I have a rather short statement here, and I do not plan to read all of it since you have heard a great deal of testimony on some of these matters already.

Senator LAUSCHE. Senator Purtell, do we have an understanding that these papers will all be included in the record as if read?

Senator PURTELL. Yes. It is customary, Senator, to simply announce it, but it is taken for granted if it isn't, that your complete testimony will become part of the record.

Senator LAUSCHE. Proceed, sir.

Mr. ROTHSCHILD. Mr. Chairman, I am appearing here on behalf of the Department of Commerce to testify on a series of proposals which would amend certain ratemaking provisions of the Interstate Commerce Act and to comment on the railroad passenger service deficit. With one exception, these matters involve several of the provisions of the Interstate Commerce Act that are proposed to be modifide by S. 1457.

As you know, S. 1457 was submitted to the Congress by the Department of Commerce as a proposal to revise Federal transportation regulatory policy in accordance with the recommendations of the Presidential Advisory Committee on Transport Policy and Organization.

As stated in its letters of transmittal, the Department intends that the proposed bill should be considered by the Congress primarily as a study document providing a means of revising Federal transportation regulatory policy in the public interest so as to harmonize it with prevailing economic conditions in the transportation industry.

Our approach to the matters here under consideration and other legislative proposals for amending the Interstate Commerce Act is somewhat similar to the extent that they bear upon the recommendations of the Advisory Committee. We have appraised them as a variety of alternate proposals directed toward some of the objectives of the Advisory Committee.

First, I would like to comment briefly on S. 378 which deals with a subject that was not discussed in the report of the Presidential Advisory Committee. S. 378 would amend part II and part IV of the Interstate Commerce Act to provide civil liability for violations of the act by motor common carriers and freight forwarders.

It would also vest the Interstate Commerce Commission with authority to render monetary awards in favor of shippers injured by such violations. Neither part II nor part IV of the act now contain any provisions for the recovery of unreasonable or otherwise unlawful rates exacted by such carriers comparable to the reparation provisions applicable to railroad and other carriers subject to part I and water common carriers subject to part III of the act.

As the law now stands, if a shipper is injured as a result of violations of the act by motor common carriers or freight forwarders his only recourse is to seek remedial damages through court action. Where the alleged violation is the exaction of established but unreasonably excessive rates, the shipper is required to seek a determination by the Commission of the lawfulness of the rate in question, either before or at some time during the court proceedings. Under the Interstate Commerce Act only the Commission has the authority to make such a determination.

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The time and expense involved in pursuing this remedy discourages its use. In the opinion of the Department of Commerce, shippers by motor common carrier and freight forwarder are entitled to the same relatively simple and less costly remedy already provided for railroad and water shippers.

We, therefore, endorse the principle of S. 378, but as to the specific adequacy of its provisions to accomplish the desired objectives, we would defer to the views of the Interstate Commerce Commission. The other matters here under consideration parallel certain of the recommendations of the Presidential Advisory Committee.

S. 937 would amend the long-and-short-haul clause of the Interstate Commerce Act by authorizing carriers operating over circuitous routes to meet competitive charges of other carriers of the same mode operating over more direct routes without seeking special permission from the Commission as is now required.

Rates established under the proposed amendment would be subject to the standards of lawfulness set forth in other provisions of part I and part III of the act. It is provided, however, that such rates could not be considered as evidence of the compensatory character of the rates involved in other proceedings. The aggregate-of-intermediates clause would not be affected by the proposal.

The purpose of the bill is to eliminate troublesome procedures in the publication of certain rates involving the fourth section. The Department of Commerce is of the opinion that the cumbersome publication requirements associated with circuitous routing should be removed and that legislation of this character is a step in the right direction.

We do not believe, however, that S. 937 goes far enough. On the other hand, the amendment proposed in the Department's bill, S. 1457, is a sensible middle ground between outright repeal of the fourth section and the incomplete procedural changes proposed in S. 937.

The Advisory Committee's recommendation, as contained in S. 1457, retains the substantive prohibitions of the long-and-short-haul clause and the aggregate-of-intermediates clause. Carriers could, however, establish departure rates without prior approval of the Commission in order to meet actual competition, provided the rates so established were not less than just and reasonable minimum charges. This principle will apply whether or not the competing carriers. were of the same mode. There is little difference in principle whether or not these situations are created by competition between like or unlike carriers. In either instance the special case of competition already exists and the only question is whether a carrier will be able to participate in the traffic without the necessity of having prior approval of its rates from the Commission.

Shippers at intermediate points would have ample protection from unjust discrimination. For one thing, the growth in competitive services has relieved shippers in most instances from exclusive reliance on a single carrier.

Contrary to the situation existing when the long-and-short-haul clause was being developed, today's competition tends to curb the development of unjust discrimination. Should unjust discrimination develop, the undiminished powers of the Commission under section 3 of the act still remain as an effective force to deal with it.

These

powerful deterrents coupled with the continued basic prohibitions of section 4 will be adequate to provide protection for shippers.

The Department also does not favor inclusion of the proviso in S. 937 prohibiting the consideration of rates established over circuitous routes as evidence of the compensatory character of rates involved in other proceedings. All rates, when published, are presumed to be reasonable and compensatory until challenged.

Any valid rates, including those for circuitous routes, should have evidential value in proceedings before the Commission equal to that accorded to other valid, unchallenged rates. Moreover, knowledge that such rates might be used as evidence in other proceedings would serve as an additional deterrent to the publishing of rates that were not reasonably compensatory.

To summarize, the problems associated with the fourth section of the act require more comprehensive amendment than is proposed in S. 937 and these comprehensive changes are provided in the amendments proposed in the Department's bill.

Senator LAUSCHE. That is S. 1457.

Mr. ROTHSCHILD. Yes, sir.

Senator LAUSCHE. All right, proceed.

Mr. ROTHSCHILD. S. 943 would amend part II of the Interstate Commerce Act so as to require contract carriers by motor vehicle to file and publish their actual rates and charges with the Interstate Commerce Commission.

Senator SMATHERS. May I interrupt just a minute?

Senator LAUSCHE. All right. You take the stand.

Senator SMATHERS. You stay right there, please. I think it would be helpful-Mr. Reporter, you could put this off the record. (Further statements off the record.)

Senator SMATHERS. I think it might be well, if he has other recommendations, which I know he will have with respect to other bills, if we can make an analysis each time. Then we could look at these bills and see the whole argument, or the differences which have been pointed up. We could see it all at one time. Would you do that? Mr. BARTON. Yes.

Senator SMATHERS. Excuse me.

Mr. ROTHSCHILD. Senator Smathers, we prepared for the use of the House committee in the last session a document which points out in columnar fashion the 'differences between the existing bill and the proposed Department bill. And if that would be of any benefit to your staff in preparing what you have just asked for, we would be happy to see that they have copies of it.

Senator SMATHERS. All right. Mr. Barton will get hold of that. All right, go right ahead. Excuse me.

Mr. ROTHSCHILD. S. 943 would amend part II of the Interstate Commerce Act so as to require contract carriers by motor vehicle to file and publish their actual rates and charges with the Interstate Commerce Commission. This proposed amendment is identical in purpose with recommendation of the Advisory Committee that contract carriers by motor vehicle be required to publish actual rates or, in the alternative, their contracts.

It was the view of the Advisory Committee that such an amendment was necessary to enable common carriers to compete more effectively with contract carriers. Under the present law, because contract car

riers are only required to file their minimum rates, the common carrier has no knowledge of what his contract carrier competitor is actually charging. He is, therefore, at a distinct disadvantage in attempting to compete for the business which both of them are seeking to capture. The Motor Carrier Act of 1935 originally required contract carriers to file only minimum rates. However, the act was amended by the Transportation Act of 1940 so as to require that contract carriers file minimum rates "actually maintained and charged." While this amendment was added in order to enable common carriers to meet the difficulties which they faced, the result was not achieved. The Interstate Commerce Commission has pointed out in various decisions that the minimum rates filed by contract carriers are more in the nature of paper rates and they are not representative of rates that have been actually charged to the shippers.

All that the Commission and the courts have required of the contract carrier filing a minimum rate is that such rate be actually maintained and charged by the carrier for the traffic of at least one shipper.

The carrier under such circumstances is free to charge higher rates to any other or additional shippers among which it may pick or choose as it pleases. The true character of the rates actually charged by contract carriers is best described by the Commission itself. Speaking of a contract carrier's minimum rate, the Commission said, in Petroleum Products, Wyoming Points to Missoula, Montana (32 M. C. C. 53), that:

A contract carrier's minimum rates, unlike common carrier rates, do not represent a stated price for which a shipper can demand service. The minimum rates of contract carriers are, in fact, not rates at all in the common carrier sense of the term. They are simply a floor for the charges actually to be made.

Obviously, if the competitive opportunity of common and contract carriers is to be placed on a more realistic basis, contract carriers' actual charges to shippers should be made public.

S. 943 does not provide the alternative for the carriers to publish their actual contract or contracts. The Department is of the opinion that this would be a desirable addition to the bill which otherwise parallels the views of the Advisory Committee.

The next part of my statement, Mr. Chairman, has to do with section 22 rates, and as they would be affected by S. 939 and S. 377.

You have heard a good deal of testimony on this subject and I would skip that part of my statement, except to say to you that the Department of Commerce supports the views of the Department of Defense with regard to these two bills.

(The balance of Mr. Rothchild's statement, which was not read, follows:)

S. 939 and S. 377 would amend section 22 of the Interstate Commerce Act-the section which provides for free transportation or reduced rates on Government traffic. S. 939 contains two comprehensive changes each of which I understand may be considered separately. The first change provides for transportation free or at reduced rates for the Government only during time of war or national emergency as declared by the Congress or the President.

The second change would establish absolute finality of section 22 rates once they had been accepted or agreed to by the Government except for actual fraud or deceit, or clerical mistakes. S. 377 would establish the finality of such contracts after 2 years from the acceptance thereof except for fraud, deceit, or clerical mistake.

As this committee may recall, the Presidential Advisory Committee considered the problem of Government transportation rates. The Advisory Commit

tee, while mindful of the fact that the present authority in section 22 may give rise to practices which may not be in the public interest, recognized, however, the peculiarities of governmental procurement practices, the differences between Government transportation and that for the general public, and national security made it necessary to treat Government traffic somewhat differently than commercial traffic.

It therefore recommended continuation of authority for carriers to establish voluntary special Government rates but to subject such rates to all the provisions of the act, including public filing, except suspension and long-and-shorthaul provisions. It also recommended authorization for application of special Government rates retroactively, or on short notice in special instances, and authorization for waiver of filing requirements in cases where national security is involved.

This recommendation was translated by the Department of Commerce in cooperation with the Department of Defense into a legislative amendment by certain sections of S. 1920, 84th Congress. This same proposal, modified in certain respects only for sake of clarity, appears in section 9 of S. 1457, which is pending before this committee. The reasons leading to these provisions have been explained in detail by the Department of Defense in its testimony before this committee.

The Department of Commerce is opposed to the enactment of S. 939 and S. 377. With respect to modification of the authority for special rates for the Government, the Department of Commerce favors the enactment of the amendments contained in S. 1457 and we are in full accord with the position of the Department of Defense.

The Department would also support amendments to section 16 (3) of the act which would subject the Government to the same limitations on retroactive review of its transportation charges as commercial shippers.

The prolonged period of unprofitable passenger train operations constitutes one of the most serious problems confronting the railroad industry today. Class I railroads have incurred a deficit in their passenger train operations continuously for almost a quarter of a century, excepting the World War II years, 1942 through 1945. The deficit computed according to the accounting rules of the Interstate Commerce Commission is alarming in size and shows no sign of abatement. Between 1936 and 1940, it averaged approximately $250 million annually; from 1946 to 1950 it rose to an average of $460 million annually; and since 1951 through 1955 it has averaged over $670 million annually. While official figures are not yet available for the year 1956, an industry estimate places the deficit for last year at $695.5 million.

This tremendous and continuing loss not only adversely affects the financial position of the railroad industry but must be borne by the users of railroad freight services in the form of higher charges. Ultimately, of course, the general public foots this loss.

Ordinarily, a private enterprise experiencing such losses over an extended period and seeing no prospect of a return to profitable operations, would in prudence seek to abandon the operation even with the loss of capital investment. Common carrier transportation enterprises faced with this problem, however, do not have such freedom. As certificated carriers they have an obligation to continue to maintain satisfactory service until authorized by appropriate authority to discontinue or curtail services. While the Interstate Commerce Commission may authorize the abandonment of line, authority to curtail or discontinue passenger service, if it exists at all, is vested with the State commissions.

The Advisory Committee in considering passenger deficit problems found that railroads have experienced difficulties in obtaining authority from State commissions for the discontinuance or curtailment of unprofitable passenger service. Quite frequently the State commissions do not even have the authority to permit the railroad to discontinue or curtail the service. Even in those instances where authority existed, State commissions have unduly delayed or have been reluctant to permit discontinuance or curtailment because of opposition from local interests.

In order to provide some measure of relief for the railroad industry in securing the necessary authority to discontinue or curtail unprofitable facilities or services for which there is no longer sufficient public need to justify the resulting operating losses, the Advisory Committee recommended vesting the Interstate Commerce Commission with authority to order the discontinuance or curtailment of services or facilities in intrastate commerce.