27093

INTERSTATE COMMERCE COMMISSION

No. 311041

CANNED GOODS IN OFFICIAL TERRITORY

Submitted August 24, 1954. Decided February 21, 1955

Rail rates, and common and contract motor carrier rates, on canned or preserved foodstuffs, in carloads or truckloads, between points in official territory, found unjust and unreasonable. Minimum reasonable rates prescribed.

Paul V. Miller, Basil Cole, John H. Colgren, Richard T. Wilson, Jr., Charles J. Henry, Jr., and John C. Lyon for respondents in No. 31104.

Clarence D. Todd, Dale C. Dillon, Charles W. Singer, Charles F. Riddle, Edgar Watkins, Joseph V. Hoffman, H. A. Welty, John R. Quillman, Bernard N. Gingerich, Robert A. Sullivan, J. G. Quisenberry, and W. C. Clayton, Jr., for respondents in No. MC-C-1431.

R. J. Mittelbronn, Gene Mayfield, Leslie C. High, Charles Donley, Charles M. Donley, B. M. Angell, C. S. Connolly, Marcus Whiting, E. S. DePass, Thomas F. Brosnan, William H. Ott, Jr., Harry A. Osterhart, Floyd L. Thomas, George O. Tong, John A. Haas, C. B. Roeder, C. S. Decker, R. L. Toolin, W. E. Aebischer, and Harold S. Shertz for interveners.

Charles B. Bowling, Leon Schilt, Charles W. Bucy, Harry Ross, Jr., Carl R. Bullock, and A. J. McDonald for the Secretary of Agriculture, intervener.

BY THE COMMISSION:

REPORT OF THE COMMISSION

Exceptions to the report proposed by the examiner were filed by certain interveners and by various motor-carrier respondents. The rail respondents and other interveners replied. Exceptions and requested findings not discussed in this report nor reflected in our findings or conclusions have been considered and found not justified. These proceedings are investigations into and concerning the reasonableness, and lawfulness otherwise, of the rates and charges, and the rules, regulations, and practices affecting such rates and charges, applicable to the transportation of canned or preserved foodstuffs,3

1 This report embraces also No. MC-C-1431, Canned Goods in Official Territory. Unless otherwise indicated, rates, charges, costs, and differencees therein are stated In cents per 100 pounds. The present and proposed rail rates stated include the 15 percent (maximum 12 cents per 100 pounds) surcharge authorized in Ex Parte No. 175. As named in item 10 of Agent C. W. Boin's tariff I. C. C. No. A-962.

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herein called canned goods, by rail, in carloads, from, to, and between points in official territory, and of the rates and charges maintained by both common and contract carriers by motor vehicle, applicable on the same commodities between the same official-territory points. The rail rates here under investigation are those now prevailing in official territory, minimum weight 36,000 pounds. All rail carriers operating in official territory, parties to the canned-goods tariff under consideration, were made respondents herein. Also named as respondents are all motor common and contract carriers who are known to transport these commodities, numbering some 218 carriers, and 18 tariff-publishing agents who publish rates for numerous common carriers. The Secretary of Agriculture, and the Pan-Atlantic Steamship Corporation intervened.

By schedules filed to become effective on September 26, 1952, the respondent rail carriers sought to establish 2 alternating distance scales of commodity rates on carload shipments of canned goods, 1 subject to a minimum of 36,000 pounds and the other subject to a minimum of 60,000 pounds, from and to points in official territory as named in footnote 4 hereof. The 60,000-pound minimum rates were proposed to be made differentially lower than the 36,000-pound minimum rates by amounts ranging from 1.7 cents for 25 miles to 7.1 cents for 1,150 miles. The operation of the schedules naming the 60,000-pound rates was suspended, and those rates were found not shown to be just and reasonable by division 2 in Canned or Preserved Foodstuffs in Official Territory, 288 I. C. C. 275, decided March 30, 1953. The 36,000pound rates became effective without suspension, but the lawfulness of both sets of rates were made the subject of the investigation in No. 31104. Because of the competitive nature of the canned-goods traffic, an investigation, No. MC-C-1431, was instituted at the same time to determine the lawfulness of both the common and the contract motorcarrier rates on canned goods in official territory. Thus, we have before us in this consolidated proceeding, the questions whether, upon consideration of the evidence, the present rates by rail and by motor on this traffic in official territory are in any respect unlawful, and if so, whether for the future application a minimum level of rates should be prescribed for one or both of the competing forms of transportation. For many years prior to May 30, 1952, the rail carriers maintained in the consolidated classification a carload rating of fifth class (35 percent of first class), minimum 36,000 pounds, on canned goods in

The present and proposed rail rates apply between points in central territory, but not between points in Illinois territory; between points in trunkline territory; between points in central territory (including Illinois territory and extended zone C), on the one hand, and points in trunkline and New England territories, on the other; and between points in trunkline territory, on the one hand, and points in New England territory, on the other.

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official territory. On and after that date, class 35 rating, minimum 36,000 pounds, was provided in the uniform classification. The rail carriers have maintained, since late in 1933, carload exceptions ratings on canned goods from, to, and between most of the points in official territory specifically to meet motor-carrier competition, all subject to a minimum of 36,000 pounds. The original exceptions rating of column 32 (32 percent of the exceptions first-class rates) was successively reduced so that on and after April 10, 1950, an exceptions rating of column 25 (25 percent of the exceptions first-class rates), prevailed throughout official territory. However, the applicability of this exceptions rating had short duration, and, as stated, on September 26, 1952, the carriers established lower distance commodity rates based on a minimum of 36,000 pounds. The rail commodity rates presently applicable consist of 2 separate distance-rate scales, 1 called the intraterritorial scale applying within trunkline territory and within central territory, except Illinois territory, and the other, on a slightly higher basis, called the interterritorial scale, applying between points in trunkline and central territories, including Illinois territory, and between points in those 3 territories, on the one hand, and points in New England territory, on the other. While the 2 scales are the same for distance under 41 and over 480 miles, the interterritorial scale exceeds the other by varying amounts ranging from 8 cents for 100 miles to 0.6 cent for 480 miles. The present commodity rates are the same as the former column 25 exceptions rates for distances of 40 miles and under and over 660 miles. The reason given for the publication of 2 separate scales subject to a minimum of 36,000 pounds is that competitive influences were found to be more severe in the area to which the lower intraterritorial scale applies. The present distancerate scales are related to the exceptions (docket No. 15879) mileages and groupings.

The rail respondents are opposed to the prescription of a minimum level of rail rates. They propose to revise the present 36,000-pound rates so as to relate them to the docket No. 28300 mileages and groupings, and thus place them on substantially the same level as at present when considered from the standpoint of mileage comparison. In addition, they propose to establish 2 alternating scales of rates subject to a 60,000-pound minimum, to be related also to the docket No. 28300 mileages and groupings. These rates, referred to as "incentive" rates, would be lower than the new 36,000-pound rates by amounts ranging from 1.1 to 7 cents. These respondent urge that if a minimum level of rail rates is required, it be made no higher than that proposed by them. In general, the shippers support the position of the rail respondents. The present and the proposed rail rates are set forth in appendix A hereto.

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92433 0-57- -9

Since early in 1930, when motor carriers had become an effective transportation agency, there has been a constant struggle between the rails and the motor carriers to attract the transportation of canned goods in official territory. Private motor transport has also been an increasingly important factor. This commodity, because of its heavy density (averaging 48 pounds per cubic foot), and regularity of movement, is particularly suited to movement by both rail and motor. From a revenue standpoint, canned goods in 1951 was the seventh most important item of freight carried by class I railroads in official territory. In spite of successive increases in production and consumption of canned goods in recent years, the railroad participation in this traffic has materially declined. The extent to which the railroads have reduced their rates from the classification basis since 1931, in an endeavor to meet motor competition, is illustrated by the fact that for a movement of 700 miles within central territory, the rail rate in 1931 was 47 cents, whereas today it is 72.5 cents, the latter being 40.2 cents less than the current classification rate of 112.7 cents for a haul of the same length. The total net tons of canned goods carried by eastern-district class I railroads for the years 1946-51 were, in millions, 14.46 in 1946, 13.43 in 1947, 12.21 in 1948, 9.85 in 1949, 10.06 in 1950, and 10.51 in 1951.

5

Although the volume of canned goods transported by motor carriers in official territory is not of record, the evidence indicates that the bulk of the traffic handled by many motor lines, contract carriers in particular, is canned goods. Three motor-carrier rate bureaus, respondents herein, show that during 1952, 62 of their member carriers transported 654.2 million pounds of canned goods, of which 10 handled in excess of 20 million pounds each. Of the total tonnage handled by 1 such carrier, canned goods accounted for 71.7 million pounds, or 50.02 percent of all the traffic handled by it in that year. The overall average of all canned goods handled by these carriers in 1952 approximated 8.26 percent of their total tonnage. A motor contract carrier, authorized to operate from specified points in Illinois, Michigan, Wisconsin, Missouri, and Iowa, handled 8.1 million pounds of canned goods and foodstuffs in 1952, while a common carrier, authorized to transport canned goods between various points in Indiana, Illinois, Ohio, and Michigan, handled 53.6 million pounds in that year.

The Emery Transportation Company, herein called Emery, a contract carrier with headquarters at Chicago, Ill., and one of the re

Tonnage figures pertain to commodity statistics, class 763, food products, n. o. 8., not frozen. Embraced thereth are many items not named in the subject canned-goods tariff. Middle Atlantic Conference, Central States Motor Freight Bureau, Inc., and Eastern Central Motor Carriers Association, herein sometimes called Middle Atlantic, Central States, and Eastern Central, respectively, or the bureaus.

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spondents herein, has contracts with many of the larger canners to transport canned goods from and to points in official territory. Forty percent of all the traffic handled by Emery is canned goods. During the period from April 1 to September 30, 1952, for example, Emery handled from and to 27 points in official territory, 754 truckloads of canned goods, or about 24 million pounds, including 122 truckloads, each transported an approximate distance of 425 miles, for one shipper. The rail carriers admit that Emery is one of their chief competitors, and state that the competition which they sought to meet when reductions in their rates were made on September 26, 1952, was that of Emery.

The rates maintained by Emery in 1947, except in a few instances, were substantially on the rail level. The rail rates were subsequently increased, under authorizations in the general ex parte proceedings, more rapidly than were Emery's, which was due in part to Government price controls affecting contract carriers. Prior to September 26, 1952, the rail rates were in particular instances, on some of the more important movements, higher than those of Emery. The reductions. made on that date tended to bring them to the same level. In instances where Emery's rates were still below the rail 36,000-pound level, Emery promised to increase such rates to the rail level as soon as practicable or to cancel any lower rates that were no longer moving traffic under an effective contract. The record indicates that, with few exceptions, this has been done.

Shipping statistics of some of the principal canned-goods shippers reveal the marked shift to truck transport during the last 6 years within official territory. Thus, for example, a producer of grapejuice shipped 98 percent of its traffic by rail in 1946 and only 29 percent in 1952. Of its official-territory traffic in 1953, the estimate is that 95 percent moved by truck. A Michigan producer of baby foods moved to all territories 14 percent of its traffic by truck in 1946 and 42 percent in 1952. Another large producer shipped 92.1 percent of its total traffic by rail in the fiscal year 1949-50, and in the fiscal year 1951-52 this percentage dropped to 74.1.

The rail classification rating on canned goods, in carloads, in southern, southwestern, and western trunkline territories since 1949 has been replaced by lower exception ratings to meet motor-carrier competition. Since late in 1949, a class 20Y exceptions rating, minimum 36,000 pounds, has been generally maintained throughout the South. In southwestern territory, an exceptions rating of class 28, minimum 40,000 pounds, was reduced to class 22, minimum 36,000 pounds, on July 1, 1949. In western trunkline territory, an exceptions rating of class 28, minimum 36,000 or 40,000 pounds, was reduced on July 1,

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