiccated eggs; oleomargarine; dressed poultry; and rabbits, other than live.

the schedules was suspended until February 16, 1942, and their effective date has been voluntarily postponed indefinitely by respondents. The protestants and the Great Lakes Transit Corporation, a water carrier, appeared in opposition to the proposal, and the National Poultry, Butter & Egg Association and the Kraft Cheese Company were represented at the hearing. Rates will be stated in amounts per 100 pounds, and do not include the general increases of March 1942.

The present rates on the dairy products and cheese, with minor exceptions, are based on a classification exception rating of column 50-K (approximately 48 percent of first class). On the former, the commodity rates proposed are the same as the all-rail rates to central territory and uniformly 5 cents higher to trunk-line and New England territories. These all-rail rates range from about 42 to 49 percent of first class. On the cheese, a reduced exception rating of column 45-S (approximately 45 percent of first class) is proposed, which is the same rating, and produces the same rates, as that applicable on allrail traffic. The proposed rates are purported to meet rail competition during the so-called winter seasons extending from December to April when navigation on the Great Lakes is closed. They are substantially higher than the lake-rail and rail-lake-rail rates. The bulk of this traffic, except eggs, moves in connection with the lake carriers during the season of navigation, and the respondents concede their inability to compete with the lake-rail rates. A large proportion of the lakerail traffic, however, is transported by motor carrier to Duluth, Minn., and Superior, Wis. This freight to the lake ports and to the destination territory is particularly attractive, as it moves east-bound in large volume, and would tend to balance the respondents' preponderant westbound movements.

Shipments by motor carrier from origins west of Minneapolis and St. Paul, Minn., hereinafter called the Twin Cities, to the destination territories would involve a three-line haul over the lines of an originating carrier to the Twin Cities, an intermediate carrier to Chicago, Ill., and a destination carrier beyond; or on movements to New York, N. Y., in connection with certain carriers, a two-line haul to and beyond the Twin Cities, respectively. Shipments from origins east of the Twin Cities would generally involve a two-line haul, except when destined to New York or intermediate points and transported by a carrier with local service to these points. The vast majority of shipments, however, would move in connection with two or more lines and would require one or more transfers en route.

Typical destinations in central territory are Indianapolis, Ind., Columbus, Ohio, and Pittsburgh, Pa.; in trunk-line territory, Baltimore, Md., Philadelphia, Pa., and New York; and in New England, Boston, Mass. The present and proposed rates, the distances, and the

truck-mile revenues under the proposed rates on dairy products, based on minimum loads of 20,000 pounds from 3 representative origins to these typical destinations, are shown in the appendix. The truckmile revenues under these proposed rates from 24 representative origins would range from 20.8 to 25.3 cents to Indianapolis, 19.5 to 22.6 cents to Columbus, 18.1 to 20.2 cents to Pittsburgh, 18.9 to 20.3 cents to Baltimore, 18.2 to 19.8 cents to Philadelphia, 17.1 to 18.7 cents to New York, and 16.1 to 17.7 cents to Boston.

The proposed rates include pick-up, delivery, loading, unloading, and, as the case may be, refrigeration or heater services, whereas the all-rail rates do not include any of these services. The respondents state that, as the traffic would move over their lines during the winter season only, the shipments would not ordinarily require refrigeration. The proposed rates are not restricted to a seasonal operation. Butter and eggs move regularly throughout the year, and dressed poultry moves largely during the winter season. Assuming a winter movement only, eggs would require heater service; and dressed poultry, refrigeration. No substantial evidence was introduced with respect to the costs of these services.

Brady Transfer and Storage Company, a respondent, transports general commodities, including dairy products and cheese, from the Twin Cities and Chicago to the Atlantic seaboard. It operates approximately 300 tractor-trailer units exclusive of pick-up and delivery equipment. Its main operation is from Iowa points to the Atlantic seaboard, its general offices are at Fort Dodge, Iowa, and it maintains terminals at various points in Iowa, and at Omaha, Nebr., St. Paul, Chicago, Boston, New York, and Philadelphia. A witness for this company introduced in evidence an exhibit containing a statement that during 1940 it operated 11,721,683 miles, and its "operating revenues" were 17.79 cents a mile, and its "total carrier expenses" 17.55 cents a mile. This carrier transports truckload and less-than-truckload traffic, and, ordinarily, the cost of the former would be somewhat lower and the cost of the latter somewhat higher than the total average cost. No information is given which would enable us to relate this carrier's costs of transporting the dairy products and cheese to its total average cost, or average truckload cost. In view of the protective services necessary on this traffic, it would seem that the transportation costs would be relatively high.

The protestants compare the revenues under the proposed rates on dairy products with the truck-mile expenses of 19 class I motor carriers computed from the annual reports of such carriers for the year 1940 on file with us. The truck-mile expenses of 13 of these carriers, which operate within the origin territory with eastern terminals at the Twin Cities or Chicago, range from 41.73 to 20.69 cents, and average 29.69

cents.

Of the 6 other carriers, which operate between the East and Chicago, or points west thereof, the truck-mile costs range from 17.55 to 25.15 cents, and average 22.67 cents. Of these, Brady Transfer & Storage Company is the lowest cost operator. These statistics are subject to the same criticism as directed against those of that carrier, but they indicate that its experience is not typical of that of the respondents as a whole.

The protestants urge that the respondents need not maintain exactly the same rates as rail carriers in order to meet their competition, and point to the fact that the proposed rates on dairy products to trunkline and New England territories would be 5 cents higher than the comparable rail rates. Shippers by rail, desiring equivalent service to that included in the proposed rates, would pay additional charges for some of the following services: Refrigeration, heating, loading, unloading, pick-up, or delivery. The rail carriers estimate that these charges would in the aggregate range from 8.75 to 14.6 cents per 100 pounds depending upon the services required.

The normal basis of rates on dairy products, in carloads, over allrail standard routes from the western origins to eastern destinations is 60 percent of first class; and the lake-rail rates are differentially lower. From time to time, the all-rail rates have been reduced to meet motorcarrier competition, and as above mentioned, they now range from about 42 to 49 percent of first class. Lake-rail rates have been contemporaneously reduced in order to preserve the differential relation.2 The dairy-products traffic is very important to protestant rail carriers, and, if the proposed rates are allowed to become effective, they intend to reduce the all-rail rates in an effort to retain it. The lake lines assert that they will thereupon be compelled to reduce their rates in order to preserve their competitive position.

The evidence adduced by the respondents is meager and in substance amounts principally to a claim that the rates must be equal in amount to those maintained over all-rail routes if they are to secure a share of the traffic, but in spite of this claim they are proposing, on dairy products to trunk-line and New England territories, rates which are 5 cents higher than those applicable over all-rail routes. The cost data for only one carrier of the many for whose account the proposed rates would apply leave much to be desired in determining whether those rates are reasonably compensatory. The burden of proof is upon respondents to show that the proposed rates are just and reasonable. They have not sustained this burden.

For a history of these rates see Dairy Products from W. T. L. to Official Territory, 214 I. C. C. 727 and 222 I. C. C. 207.

We find that the proposed rates and charges have not been shown to be just and reasonable. An order will be entered requiring cancelation of the suspended schedules and discontinuing the proceeding.

COMMISSIONER SPLAWN dissents.

APPENDIX

Present and proposed rates on dairy products, in cents per 100 pounds

From Watertown, S. Dak. From Grand Forks, N. Dak. From Williston, N. Dak.