identical in its terms to the precent bill, S. 378. And after full consideration of that bill, your committee reported an amended bill which did not provide for reparations on shipments that moved in the past, but which provided a Federal statute of limitations on suits for overcharges and on corresponding suits by carriers for undercharges. Senator SMATHERS. What happened to that bill?

Mr. MORROW. The bill was enacted in this revised form.

It created the two sections which this current bill would amend. In other words, this bill picks up the parts of the prior bill that were dropped out by this committee. It adds the provision for the award of damages by the Commission or the courts on shipments that moved in the past.

I am going to try to

Senator SMATHERS. Let me ask you a question.
Mr. MORROW. Sure.

Senator SMATHERS. I am not quite clear on it.

The law now does not provide any damages, you say, if there is an overcharge, but just merely provides-what is the present law? I am not clear on that.

Mr. MORROW. Under the present law there is a remedy for both damages and overcharges, but that remedy-I mean the damages must be awarded by a court.

I am going to deal a little more specifically with that as I take up the three points I want to try to make.

There is a remedy.

Senator SMATHERS. But it has to go to court?

Mr. MORROW. It has to go to court, unless there is voluntary settlement.

Now, if the Interstate Commerce Commission makes a finding that there has been an overcharge, the carrier can refund, and he generally would, I think. I don't know

Senator SMATHERS. Well, let me ask you this, now: This present bill we are considering now, does it propose that the Interstate Commerce Commission can make the award rather than carry it into court? Mr. MORROW. The Interstate Commerce Commission can make the award, but it could only be enforced in court under the seventh amendment of the Constitution. You couldn't take that right away.

Senator SMATHERS. What does this bill propose that is different from what we now have? That is what I am trying to determine.

Mr. MORROW. It just adds some cumbersome machinery that we think will cause litigation.

Senator SMATHERS. You say it is cumbersome machinery. What is it?

Mr. MORROW. It is going to be a little difficult for me to-I think I had better deal with that point right now.

I was going to come to that.

The machinery that prevails right now-you would want that first, wouldn't you?

Senator SMATHERS. Well, you said you have an objection to it.
Mr. MORROW. Yes.

Senator SMATHERS. I am trying to find out what it is.

Mr. MORROW. Just what it is?

Senator SMATHERS. That is right.

Senator PURTELL. Isn't it a fact that what this proposes to do is to bring the freight forwarders and the motor carriers into conformity with the present law as it pertains to railroads?

Mr. MORROW. If you look solely

Senator PURTELL. And water carriers?

Mr. MORROW. If you look solely at the standards, that is correct. Senator PURTELL. Yes.

Mr. MORROW. As I have set out here, however, the effect would be quite different in our case than it is today in connection with the railroads.

Senator PURTELL. Well, the effect might be the same, but the purpose of the act, as I see it, the proposed legislation, is to bring them all in conformity; is that correct?

Mr. MORROW. The Commission says that they want uniformity.
Senator PURTELL. Yes.

Mr. MORROW. And that is the only reason.

Senator PURTELL. That is right.

Mr. MORROW. Although the Commission, for many, many years, pointed to bad practices and difficulties of administration of reparations provisions. Now, the way a reparations statute works, that is, in making the award of monetary damages, a statutory matter rather than a matter for the courts to decide, is this:

The shipper brings a complaint and says that "This rate charged me on my past shipments was unreasonable."

The Commission makes a finding of unreasonableness and without any showing of damage or any showing that the person who brings the complaint suffered any monetary loss at all, reparations will be awarded in the full amount of the difference between the rate the shipper pays and the rate which the Commission later finds unreasonable. In other words, it is simply the amount of the difference. No shipper has to show he was damaged. In fact, commission merchants, people who have passed on the charges which they paid to their principles, can recover. And that is a thing that the Commission for many years represented to Congress was very bad.

It said to Congress-I and have quotations from many reports, covering a long period of years, complaining about the fact that the ease of filing complaints-the liberal interpretation of the courts in awarding damages where no monetary loss was shown, encouraged many agencies to spring up over the country who would simply go to the shippers of the country and say, "Let me have your paid freight bills. I will see if I can recover-I will give you you 50 percent if I can collect."

Some of them would buy the freight bills outright.

But the Commission told Congress, as late as 1930, that this machinery was almost breaking its administrative processes; that it was getting so heavy; these claims that were being filed on that kind of a basis, that they wanted some relief.

But that was not the real basis of the Commission's complaint or of our objection to this type of a statutory provision for the award of reparations.

The real basis is that the courts adopt the so-called first-step doctrine. Anybody can come in and complain, and once he has upset a rate or got the Commission to find that the rate was not a reasonable rate in the past for the 2-year statutory period, anybody who used

the rate by filing a claim can simply get the full measure of the difference between the two rates.

That means that many people are enriched at the expense of the carriers. You and I, for example, have probably absorbed any rate that has applied in the past.

Another reason-I am completely away from my text now, but I think I can probably get this issue before you in this way.

We say not only that the shipper has this complete remedy in court today where the courts apply the kind of rules that we think ought to be applied. If a man has been injured, he can go to court and he can get recompensed.

Secondly, the shipper has very little excuse for using an unreasonable rate.

Freight Forwarders, like all other carriers, have to file every rate that they assess on 30 days' notice.

Now, any shipper can protest at that point and say, "This is not reasonable," and the Commission will suspend, if there is any ground for suspension, and will make a determination, with the burden of proof on the forwarder to show it is just and reasonable.

Senator SMATHERS. Do I understand that you are arguing that if we pass this bill, No. 378, that it would in effect bog down the Commission in certain of its activities and that thereby it should not be adopted?

Mr. MORROW. That is not my full argument. I do think it would create that kind of machinery.

Now, I call your attention

Senator SMATHERS. All right.

Mr. MORROW. Excuse me.

Senator SMATHERS. Just stay on that for just a minute.

Mr. MORROW. Yes.

Senator SMATHERS. The fact that the ICC itself comes up here and might be for this-do you think you are in a better position to know than they are as to what they can handle and what they can't handle? Mr. MORROW. No, sir; I do not maintain that.

Senator SMATHERS. So if we sit here as people who are trying to make up our minds as to what to do on the case of whether or not they could handle it, should we follow your suggestion or do you think we would be better advised to follow his?

Mr. MORROW. I just hope you would give some weight to my point, the point I am trying to make.

Senator SMATHERS. You will admit that they are in a better position to know what they can handle than you are.

Mr. MORROW. Oh, yes; entirely so.

Senator SMATHERS. All right.

Now, the other objection-we are trying to get this. This other objection that you have, as I understand it, is-anyway, I don't quite understand the other objection. But is it not a fact that what this bill seeks to do is put you people on the same basis which they now have with respect to the motor carriers?

Mr. MORROW. No, sir.

Senator SMATHERS. I mean with respect to the railroads.

Mr. MORROW. The railroads, yes, sir. I would like to talk to that point a minute, if I may, right now.

Senator SMATHERS. That is what I have been trying to get you to do. Right on that point. Just talk about that.

Mr. MORROW. Well, it would apply the same standards. That is, the language of this bill corresponds to sections 8, 9, and 13 of part 1; but in 1932

Senator LAUSCHE. 8, 9, and 16, isn't it?

Mr. MORROW. 8, 9, and 16. Did I say 13?

Senator LAUSCHE. Yes.

Mr. MORROW. It is 8, 9, and 16; I am sorry. In 1932 the Supreme Court in what we refer to as the Arizona Grocery case, which I have cited in my paper, held that the Commission may not award reparations or damages in connection with rates which the Commission itself has prescribed.

Now that very definitely limited the area as to railroad rates. Over a period of years the Commission has prescribed the big majority of the railroad rates.

Now, at that point, the Commission stopped making recommendations to Congress for the repeal of the reparations provisions. It always up to that point had been in favor of repeal. It didn't like the way it worked.

But in our case, there have been no prescribed rates. The Commission hasn't prescribed our rates. So that our whole rate structure, which is comparatively new and has been in effect only since 1942, would be subject to these attacks, and going back historically we can see what happened in the railroad field when this was a very serious problem and many rates were upset. The carriers exercise their best judgment. There are no fixed standards of reasonableness for rates. They exercise the best judgment that they can to establish a reasonable rate in the first place; and if they fail to do that and the Commission comes along later and says "By our standards you failed to do it," it would open up possibly a large segment of the forwarder rate structure to that kind of attack.

Now, it would create hardship if that should occur. I am guessing as to what would occur there. But if it did occur, the freight forwarding industry operates on probably the thinnest margin of any of the carriers. It fixes its rates in the first instance based on its costs, which are very largely the cost of transportation of the underlying carriers; and traditionally over the 17-year period since regulation, the forwarders realize, after they have paid all their expenses and taxes, 1 cent on the dollar.

They have no reserves built up to withstand that kind of reparations suits.

Senator SMATHERS. I think you have answered my point.

Mr. MORROW. Thank you.

Senator PURTELL. Just one question I wanted to ask you, because you spoke about the practice of going in and buying up freight bills for claims or on a percentage basis. Actually most of those claims arise, however, because of a clerical-that is, the agent of a carrier's error in the proper classification of the proper rate, isn't that right? It isn't a question of the rates applied. It is simply because an agent of the carrier, the rate clerk, has applied the wrong rate?

Isn't that why most of those claims arise?

Mr. MORROW. That is where all of the so-called-I think a great majority of the so-called overcharge claims arise.

Senator PURTELL. Yes.

Mr. MORROW. But I am talking now of another type, the reparations type, with the allegation that the rate was unreasonable. Senator PURTELL. To begin with.

Mr. MORROW. That is right.

Senator PURTELL. I see.

Mr. MORROW. As I said in the beginning, we are not very much concerned about the overcharge problem because it is a an error in most cases.

Senator PURTELL. Yes.

Mr. MORROW. And the carrier is happy to make the refund if the Commission looks at the situation and determines that there has been a mistake.

I think I have covered, Mr. Chairman, all the points, maybe in a rambling way, but

Senator SMATHERS. I think you have done well. You have answered the question that I had in my mind.

Senator Lausche, do you have any questions?

Senator LAUSCHE. Well, is your opposition to this proposal rooted in the fact that it is trying to apply to you a uniform rule as applied the same rule that is applied to railroads, when in truth the conditions of your operations are different than the conditions of the railroads' operations?

Mr. MORROW. Yes, sir, plus the fact

Senator LAUSCHE. That is the principal reason of your opposition. Mr. MORROW. Yes, sir.

Senator LAUSCHE. Now you mentioned the difficulties that are created through scavengers moving about and buying claims. Isn't that applicable to railroads just as well as yourself?

Mr. MORROW. It was, but I think it has been very limited since the Arizona Grocery decision in 1932, which limited the area in which the Commission can prescribe the Commission can award reparations to only the railroad rates that have not been prescribed by the Commission. So that is a very limited area now. I have looked at some of the Commission's annual reports as to the number of formal complaints being filed. They are running in the neighborhood-between two and three hundred formal complaints are being filed against railroads today. It was in the thousands that were filed each year up until the time of the Arizona Grocery case doctrine.

And in at least half a dozen reports the Commission said:

This has taken so much of our time, we haven't much time to devote to the real business of administering the act.

Senator LAUSCHE. You can probably help me substantially if you will just enumerate 1, 2, and 3, and briefly your reasons why you feel this should not apply to the freight forwarders.

Mr. MORROW. All right, sir. I would like to make them in three

steps.

First, I say there is no real need or justification for it. If you heard Commissioner Clarke-yesterday he said

While no important need has been shown for such a provision in part 4, we believe that it is desirable to have all four parts of the act uniform in this respect.

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